US Should Kill Monopolies, Not Punish American Workers for Rising Prices | Robert Reich

Job growth and wages are slowing. Employers added 223,000 jobs in December, the Labor Department reported Friday, below the average for recent months.

Average hourly wages rose 4.6% in December, according to Friday’s report. That’s a slowdown from 4.8% in November.

All this is music to the ears of Federal Reserve Chairman Jerome Powell, because the Fed blames rising wages for inflation. The Federal Reserve has been raising interest rates to slow down the economy and thereby reduce the bargaining power of workers for wage gains.

At his press conference on December 14 announcing Following the Fed’s latest rate hike, Powell warned that “the labor market remains extremely tight, with the unemployment rate close to its lowest level in 50 years, job vacancies still very high and wage growth high.” .

But higher salaries are not a Good thing?

The wage of the typical American worker has been stagnant for four decades.

Most of the gains from a more productive economy have gone to executives and investors. The richest 10% of Americans now own more than 90% of the value of stocks owned by Americans.

Powell’s solution to inflation is to hit workers even harder. He He says “The labor market continues to be unbalanced, with demand substantially exceeding the supply of available workers.”

But if the demand for workers exceeds the supply, isn’t paying workers more the answer?

Not according to Powell and the Fed. Their answer is to continue raising interest rates to slow down the economy and put more people out of work, so workers can not get higher wages. In this way, “the conditions of supply and demand in the labor market [will] better balance over time, easing upward pressures on wages and prices.” He says Powell.

Putting people out of work is the Fed’s means of reducing the bargaining power of workers and “upward pressures on wages and prices.””.

The Fed projects that as it continues to raise interest rates, unemployment will rise to 4.6% by the end of 2023, resulting in more than 1 million job losses.

But fighting inflation by putting more people out of work is cruel, especially when America’s safety nets, including unemployment insurance, are in tatters.

As we saw at the start of the pandemic, because the US does not have a single national system for handing out cash to unemployed workers, they have to rely on state unemployment insurance, which varies considerably from state to state.

Many fall through the cracks. When the pandemic began, less than 30% of unemployed Americans qualify for unemployment benefits.

The problem It is not that wages are going up. The real problem is that corporations have the power to approve those wage increases, along with record profit margins – to consumers in the form of higher prices.

If corporations had to compete vigorously for consumers, they couldn’t do it. Competitors would charge lower prices and take those consumers away.

Corporations are not even investing their extra profits in new investments that would generate higher productivity in the future. They are buying back their shares to boost stock prices. Until the end of 2022, US companies announced share buybacks more than 1 trillion dollars.

A rational response to inflation, therefore, would be not increase unemployment in order to reduce the bargaining power of workers for higher wages.

It would reduce the pricing power of corporations to pass those costs on to consumers along with increased profit margins, by making markets more competitive.

The pricing power of corporations is out of control because corporations face very little competition.

Worried about sky-high airfares and lousy service? That is largely because airlines have merged from 12 aircraft carriers in 1980 to four today.

Worried about drug prices? A handful of pharmaceutical companies control the pharmaceutical industry.

Annoyed by food costs? Four giants now control more than 80% of meat processing, 66% of the pork market and 54% of the poultry market.

Worried about grocery prices? Albertsons bought Safeway and now Kroger is buying Albertsons. Combined, they would control almost 22% of the US grocery market. Add Walmart, and all three brands would control 70% of the grocery market in 167 cities through the country.

And so. The evidence of corporate concentration is everywhere.

It’s getting worse. There was More than a thousand major corporate mergers or acquisitions in the past year. Each had a merger value of $100 million or more. The total value of the transaction was 1.4 billion dollars.

The government must stop placing the responsibility of fighting inflation on workers whose wages have gone nowhere for four decades.

Put the responsibility where it belongs: on the big corporations with the power to raise their prices.

One possibility: Any large corporation in an industry dominated by five or fewer giant corporations that raises its prices more than the Federal Reserve’s target of 2% should be presumed to have monopoly power, and should be the subject of an antitrust lawsuit.