The #UK doesn't have wage-price #inflation, it’s #greedflation – and big companies are to blame
British ministers seem keen to avoid what the data tells us: it’s not pay that is turbocharging the cost of living. Despite attempts by ministers to finger workers for the persistence of the cost of living crisis, there is no real evidence that this is the case. Both the International Monetary Fund and the European Central Bank have looked at whether higher wages are driving up prices, and neither of those august bodies thinks that is happening.
What they have found is that companies have been able to use the crisis to drive up prices and boost profit margins. The IMF and the ECB wouldn’t put it in these terms, of course, but both support the idea that companies are gouging their customers when they can. The non-technical term for what is going on is greedflation.
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This was a point made by the IMF’s chief economist, Pierre-Olivier Gourinchas, last week. “Should we worry about the risk of an uncontrolled wage-price spiral? At this point, I remain unconvinced. Nominal wage inflation continues to lag far behind price inflation, implying a steep and unprecedented decline in real wages.”
Gourinchas went on to note that companies were doing rather better out of the cost of living crisis than workers were. The flipside of steeply rising prices but only modestly higher wages was that profit margins had “surged”, he said.
This echoes what unions have been saying. Unite, one of the UK’s biggest unions, published a report in March that blamed systematic profiteering across the economy for fuelling the cost of living crisis. Energy companies, supermarkets, shipping companies, car dealers and food manufacturers had all cashed in on drought, war, and strong demand after the pandemic to “push prices and profits through the roof”.
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