Surprise! Corporate Greed Driving Inflation — Not Mean Workers Who Won't Work For Pennies
In many ways, sheltering-in-place during the beginning of the COVID pandemic had the effect of a general strike. We learned that we cannot actually survive without a lot of workers — particularly workers who themselves do not make enough to survive. It also gave many of those workers an opportunity to find jobs that did pay them enough to survive, resulting in many businesses that preferred not to pay their workers very much finding it difficult to find people to risk their lives during a pandemic to work for next to nothing. As a result, they had to start paying more.
Supply and demand, right?
Between that and other supply chain issues caused by the pandemic, many large corporations started raising prices on things and placing the blame for that on the cruel, greedy workers who were too lazy and un-American to work jobs that did not allow them to pay their rent. Literally. Because the average asking price for an apartment in the US these days is $1,659 a month, which is over $400 more than someone making minimum wage makes per month ($1208).
That blame, it turns out (again) was misplaced.
Republicans as recently as Thursday were blaming rising prices on said greedy, lazy workers. On CNBC yesterday, Texas Congressman Kevin Brady, the top Republican on the Ways and Means Committee, said, “Both the White House and the Fed don’t understand the worker crisis we’re in and how that’s driving higher prices persistently for a long time, as well."
According to these "Ways and Means" Republicans, inflation is being caused by a "wage-price spiral" — meaning that wages go up, prices go up to reflect that, and then wages go up again due to that, and then prices go up again because of that. The basis of this belief is that corporations pay their workers the exact amount it is possible (and fair) to pay them and so if labor costs go up, prices must also go up.
This is, of course, absolute bullshit. We know this because productivity has increased steadily for the last several decades, while worker compensation has (until very recently!) stagnated.
You, as a casual observer, may have also noticed that when massive corporations do rake in incredible profits, it's only those at the top who benefit. They don't say, "Wow, we've had an incredible year! Now we can pay the people in our shops and factories even more!" So to raise prices and blame it on workers whose wages stagnated for 40 years is some serious bullshit. It's not just me saying that though — it's actual economists.
In a note to investors this week, Swiss Bank UBS economist Paul Donovan debunked the "wage-price spiral" theory by explaining that profits have grown far faster than labor costs for the last several quarters.
Yesterday’s US unit labor cost numbers are subject to possible future revisions, but showed non-financial corporate profits growing faster than labor costs. In fact, profits have growth faster than labor costs for seven of the past eight quarters, as prices have growth faster than labor costs for seven of the past eight quarters. Today’s inflation is more about margin expansion than labor costs.
Margin expansion? That literally means "profits."
This pretty much just means that the reason things are expensive is because corporations are charging a lot of money for them, for absolutely no reason other than that they would like to make more money. The labor costs are not actually even going up anymore, and they're jacking up prices anyway.
This hurts not just consumers but smaller businesses that are also forced to pay higher prices when purchasing wholesale and thus also have more difficulty paying their much smaller workforces — you're reading one! — and the compounded difficulty of the fact that people are likely buying (or donating, as the case may be) less because things cost more is not helping.
So to be clear, large corporations are greedy and everyone is getting screwed because of that.
I will say this straight out, however — we actually do pay too little for a lot of things. The fact is, a lot of US employers want to pay their employees very little in order to make lots and lots of money for themselves, their CEOs, and their shareholders. The US is also the world's largest importer of foreign goods. In order for things to be cheap enough for the vast majority of Americans to be able to afford to buy them, people further down in the supply chain have to be paid practically nothing. Or, in the case of certain products — like cotton, chocolate, cosmetic products made with palm oil — literally nothing, because they are actual slaves. Diamonds are also mined by slaves, of course, but we actually overpay for those thanks to clever marketing from DeBeers (but let's not get into that).
Much of the world (including the US) has had to suffer because American employers want to be able to pay their employees very little — and in the face of having to pay those employees just a little bit more, they unnecessarily drove up the prices of everything at least in part to get to do a big "Look at what these greedy workers have done to you, the American people, by rudely demanding to be paid enough to live on!" while raking in even bigger profits for themselves — and hopefully putting workers in their place, too afraid to ask for more ever again.
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Robyn Pennacchia is a brilliant, fabulously talented and visually stunning angel of a human being, who shrugged off what she is pretty sure would have been a Tony Award-winning career in musical theater in order to write about stuff on the internet. Follow her on Twitter at @RobynElyse