ICYMI: The Guardian, USA Today Show How Inflation Offers Companies ‘Convenient Pretext’ to Jack Up Prices
April 27, 2022 Groundwork Collaborative
New reporting from The Guardian and USA Today published today offers more evidence of ongoing corporate profiteering. Corporations are reporting record-breaking profits by raising prices under the cover of inflation – and struggling consumers are picking up the extra costs.
- The Guardian’s analysis of 100 top corporations’ financials and earnings calls reveals net profits rose by 49% and in one case by as much as 11,000%. These findings are consistent with new BEA data showing corporate profit margins are at their highest level since 1950.
- USA Today cites profit margins and earnings calls as further proof that, rather than being forced to raise their prices because of forces beyond their control, like supply shortages, companies are choosing to jack up prices to enrich their shareholders and executives.
Dr. Lindsay Owens, executive director of Groundwork Collaborative, put it succinctly:
“Anyone who still believes CEOs raise prices as efficient and benevolent stewards of supply shortages is living in a fantasy land found only in an introductory economics textbook.”
Email firstname.lastname@example.org to speak to Dr. Owens about this latest reporting on profiteering and profits. And visit endcorporateprofiteering.org for the latest evidence from quarterly earnings calls.
The Guardian — Revealed: top US corporations raising prices on Americans even as profits surge
“The analysis of Securities and Exchange Commission filings for 100 US corporations found net profits up by a median of 49%, and in some individual cases by as much as 111,000%. Those increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or bumped dividends to enrich investors.”
“In earnings calls, executives detailed how even as demand and profits rose post-vaccine, they passed on most or all inflationary costs to customers via price increases, and some took the opportunity to add more on top. Margins – the share of sales converted into profits – also improved for the majority of the companies analyzed by the Guardian.”
“Commodity price spikes reverberate down the supply chain, eventually hitting consumers, noted Martin Schmalz, an Oxford University economist. The Guardian’s data, he added, objectively shows a massive ‘transfer of wealth’ from consumers, who pay higher prices, to shareholders and investment firms that reap the benefits.”
“The pandemic, war, supply chain bottlenecks and pricing decisions made in corporate suites have created a ‘smokescreen,’ said Lindsay Owens, executive director of the Groundwork Collaborative, which tracks companies’ profits…That gray, nebulous area is fertile ground for companies right now, and you hear about it in their earnings calls. Inflation itself is the opportunity.”
USA Today — Critics say corporate greed is making inflation worse, citing record profits despite rising costs
“‘They see (inflation) as an opportunity,’ says Lindsay Owens, executive director of Groundwork Collaborative, a progressive economic policy research group. ‘It’s a convenient pretext.’”
“‘Corporations enjoying record profits in a healthy competitive economy would absorb (their higher costs),’ Reich said. ‘Instead, they’re passing these costs onto consumers in the form of higher prices. Why? Because they can. And they can because they don’t face meaningful competition.’”
“A recent analysis by lead U.S. economist Oren Klachkin of Oxford Economics found that industries with fewer competitors are enjoying the most pricing power during the current spate of inflation. They include chemicals; technology; utilities; food, beverage and tobacco; and industrial goods and services.”
“In a blog last week, Josh Bivens research director at the left-leaning Economic Policy Institute, said more than half of the 6.1% overall price increase among nonfinancial corporations during the recovery can be traced to fatter profit margins while labor costs contributed less than 8%. From 1979 to 2019, earnings contributed about 11% to price gains and labor costs accounted for more than 60%.”