Bank of England chief issues frightening warning over productivity despite wage growth | United Kingdom | New
Speaking to the Telegraph on Saturday, Michael Saunders, who sits on the Bank’s Monetary Policy Committee (MPC), said: “The best way, really the only one, to achieve a sustained increase in real wages is to increase the productivity growth. When asked if there are signs of higher productivity growth now, he replied, “So far no. “
Mr Saunders said: “It is very difficult to anticipate the details of the upturn in productivity growth, but we know the general conditions that help.
“This is where the economy grows steadily, where business investment is strong, where businesses are able to plan for the long term, where the focus is on skills, training, a workforce. well educated and flexible markets.
“Once you have these conditions and companies are confident they’re going to continue, you tend to see productivity growth and you’re more likely to see it across different industries. “
He added that labor shortages “in many sectors” were “likely to stimulate wage growth, and indeed appear to already be.”
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He said that although his remarks were “not intended to be a criticism of government policy,” he warned that “the problem is that with a tight labor market […] you could get wage growth above the rate corresponding to the inflation target, without the productivity growth that goes with it. “
His cautious assessment of the current UK job market contrasts with the more optimistic views of the Prime Minister and other economists.
In the Telegraph last Wednesday, Patrick Minford, professor of applied economics at Cardiff University, noted that “productivity has risen 2.6% in the past 18 months” as a “tightening” in the work forces companies to use labor “more efficiently” and introduce new ways of working.
The professor of applied economics at Cardiff University said UK businesses being denied “easy access to unskilled European workers” by new immigration rules after Brexit means “saving on unskilled workers is now as important a management task as […] has always been”.
The Prime Minister also hailed the increase in wages as something “long overdue in the UK economy”.
Boris Johnson added: “We are not going back to the same old broken model of low wages, low growth, low skills and low productivity – all enabled and assisted by unchecked immigration.
“The answer to the current tensions and tensions – which are primarily a function of economic growth and recovery – is not to use that same old lever of uncontrolled immigration to keep wages low.
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“The answer is to control immigration, to allow talented people to come to this country, but not to use immigration as an excuse not to invest in people, skills and equipment and facilities. the machines they need to do their jobs. “
In the UK, a Road Haulage Association (RHA) survey of its members estimates that there is now a shortage of over 100,000 qualified drivers.
This is made worse by a shortage of natural gas supply globally, as economies begin to extricate themselves from the pandemic.
Mr Saunders said that “although shortages in stores are a really obvious symptom of labor shortages, the problem is much more widespread.”
He took a dim view of those who are currently lining up at gas pumps during the fuel shortage.
“I see no point in going around the gas stations at this time because as far as I know none of them have any and if they do, there is a queue of a mile long, “he said.
These “transitional” prices could last three to six months – but the labor shortage could last longer, he warned.
Mr. Saunders has personally responded to the current fuel shortages by getting on his bike.
It comes as he hinted that the Bank of England may raise interest rates before the end of this year. Investors expect interest rates to rise to 0.75% by the end of next year.
Markets begin to price in a rate hike in December, which although he said he was “not in favor of […] stating our intentions in advance, ”Saunders called“ appropriate ”.
The consumer price index, including owner-occupied housing costs, rose 3% in the 12 months ending August 2021, the Office for National Statistics said in September, and this is expected to increase before the end of the year.
A rise in interest rates would help control inflation. However, it would also lead to higher bills for many UK households, pushing mortgage rates up and putting pressure on businesses that had taken on debt during the coronavirus pandemic.
The Bank of England – which sets the base rate on UK lending – cut its interest rate to 0.1% in March last year as part of measures to tackle instability economic impact caused by the pandemic.
Mr Saunders said, “You can be aggressive in providing stimulus when needed. But the flip side is being prepared to remove some of that stimulus when inflation risks are no longer on the downside, but rather on the upside. “