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What’s the crisis? Boris Johnson’s team says supply crunch is good for salaries

Facing a supply-chain squeeze that has pushed up prices in the economy, the UK government is looking to reframe the crisis as good news for British workers.

Labor shortages in transportation, agriculture and meat processing are causing significant disruption, with troops now intervening to ensure supplies to petrol stations. It is forcing firms to offer higher wages, threatening to drive up costs further for consumers battling increases in tax and energy bills. Inflation is already likely to exceed 4% this year.

At the governing Conservative Party convention in Manchester, however, the narrative was different.

Asked about the issue in a series of interviews, senior Tories, including Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak, sought to reimagine rising costs as part of a broader, positive development.

“I don’t think anyone has a plan to address the supply chain challenges as we’re seeing,” Sunak said on Times Radio on Monday. “But I mean more broadly, do we all want to see a high-skill, high-paying economy? Of course we do. It’s a good thing for Britain.”

He said high-paying jobs are part of Britain’s post-Brexit transition away from a low-wage economy. Sunak said the shortage could force companies to increase investment and increase productivity.

The trouble, say economists, is that sharp wage growth without any increase in productivity is far from positive. The situation may lead to jump in unit labor cost which may be a matter of concern for the bank England Officer. Wage growth is also restricted to specific industries, there is a risk that real income declines due to the effects of inflation.

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