September 28, 2021

British warehouse worker shortage results in significant pay spike

British warehouse worker shortage results in significant pay spike

Members of the UK Warehousing Association have reported having to increase pay by between 20% and 30% to secure workers for entry-level jobs. 

Reuters reports that British warehouses are struggling to replace the European staff who used to come to the UK to work over the festive period. Those workers have opted instead to go to countries like France or Germany where they do not need visas.

The Warehousing Association’s CEO, Claire Bottle, says the industry is “tens of thousands short.”

The retail sector’s shift to online shopping and away from physical stores means more labor is needed in warehouses than ever. The Covid-19 pandemic has also played its part—in 2020, those furloughed by the Covid-19 pandemic taking on part-time jobs covered the staff shortage. However, the furlough scheme closes at the end of this month. 

Companies are instead having to rely on higher salaries to secure workers. Jordan Francis, commercial director of the Prodrive recruitment agency, said he is currently offering a 25% increase in pay for a standard warehouse operative role. Francis also says that higher pay means workers are less willing to do overtime, a big concern for the busy festive period.

On the subject of whether workers work more or less when wages are high, Tess M. Stafford, in her IZA World of Labor article, notes that standard economic theory predicts two competing responses. On the one hand, higher remuneration makes leisure more costly because in order to enjoy it a worker must forgo greater compensation, which “induces individuals to work more.” On the other hand, higher remuneration generates greater wealth so that workers can afford to consume more of everything, including leisure, which “induces individuals to work less.” Stafford says that standard theory is, however, unambiguous that the substitution effect is positive: “Thus, when increases in remuneration are relatively small and transitory or are fully anticipated by the worker so that lifetime wealth is reasonably unchanged, standard theory predicts that workers will work more.”

Britain’s major supermarket groups and blue chip general merchandise retailers are expected to cope better than smaller industry players as they are better financially supported and have higher levels of automation.

Read Tess M. Stafford’s article, “Do workers work more when earnings are high?

Explore more IZA World of Labor content on the subject of personnel economics.