U.K. Construction and Manufacturing Boost Wage Inflation

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Britain’s construction, manufacturing and food preparation industries are pushing wages higher across the economy due to a shortage of workers to fill available jobs. 

Building companies increased advertised pay by 6.7% from February to July 2021 to draw more workers into the industry, according to data from jobs site Indeed. That compares with wage growth of just 0.8% across all jobs. 

“We’re seeing some pretty staggering numbers,” said Pawel Adrjan, head of EMEA research at Indeed, noting that the six industries experiencing high wage growth made up 30% of all job postings on the site. “Wages and salaries have gone up significantly faster in those sectors where we are seeing outsized demand for workers.”  

The Bank of England is keeping a close eye on whether salary increases will lead to more persistent increases in prices across the economy. A separate survey by the Recruitment and Employment Confederation intentions to hire permanent staff remained strong and that a quarter of employers have started to pass increased costs onto consumers. 

“Even with a large number of people coming off furlough in August and September, it’s likely that high demand for workers will continue to cause shortages through the autumn,” said Neil Carberry, chief executive officer of REC. 

The sectors experiencing higher wage growth also tend to be those that recruit people from the European Union and are struggling since Britain’s departure from the bloc made hiring foreigners more difficult. Furloughed workers may also believe they’ll be returning to their jobs in September, so aren’t searching for jobs, Adrjan said.

The patchiness of the recovery means some sectors are still lagging on recruitment and pay -- especially travel and tourism. “The labor market still hasn’t recovered fully when we look at employment, so that might be dampening wage growth in some other sectors,” said Adrjan. 

The reports also found: 

• One-in-five employers surveyed by the REC said increased costs were boosting plans to invest in technology and automation
• Demand for temporary workers was the highest in London both for the short- and medium-term, according to the REC

©2021 Bloomberg L.P.