The way to beat inflation - strike for higher wages!


Inflation is now at it highest rate since 1983. Compared to a year ago prices are up 8.1% on average. Food has increased by 8.8%, gasoline is 50% more expensive, and goods overall have increased by 11.2%. This means that your standard of living is decreasing. The Bank of Canada is taking action to decrease it even more.

 

Not everyone is suffering. Big business and the 1% are making out like bandits. CEOs in the top 100 largest publicly traded companies got an average pay increase of 23% last year. The total pay of all 100 CEOs increased by 32%. For the rest of us, from April 2021 to April 2022, the average wageincreased by less than 4%.

 

Combining their salaries and bonuses, these 100 CEOs (nearly all of whom are men) took home over $1.1 billion last year. That’s as much as the combined wages of 20,000 workers making the average wage in Canadain 2021 of $58,790. Philip Fayer, CEO of Nuvei Corp is the highest paid of the bunch. He was given $141 million, or more wages than 2,390 average workers.

 

Corporate profits have followed the same trend. A study by David Macdonald from the Canadian Centre for Policy Alternatives(CCPA) showed that profits have increased more since the 2020 recession than any of the previous six recessions that occurred over the last 50 years. 

 

The study shows that, “in the final months of 2019, corporate profits captured 12.4% of GDP. By the first quarter of 2022, corporate profits had risen to 15.2% of GDP. This unprecedented 2.8-point increase during the pandemic recovery is more than three times larger than the next highest recovery of corporate profits, in 1981.” 

 

At the same time the share of GDP going to workers has decreased, leading to the second worse decrease in wages after a recession in 50 years.

 

Inflation is due to businesses increasing prices to boost profits even higher.

 

The Bank of Canada wants you to suffer

 

The Bank of Canada (BOC) has been raising interest rates in order to “fight inflation.” You might think that they intend for food and shelter prices to come down. That is is not what they are after. Instead they want to lower future increases in prices and to do that they want to lower the demand for goods and services. 

 

The key to the BOC fight against inflation is to lower wages and increase unemployment. One of the “key messages” in the the BOC July Monetary Policy Reportis, “labour markets are tight. The unemployment rate is low, and elevated job vacancies and widespread labour shortages are pushing up wage growth. With strong demand for their products, businesses are passing through higher input and labour costs to consumer prices.” In other words low unemployment and rising wages are problems that the BOC hopes to fix. 

 

Later on the report quotes the Business Outlook Surveyof 100 firms which states that “labour shortages” include, “an inability to find suitable new labour at the current wage.” And 85% of respondents to the survey expect to have to pay higher wages over the next 12 months. Business owners themselves know that they aren’t paying decent wages.

 

The BOC also blames rising wages for inflation, but wages were falling when inflation started last year, and they still aren’t keeping up with inflation. The Monetary Policy Report cites increasing wages also as a threat for future inflation. “The Bank of Canada is keenly aware of the possibility of a wage-price spiral and is firmly committed to ensuring that this dynamic does not set in. This requires setting monetary policy much tighter than in the base case to ensure that long-run inflation expectations remain well anchored.” In other words, the beatings will continue until morale improves.

 

But it isn’t wage increases that are creating inflation. Businesses are adding to their own increased costs to increase profits. A study from the Roosevelt Institute in the US showed that markups and profits by US corporations are at their highest level since the 1950s, and the increase in 2021 was the greatest since 1955.

 

Canadian corporations are doing the same thing. An investigationby The Toronto Star found that grocery store chains are bringing in record profits by raising the prices they charge by more than their own costs are rising. 

 

The report states, “In the first six months of the pandemic, the three chains’ sales revenue increased by almost $4 billion. It was more than enough to make up for the increased costs. Gross profit was $1 billion higher than it had been the previous year. “ The Star calculated that if grocery store profits had not increased during the pandemic, shoppers would have spent $1.4 billion less than they were forced to.

 

The BOC is going to defend these profits, not matter what the cost to you is.

 

Interest rates and inflation

 

Despite how it’s presented by the mainstream media and the BOC, raising interest rates is not like a dial that controls inflation. Rising interest rates are expected to take money away from workers who have mortgages so that they have less to spend. At the same time, it makes borrowing for businesses more expensive, so they are less likely to expand their business and hire more workers. In both cases workers are expected to suffer to try to lower inflation.

 

Another CCPA study, also by David Macdonald was published two weeks ago that shows that in the last 60 years each time the BOC raised interest rates in order to lower inflation by more than 5% it caused a recession. The study points out, “Recessions often discussed in rather dry terms of two quarters of negative real GDP growth. The practical impacts on regular Canadians through job loss and suppressed wages are often under-appreciated.” If the next recession is similar to the last three times the BOC engineered a recession to try to save profits, Macdonald calculates that between 850,000 to 1.3 million people will lose their jobs.

 


The real story

 

Inflation comes about due to the chaos of capitalism. Investment flows to where profits are highest. But every business needs inputs from other industries. Grocery stores can’t sell bread without wheat farms, and wheat farms can’t produce wheat without fertilizer production and all of them rely on transportation companies to move everything around. 

 

But, production isn’t planned on the basis of what we need or how it all fits together. As one industry becomes more profitable than others, investment is directed there and its production increases while other sectors grow at a slower rate, or shrink. Eventually this leads to supply bottlenecks when a growing sector needs inputs from a shrinking one. Then a lack of supply can drive up the prices capitalists can demand for their products, allowing them to increase their profits. 

 

Pandemic shutdowns, Russia’s invasion of Ukraine, and NATO’s sanctions on Russia are the most recent trigger for this recurring problem in capitalism. But it is built into capitalism to produce this sort of chaos and price-gouging. The BOC and our various levels of government will act to protect profits and expect us to pay for the continued growth of the wealth of the 1%.

 

Strike for higher wages

 

Inflation is a class issue. Business owners are causing it and they want the rest of us to pay for it. The only way to defend our standard of living is to strike for higher wages. Recent strikes have shown that this is possible. In May, workers at concrete plants in BC  won a 14% increase spread over three years. HBC warehouse workers in Scarborough won a 13.3% wage increase over 3 years plus $1,500 in retroactive pay. Operating Engineers in Ontario struck construction sites across the province in May and won a $3/hour raise each year for three years. Last August, Steelworkers in Sudbury ended their first strike in over a decade with a 6% wage increase and a cost of living adjustment. They also won a $2,500 payment for their work during the pandemic and a $3,500 signing bonus.

 

Wage gains are possible, but in order to keep up with inflation much greater increases are needed. We need to win 9% or 10% increases per year and/or a cost of living adjustment that rises with inflation.

 

As more workers strike and win, the employers and their government will fight back. In 1975, the federal Liberal government imposed wage controls that were below the rate of inflation. This was the beginning of a long term lowering of wages that we still live with nearly 50 years later. Several provinces already have wage controls for the public sector. They will all fight to keep those low wage increases and try to divide public and private sector workers from each other.

 

Only strike action can defend our standard of living right now. But we also need to fight for a society that is free from the chaos of capitalist markets with their disruptions, shortages and attacks on our standard of living. We need a world were workers democratically control production and can increase everyone’s standard of living in solidarity with each other and the natural world.