For the first time in several decades, the balance of negotiating power in the UK economy has shifted. Owing to a nationwide labour shortage, workers are in an advantageous position, being offered better benefits for their daily grind. British companies are adjusting to this new reality by extending a “five days in the office" premium to attract staff, the country’s largest recruitment agency, Reed, told Bloomberg. A report by the news outlet said that close to 600,000 people leaving their jobs during the pandemic has triggered a rise in wages at near-record rates even though the economy is headed into recession. Why has employment in the UK not reached pre-pandemic levels? How is the pay raise affecting the economy further? Find out.
Every advanced economy in the world has been able to restore employment to pre-pandemic levels. The UK remains an exception to this. Analysts believe that there are multiple positive and negative reasons keeping people off the jobs market. First up, Brexit. UK’s exit from the European Union (EU) has shrunk the workforce. Second reason: is the pandemic’s health impact. Covid-19 has caused a dramatic rise in the long-term sick part of the population. It has also caused an increase in sickness. Then there is the shift in personal priorities. Following Covid-19 has caused a dramatic rise in the long-term sick part of the population. It has also caused awing the pandemic, many have rethought their life choices. A move towards early retirement is attributable to this.
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With greater difficulty in finding workers come greater wages. Many employers have resorted to offering higher pay to attract staff in what is now a “tight labour market". In the second quarter of 2022, average wages across the country increased by 4.7 per cent QoQ, the New York Times reported. Retail, hospitality, and finance sectors have seen even larger wage increases, with wages growing between 6-8 per cent. Wages for in-person positions have risen substantially.
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Rising wages, however, are feeding the inflationary pressures already prevalent in the country. This has created a complicated scenario for a country where alarm bells of a recession have been sounding for a while now.
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