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Why Wages Fell and Profits Surged
February has been punctuated by record shattering profit announcement, and its becoming increasingly obvious corporations are using emergencies — such as the pandemic, supply chain disruption, or gas shortages — as an excuse to raise gains.
Analysts are only just beginning to lay out the pattern, but in case you were wondering why stuff like peanut butter and cola got so expensive: it’s because big corporations are hiking prices by double-digit figures and making record profits, not because people are buying too much of it.
To those who actually buy stuff this may not seem like a groundbreaking insight, and yet for the past nine months, the European Central Bank (ECB), responsible for keeping prices level, has increased interest rates, making it even harder for people to buy things, while letting corporate profits — the main driver of inflation — off the hook.
This puts further pressure on disposable income, which despite massive government support schemes — estimated at €800bn in 2022 alone — fell by 2.9 percent last year; 6.9 percent in Greece and 3.1 percent in Germany, where it fell for the third year in a row.
The question is, why? Why do we suppress wages while letting let profits rip? To put it in historical perspective: in the 1970s, nearly 70 percent of economic output went to employees, with just over 20 percent going to profits. Now, labour’s share stands at 56 percent with a third going to profits.
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Analysts are only just beginning to lay out the pattern, but in case you were wondering why stuff like peanut butter and cola got so expensive: it’s because big corporations are hiking prices by double-digit figures and making record profits, not because people are buying too much of it.
To those who actually buy stuff this may not seem like a groundbreaking insight, and yet for the past nine months, the European Central Bank (ECB), responsible for keeping prices level, has increased interest rates, making it even harder for people to buy things, while letting corporate profits — the main driver of inflation — off the hook.
This puts further pressure on disposable income, which despite massive government support schemes — estimated at €800bn in 2022 alone — fell by 2.9 percent last year; 6.9 percent in Greece and 3.1 percent in Germany, where it fell for the third year in a row.
The question is, why? Why do we suppress wages while letting let profits rip? To put it in historical perspective: in the 1970s, nearly 70 percent of economic output went to employees, with just over 20 percent going to profits. Now, labour’s share stands at 56 percent with a third going to profits.