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Labour markets - Tesco offers lorry drivers £1,000 signing-on fee due to shortage

Geoff Riley

28th July 2021

Every little helps! Tesco's £1,000 signing on bonus for HGV drivers is a natural market response to the chronic shortage of drivers that threatens to impede recovery from the pandemic.

The shortage of drivers is a long term problem exacerbated by short term issues including the loss of thousands of non-UK drivers due to Brexit, the postponement of over 30,000 HGV licence exams during lockdown, allied to the more recent impact of the "pingdemic" with thousands of drivers having to self isolate. One key question is whether the £1,000 bonus will be sufficient given that the shortage of drivers is essentially a structural problem.

No doubt Tesco and other large-scale companies such as Amazon, DPD, Hermes and the major supermarkets, have the financial resources to bid up pay and offer bonuses.

Small-scale haulage companies operating in an industry with low profit margins, have much less scope to do likewise and they fear losing some of their own drivers to businesses ramping up pay. Tesco's move is in their own self-interest but risks shifting the problem onto businesses less able to cope or respond.

The shortage of drivers - it takes up to six months to fully train them - shows the important linkages between the labour market and the wider macroeconomy.

To what extent is the shortage of drivers an example of labour market failure?

What government policy interventions might be effective in addressing the shortage of HGC drivers?

Why do we all pay the price when a chronic excess demand for drivers is allowed to persist?

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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