US Should Break Up Monopolies – Not Penalize Working Americans to Raise Prices | Robert Reich

Job and wage growth are slowing. Employers added 223,000 jobs in December, the Labor Department said Friday, less than the average in recent months.

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

All this is music to the ears Federal Reserve Chairman Jerome Powell as the Fed blames inflation for rising wages. The Fed raises interest rates to slow the economy and thereby reduce the bargaining power of workers to receive wage gains.

At his press conference on 14 Dec announcement the Fed’s latest rate hike, Powell warned that “the labor market remains extremely tight, with the unemployment rate near a 50-year low, job vacancies still very high and wage growth elevated.”

But aren’t the higher wages a A good thing?

The wages of the typical American worker have been stuck in the mud for four decades.

Most of the gains from a more productive economy go to the top—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 dealing with inflation is an even greater destruction of workers. He says “the labor market remains imbalanced, with demand greatly exceeding the supply of available workers.”

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

Not according to Powell and the Federal Reserve. Their response is to keep raising interest rates to slow the economy and put more people out of work, so workers I can not receive higher wages. Thus, “the supply and demand conditions in the labor market [will] strike a better balance over time, easing upward pressure on wages and prices.” says Powell.

Putting people out of work is the Fed’s tool to reduce workers’ bargaining power and “upward pressure on wages and prices“.

The Federal Reserve predicts that as it continues to raise interest rates, unemployment will rise to 4.6% by the end of 2023 – resulting in the loss of more than 1 million jobs.

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

As we saw at the beginning of the pandemic, because the US does not have a single national system for getting money to unemployed workers, they must depend on state unemployment insurance, which varies widely from state to state.

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

The problem is not that wages are rising. The real problem is that corporations have the power to accept these wage increases – along with record profit margins – on consumers in the form of higher prices.

If corporations were to compete vigorously for consumers, they would not be able to do so. Competitors will charge lower prices and grab those users.

Corporations are not even putting their extra profits into new investments that would generate higher productivity in the future. They buy back their shares to boost share prices. By the end of 2022, US companies have announced share buybacks exceeding $1 trillion.

Therefore, the rational response to inflation would be no increasing unemployment to reduce the bargaining power of workers to obtain higher wages.

It would be to reduce the pricing power of corporations to pass these costs on to consumers along with increasing profit margins, making markets more competitive.

Corporate pricing power is out of control because corporations face so little competition.

Worried about sky-high airfares and poor service? This is largely because airlines merged from 12 carriers in 1980 to four today.

Worried about drug prices? Several pharmaceutical companies control pharmaceutical industry.

Frustrated by food costs? Four giants now control over 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 the three brands are in control 70% of the grocery market in 167 cities across the country.

And so on. Evidence of corporate concentration is everywhere.

It’s getting worse. There was over 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 deal was $1.4 trillion.

The government must stop shifting the responsibility for fighting inflation to working people whose wages have not gone anywhere for four decades.

Put the blame 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 Fed’s 2% target should be considered a monopoly power and be inundated with an antitrust lawsuit.

#Break #Monopolies #Penalize #Working #Americans #Raise #Prices #Robert #Reich

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button