Over-50s leading a “great resignation” have shrunk the UK labour market and driven up inflation, the boss of John Lewis has said.

An exodus of around a million people from the workforce since the pandemic has led to an increase in inflation and wage growth, chairwoman Dame Sharon White told BBC Radio 4’s Today programme.

Fewer employees in work means businesses are facing pressure to raise salaries which in turn is pushing up prices.

As a company we are trying to balance how our partners cope with the cost of living with affordability considerations

It is also having major long-term implications for businesses struggling to fill jobs, Dame Sharon added.

Despite inflation and wages going up, the John Lewis Partnership revealed it has no plans to raise employee wages in line with current rates.

The business announced in April that it would give its employees, known as “partners” within the group, a 2% pay rise and a 3% bonus, as well as committing to the voluntary real living wage set at £9.90 an hour outside London and £11.05 an hour in the capital.

It will also double its support fund for employees from £400,000 to £800,000 with a combination of grants and some loans for staff in financial difficulty.

The targeted support measures include plans to offer all employees a free meal between October and January, in line with an expected winter surge in energy costs.

But pushing up wages to match inflation could damage the business and the economy, Dame Sharon said.

“As a company we are trying to balance how our partners cope with the cost of living with affordability considerations,” she said.

“But we have to be mindful of ensuring jobs and the sustainability of the business, as well as the potential wage-inflation spiral and the impact that would have on businesses and the wider economy.”

Dame Sharon, who previously headed broadcasting regulator Ofcom, added that businesses and the Government need to work together to encourage over-50s to go back to work.

Flexible retirement options or retraining over-50s for a different occupation could be solutions, she said.

A wave of staff leaving their jobs to seek better pay and job satisfaction, or to retire altogether, sparked the “great resignation” after national lockdowns.

Almost a fifth of UK workers said they expect to leave their job for a new employer in the next 12 months, PwC found in May.

But Bank of England boss Andrew Bailey said this month that workers should refrain from asking their employer for inflation-matching pay rises to prevent inflation becoming “embedded”.