Unfortunately, in the short run, in trying to prevent a wage-price spiral from starting, the Fed is slowing the economy in a way that is likely to lock in employers’ advantage over employees.
Yes indeed. What else is new?
Spot the unquestioned premise:
Inflation hawks such as Powell appear to believe that if wages did go up a lot this year — say 7 percent — employers would pay for them with another round of big price increases, which would trigger another round of demands for higher wages and so on ad infinitum.
Why do they pay for them this way? Why not ABSORB the cost? How? Answer: From the billions of profits that they make. Take some of
that money and give it back to workers, while keeping prices the same? Am I missing something here?
Who loses? Well, shareholders. Because that’s who you’d be taking from.
This is the same argument made concerning wealth redistribution, and a related one since the wealthiest 1-10% also own the majority of shares, and these are the people it is proposed that we take from (by taxing more).
Is it wrong? No. Because no where is it written, in law, in finance, in accounting, in ethics, in politics, or in philosophy, that shareholders are entitled to 90% of the profits.
To maintain this 90% number by either (1) keeping prices the same and refusing to raise wages or (2) raising wages but also raising prices (inflation, thus keeping real wages the same) is morally indefensible — but quite apart from that is clearly leading to enormous societal pain.
Leaders and rich folk better get with the problem. A society in pain will eventually revolt, their angry eventually will come for you too. We’re seeing it happen before our eyes already.
In terms of what we working class folk can do about it is join in the revolt. One way is organizing through unions. Without collective action, individual workers are simply expendable if they cause too much fuss, and can be picked off one by one if they start asking the wrong questions or making the wrong demands. Most have no recourse alone, since most don’t have the legal and financial resources to fight back— and even if they did, would be involved in an undesirable protracted fight.
I see a number of outcomes:
1) Corporate boardrooms (and the people they represented: namely, the wealthiest Americans) wake up and start treating workers better, both monetarily and in conditions.
2) Government starts taking a bigger chunk of their profits and redistributes it a la 1930s and 40s (and 50s).
3) Workers force the hand of employers through strikes (and so unions) or force the hand of government through votes.
4) Things remain essentially the same. Employees are hit the hardest, inflation is reduced, profits are kept roughly the same in terms of net earnings allocation (percentage of profits) being given to shareholders, and everything just carries on.
I don’t see (4) going on forever, though. I think that’s the least likely. Eventually something will break— and again, probably has already.
Reference:
https://www.nytimes.com/2023/01/04/opinion/workers-employers-inflation-raises.html