We’re living in an upside-down world created by CEOs. Wall Street wants us to believe that inflation is the result of workers unjustifiably demanding higher wages, propped up by massive unions. Worker shortages are further driving up operating costs, in this story, forcing companies to pass on those additional costs onto the consumer. Tangled supply chains and the pandemic have only exacerbated these wage pressures. In their telling, as wages rise, so too do prices.
But let’s call out this story for what it really is: a devious tactic to shift blame from their own role in jacking up prices. At the end of the day, it’s greedy corporations that have gotten us into this mess, not workers. In short, the story of price increases today is one of a profit–price spiral – not one driven by workers’ wages.
The data are clear: Corporations – not workers – are to blame for recent price hikes. Research from the Economic Policy Institute looks at 110 industries and finds that there is no correlation between price acceleration and wage growth. Simply put, wage increases are not driving prices up.
So if it’s not wages and hypothetical labor shortages, what’s actually making things more expensive? My team at the Groundwork Collaborative and I pored over hundreds of earnings calls and found that across a wide range of sectors, corporate executives are excitedly telling their investors “what we are very good at is pricing” — code for jacking up prices on consumers to pad their profits. While there are other factors in driving up prices, such as increased demand as a result of the pandemic, corporate executives simply can’t stop bragging to their investors about how they are enjoying the highest profit margins in 70 years. And we hear them saying the quiet part out loud: that they can use the cover of inflation to push prices ever higher, so that they can enjoy the spoils.
Take Constellation Brands, producer of popular beers like Corona and Modelo. In the company’s latest earnings call, Constellation’s CFO noted that many of its consumers are low-income and named the extractive methods the company planned on using: “We want to make sure that we’re not leaving any pricing on the table. We want to take as much as we can.”
Companies from Starbucks to Chipotle have been celebrating how “fortunate” they are to be able to raise prices on consumers. The CFO of Krispy Kreme stressed the company could have “further price increases to still grow our margins” and that it had “actually already covered” most of its input costs.
Even Johnson & Johnson, which made millions on its COVID vaccine, said on a recent investor call that the “strong underlying demand for medical care,” meaning all there is to do to address suffering and death, is part of their company’s “optimism” and “opportunity” for its future performance.
And now, the war in Ukraine is providing yet another opportunity for multinational energy giants, Wall Street and oil company executives to drive up profits — while forcing families to pay more at the pump and on their energy bills. As President Biden warned, “Russia’s aggression is costing us all, and it’s no time for profiteering or price gouging.”
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Unfortunately, it’s clear that pandemic profiteering is rampant, in part because we live in an economy that sits on a scaffolding of investors demanding ever higher returns. Case in point: Companies like Walmart, which had initially shied away from the profiteering tactic, saw massive selloffs.
And it’s a dismal cycle. As profits rise as a result of price hikes, so too does the demand for those profits — sending prices ever spiraling upward.
To be clear, both wage increases and increased worker power backed by unionization are good things — both for workers and our economy as a whole. The sectors where wages have been rising at the fastest pace are sectors like leisure and hospitality where workers have faced decades of rock bottom wages and dismal working conditions. Workers with disabilities and tipped workers in 17 states still make an unconscionable $2.13 subminimum wage.
And it’s not just wages. Workers across our economy face working conditions more undignified than most in the industrialized world, and we all pay the price. Workers are treated like widgets at Amazon warehouses, forced to pee in bottles and treated as disposable. And millions lack health care and other critical benefits, in the midst of a global pandemic. It’s not a labor shortage; it’s a shortage of dignified jobs that pay enough to live on.
Of course, the pandemic did not create these inequities — it merely exacerbated them. For years, excess corporate power, declining unionization rates and deregulation have resulted in workers facing dangerous working conditions, the erosion of labor standards and tenuous economic conditions.
Ever increasing prices make people ever more dependent on a labor market that functions like a tightrope: One tiny wobble and there goes your economic security. Simply put, increasing prices are hurting workers — exactly those who have been facing precarious economic conditions caused by the outsized power that megacorporations hold in our economy. Too many people have been wobbling on that tightrope for decades, increasing the fragility of our economy as a whole. Taking on corporate power is a must if we are to have a resilient and healthy economy where workers and their families can thrive.
After two years of lauding these same workers as “essential” and “heroes,” CEOs are turning around and blaming them for rising prices — all while these same executives are robbing the bank in plain sight.
Thankfully, we have a choice. We can keep living in the upside down world like the CEOs want us to, or we can face reality and invest in an economy that actually works for workers. The right choice has never been clearer.
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