Aldi will increase workers’ pay in September for the second time this year in a move that highlights competition among retailers to retain staff a the cost-of-living crisis bites, as well as the risk of soaring inflation becoming embedded in the UK.
London workers at the budget supermarket chain will get £11.95 an hour, up from £11.55, above the Living Wage Foundation’s recommended “real living wage” of £11.05 in the capital. Outside London, the hourly rate will go up to £10.50 from £10.10. The company, which claims to be the UK’s highest paying supermarket, said the move would take its “investment in pay” to £43 million this year after the previous rise five months ago.
The rising wage bill for Aldi’s 26,000 staff comes at a time when the cost of a weekly shop is already soaring. Research from Kantar, the market data firm, found grocery price inflation hit 9.9% in the four weeks to July 10, up from 8.3% over the previous month.
Falling spending power has drawn shoppers to Aldi, and its rival and fellow German discounter Lidl as shoppers seek out ways to control rising costs. Kantar found Aldi’s sales were up 11.3% over the same period, with Lidl’s up 13.9%.
Increased pay for workers will help them cope with rising prices, but it also runs the risk of setting off a wage-price spiral, adding to companies’ costs and so providing further inflation. Russia’s invasion of Ukraine upended a range of world markets, including ones for food such as wheat and sunflower oil, with the biggest impact seen for fuel prices.
Tight labour markets and growing calls for higher wages, plus a wave of industrial action in parts of the economy mean the people in charge of price stability in the UK think there is worse to come. The Bank of England forecasts inflation will pass above 11% in October, just as the autumn weather will leave millions of people facing sharp rises to heating costs as the seasonal chills arrive.
Pay in supermarkets has been a major theme for investors this year. Sainsbury rejected a formal motion from some of its own shareholders for the adoption of Living Wage, which is set independently by the Living Wage Foundation, as a minimum for its staff. The company -- which already pays it to directly employed staff -- argued it should set wages itself alongside stakeholders and defeated the move, which was only backed by around 17% of votes cast.
Tesco holds a similar position against outsourcing setting the level of one of its biggest costs to a third party, pointing towards the regular talks on wages it holds with trade unions.