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

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At the governing Conservative Party’s conference in Manchester, though, the narrative was rather 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 repaint the rising costs as a part of a broader, positive development.

“I don’t think anyone plans to have supply chain challenges, the likes of which we’re seeing,” Sunak said on Times Radio on Monday. “But I mean more broadly, do all of us want to see a higher skill, higher wage economy? Of course we do. That’s a good thing for the UK”

Higher-paid jobs are part of the UK’s post-Brexit transition away from a low-wage economy, they said. Sunak said the shortages could force companies to boost investments and increase productivity.

The trouble is that steep wage increases without any corresponding increase in productivity is far from positive, economists say. The situation could lead to a jump in unit labor costs that will likely worry Bank of England officials. With wage increases also confined to specific industries, there’s also a risk that real incomes drop because of the effect of inflation.