US should break up monopolies – not punish working Americans for price hikes | Robert Reich

Job growth and wages are slowing. Employers added 223,000 jobs in December, the labor department said Friday, which was lower than the average in recent months.

Average hourly wages rose 4.6% in December, according to a report on Friday. This means a decrease of 4.8% compared to November.

All of this is music to Federal Reserve Chairman Jerome Powell’s ears, as the Fed attributes inflation to rising wages. The Fed raises interest rates to slow the economy, thereby reducing the bargaining power of workers to win wages.

Announcing the Fed’s latest interest rate hike at a Dec. 14 press conference, Powell warned that “the job market remains extremely tight with unemployment near 50-year lows, job vacancies still high, and wage growth.”

But isn’t it higher wages? 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 have flowed to the top—executives and investors. The richest 10% of Americans now own more than 90% of the value of American-owned stocks.

Powell’s solution to inflation is to inflate workers further. “The labor market continues to be out of balance, with demand significantly outstripping the available supply,” he says.

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

Not because of Powell and the Fed. Their response is to keep raising interest rates to slow the economy and put more people out of work, therefore workers can’t get a higher salary. Thus, “demand and supply conditions in the labor market [will] over time it will achieve a better balance, reducing upward pressures on wages and prices,” says Powell.

Layoffs are the Fed’s means of reducing workers’ bargaining power and “reducing upward pressures on wages and prices.”“.

As the Fed continues to raise interest rates, it predicts 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 beginning of the pandemic, because there is no single nationwide system to get cash to unemployed workers in the United States, they must depend on state unemployment insurance, which varies greatly from state to state.

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

Problem not that wages are increasing. The real problem is that corporations have the power to pass these 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. Competitors charge lower prices and take away these consumers.

Corporations do not even spend their extra profits on new investments that could generate higher productivity in the future. They buy back their shares to increase their share prices. By the end of 2022, American firms have announced share buybacks exceeding $1 trillion.

Therefore, it would be a rational reaction to inflation no increasing unemployment to reduce workers’ bargaining power for higher wages.

By making markets more competitive, the pricing power of corporations could be reduced to pass these costs on to consumers, along with increased profit margins.

Because corporations face so little competition, corporate pricing spirals out of control.

Worried about sky-high airfares and poor service? The main reason for this is the consolidation of airlines from 12 carriers in 1980 to four now.

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

Worried about food costs? Currently, the four giants control 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. Together, they would control almost 22% of the US grocery market. Add Walmart and the three brands 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. Last year there were over a thousand major corporate mergers or acquisitions. Each had a combined value of $100 million or more. The total transaction value was 1.4 trillion dollars.

The government needs to stop putting the responsibility of fighting inflation on working people whose wages have not gone anywhere for 40 years.

Put the blame where it belongs – on the big corporations with the power to raise prices.

One possibility: in an industry dominated by five or fewer giant corporations, any large corporation that raises its prices by more than the Fed’s 2% target must be presumed to have monopoly power and be criticized in an antitrust suit.

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