What workers should know about price gouging

Many prices are far above average inflation. Gasoline is up 18.2%; butter and eggs 30%. PHOTO: Kathleen Merrigan / FS
Share with your friends

Este artículo en Español

Prices for many commodities that workers need for survival continue to climb or remain stubbornly high. The wage growth seen over the last 18 months that dampened inflation for some is now on the decline. Supply chain shocks and shortages are starting to abate, but corporations are keeping prices high because, due to limited competition, they can. How can workers find relief?

Inflation and its causes. In the United States, the Consumer Price Index (CPI) issued by the Bureau of Labor Statistics is a measurement of average market prices over time for select commodities. It increased 0.4% in September 2022 and is up 8.2% over the last year.

But the actual change in certain prices versus one year ago is more telling. To name just a few national averages, butter and eggs are up over 30%, public transportation 27%, and gasoline 18.2%. In several states, rental housing has increased by double digits.

Wages, on the other hand, declined by 0.1% in September and have fallen 3% year over year when adjusted for inflation. Federal pandemic era assistance programs that temporarily protected workers have all expired.

If it isn’t supply chain disruptions caused by global events that are hitting workers’ pocketbooks, it is the stone-cold greed of major corporations. Almost every industry providing vital goods and services — food, pharmaceuticals, autos, banking, fuel, cable and more — is dominated with near monopoly power by a few behemoths.

They are using international affairs supposedly out of their control as a pretext to raise prices far above their costs of production. And they’re laughing all the way to the bank with record profits. The Economic Policy Institute found that since recovery from the Covid-19 recession began, rising profit margins have accounted for roughly 40% of the increase in prices in the U.S.

Price controls and other partial solutions. There are two forms of controls: “floors” and “ceilings.”

Raising the floor, meaning minimum wages, would be a big help. In the United States, the federal minimum of $7.25 per hour has not increased since 2009. And the federal rate for tipped employees of $2.13 is a disgrace! Workers in 30 states; Washington, D.C.; and Puerto Rico have taken the initiative and won wages above the federal minimum, giving them a little breathing room. But it still applies in 20 states. And the federal minimum wage and many others don’t rise with inflation as they should.

Price “ceilings” have been applied around the world in the last 100 years, with mixed success for working people. They have been used in times of economic calamity and war.

In both world wars and the Korean and Vietnam wars, price and wage controls and rationing of commodities were on the menu of temporary measures as the U.S. directed maximum resources to war efforts. (War production accounted for 52% of the gross national product in World War I.) In World War II, new government departments, including the Office of Price Administration were created to administer production of and prices for commodities that were in short supply and high demand. Such measures were also employed during the Korean War and after Vietnam to keep inflation down, but it reignited when they were lifted.

There are other ways to keep prices down that don’t cut wages. They fall on a spectrum of effectiveness; some are more valuable than others.

The U.S. has Medicare and Medicaid, which are public health care insurance programs limited to seniors and low income people. They pay for mostly private sector services and medications, so they must contend with the capitalist marketplace. Their ability to control prices is limited and often prohibited by law. They are not as widely available or cost effective as the fully public healthcare in the U.K. and France.

Public housing in the U.S., originally a New Deal program of the 1930s, limits rents to 30% of tenants’ income. When widely available, it kept the entire housing market more affordable due to competition but has been steadily starved of funding over decades. Rent control has been used in select cities but starts at unaffordable market rates and has been undermined by developers and politicians so that the available housing supply is limited.

The Brazilian government-owned oil company, Petrobras, controls 80% of refining capacity, and its management must get federal permission to raise prices. In the U.S., calls are getting louder to impose windfall profit taxes on industries like oil and gas, and to break up trusts to reintroduce competition.

Nationalization. Price controls, regulation, taxes, and partial public ownership of certain firms give working people a relatively better shot at survival. But these will never be as successful as fully nationalized industries under workers’ control, where the power of the private market is eliminated. Not only can nationalization determine prices, but it can also usher in much more efficient use of resources by producing for human needs and those of the planet, instead of private profit.

If the energy industry alone were nationalized in the most developed countries, it could stabilize prices globally and give humanity a fighting chance to curb and eventually reverse global warming by phasing out fossil fuels and shifting to sustainable forms of energy.

Send feedback to FSnews@socialism.com.

From August 2021 to August 2022, profits went up 20%, prices went up 8%, and wages went up 6.5%. Source: Portside.org

Share with your friends