Mike's Minute: The pay rises are fine, until the economic reality comes

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Recorded29 Jun 2022

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At PWC in Britain, the pay rise coming is 9 percent. They employ about 20,000 locally. Some pay rises will be as high as 10 percent . The chairman says you can't ignore reality, which is true.Given the job market, if you are not offering the 9 percent, someone is. And that person will be hoovering up the scare resource that makes up today's labour market.Locally, Air New Zealand is offering in house bonuses to those who nominate people who can be hired. They currently have about 1100 jobs up for grabs. I was shown an ad last week for a job at TVNZ, they are offering five weeks leave. And it's not just for the job ad I saw, but it seemed all jobs advertised.A whole bunch of worrying stuff comes out of all of this. Firstly, where does it end? How many rises? How many bonuses? And who ultimately pays the bill?Secondly, it’s the exact opposite of what central banks all over the world want you to be doing.Thirdly, are you taking a job just for the perks? If you are, what sort of calamitous workforce predicament have we created as we get more and more people in any given office not necessarily there for the pathway, environment, or challenge, but for the sugar on the topThe natural outworking of all this activity is sooner or later it starts to fall over. The very thing the central banks want will happen; it's called a recession.As the increasing costs of doing business get too great to pass on, people start to fail and fall. Layoffs begin. You still have your 9 percent pay rise, but only if you still have your job.As more and more of it happens, that creates what they call "slack" in the workforce or labour market. In other words, the job ads drop, but the people looking for work goes up. So instead of an employer begging you to join or praying someone applies for the role, you are up against a whole bunch of others looking for the same spot.The great piece of magic central banks are looking to pull off is they land their respective economies so softly you don’t even notice this is happening. In reality that most likely won't happen, what most likely will happen is economies will go thump, bits will break, the hard landing will be on, and we will get a much-needed re-calibration.We are living through one of the great financial and economic cock ups of all time and the banks are working out as we speak how to put it right.Your 9 percent is their mistake, but you don’t mind. But if you lose your job that’s on them too, you will mind then.But for every 9 percent pay rise, the day of reckoning is a day closer.See omnystudio.com/listener for privacy information.

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