PETERBOROUGH, A MEDIUM SIZE town 100 miles north of London, is at the forefront of Britain’s takeover. It has many assets: a pretty town center built around an imposing medieval cathedral, reasonably priced accommodation and a town keen on development. But above all, it offers easy access to the motorway network.
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This was important before the covid-19 pandemic. It’s even more important now. Amazon, an online retailer, built a 500,000 square foot distribution center in the city in 2010, and has become the largest local employer. The company is now looking to add an additional 110,000 square feet. During the last years IKEA, a Swedish furniture supplier, and Tesco, Britain’s largest supermarket chain, have also moved distribution depots to the outskirts of the city. All of this means that now is the right time to look for warehouse work in Peterborough.
But it’s not just warehouse workers that are in demand. In Peterborough and across the country, the reopening of brick-and-mortar retail and hospitality businesses has sparked an increase in hiring. Bosses complain about labor shortages. For the first time in decades, bargaining power is shifting from companies to low-paid workers.
This is an unusual situation for Great Britain. After the global financial crisis, the country experienced a job-rich, low-paid recovery, thanks to a flexible labor market created by deregulation in the 1980s and 1990s. Employment rates reached record levels, but Wages did not return to their pre-crisis levels until 2020. Economists were repeatedly forced to revise estimates of falling unemployment before generating sustained wage pressure. Only about a year ago, “we were starting to see what a tight but flexible job market would look like,” says Gavin Kelly of the Resolution Foundation, a think tank. Then the pandemic struck and the recession followed.
Peterborough’s economy, which began its early recovery, offers a glimpse into the future. An analysis of labor markets in 63 urban areas by the Center for Cities, another think tank, found that in April, fulfillment centers were experiencing the fastest growth in job vacancies. Online ads for positions in Peterborough were already 4% above pre-pandemic levels before retail and hospitality reopened (at a time when they were still down 15% in the capital ). As more and more businesses have reopened, the demand for workers has intensified. Bars and cafes in central Peterborough are littered with âhelp neededâ posters. A local pub owner says he has stopped serving lunch because he is unable to find a chef.
The increase in the number of vacancies has not yet been accompanied by an increase in salaries. But that can change. Pawel Adrjan, economist at Indeed, an online recruitment company, notes that the advertised salary in food preparation and service has increased from Â£ 9.25 ($ 13.11) at the start of the year to 9.40 Â£ now. When asked if he should raise salaries to attract a chef, the Peterborough pub owner pauses for a moment, before admitting “it could come to this”. For employers used to being able to hire at will, at a price that suits them, the past few weeks have been a shock.
It’s not just the post-pandemic recovery that is causing the shortages. Although the exact number is unknown, many migrants appear to have left the country, proving particularly difficult for businesses that depend on seasonal workers and in sectors with low wages and long, antisocial hours. Unless changed by the government, the post-Brexit immigration regime will continue to reduce the number of low-paid workers who can travel to Britain.
Participation rates have also fallen among older workers, suggesting that the recession has prompted those 60 and over to move forward in retirement. Some young people are also reluctant to work. Reservations for Covid-19 vaccines in England only opened for 25-29 year olds on June 8, meaning most people 20 and over remain at a higher risk of infection. Bosses note that many are reluctant to work in crowded rooms.
Some of these disruptions will subside over the next few months. Young people will receive their jabs. Martin Beck of Oxford Economics, a consultancy firm, notes that 5m EU workers have applied for settlement status in Britain since Brexit. âEven though many have returned home during the pandemic, the obstacles to return will not be particularly heavy,â he said. Most forecasters expect unemployment to rise later in the year as support is withdrawn. Tom Clougherty of the Center for Policy Studies, a think tank, suggests that the end of the leave scheme, which is expected to be reduced by September, “will be a real test of the strength of the labor market.”
Yet even if some of the bargaining power rests with employers, workers in these industries will benefit from a rising wage floor. The bite of the UK minimum wage, the ratio of that wage to median earnings, has increased markedly in recent years compared to other rich countries (see chart). The government aims to increase it further, to 65%, by 2024. The hope is that this will force companies to train people, invest in technology and thus increase productivity.
The poor Brits had a miserable time last year. They were the most likely to see their incomes drop due to job losses or a leave. But after being at the center of the storm, they now find themselves at the heart of the recovery. Unlike America, the British government has not made a commitment to “run the economy hot”. Rising unemployment could put an end to wage pressure. But for now, at least, low-wage workers have been enjoying their first taste of bargaining power for nearly 20 years. â
This article appeared in the Great Britain section of the print edition under the headline “Something to Celebrate”