When the governor of the Bank of England, Andrew Bailey, asked companies in February to exercise “pay restraint”, he did so because the Bank is tasked with keeping inflation low and stable, and it doesn’t want competition for jobs driving wages too high (which would push up the prices of goods and services, sending inflation still higher).
As was pointed out at the time, Bailey might also have asked companies to exercise “profit restraint” and keep prices down by accepting tighter margins, but that was obviously not going to happen because that’s not how capitalism works. And pay restraint isn’t going to happen either, because that’s not how job markets work. If a company needs HGV drivers or cyber security experts, it has two choices: pay for them, or go out of business.
There is one employer, however, that is strongly incentivised to pay workers less: the government. The spectre of uncontrolled inflation gives the government a reason not to inflate the pay of public sector workers (to keep the dreaded wage-price spiral at bay), which also saves on spending.
The problem for public sector workers is that private sector pay is inflating anyway, so the private sector’s wage-price spiral is, for nurses and teachers, just a price spiral. Inflation is hitting the most important workers the hardest.
This situation is particularly dangerous for the British public sector because it contains large numbers of workers who are chronically underpaid. In health, education and social care, there were already crises of recruitment and retention.
The Royal College of Nursing’s (RCN) 2021 employment survey found that almost one in five nurses were actively planning to leave their jobs. A survey of more than 10,000 teachers by the National Education Union (NEU) found that 35 per cent “would definitely be no longer working in education in five years’ time”.