Inflation has been in the news a lot lately. The Consumer Price Index, released by the Bureau of Labor Statistics, shows a 5.4 percent increase in prices nationally since September 2020. Higher prices for basic needs such as food, energy, and housing are driving the increase. Food prices increased 4.5 percent overall, with meats, fish, and eggs up 10.5 percent. In Washington, the trends are the same: the CPI-U rose by 5.3 percent, food by 4.7 percent, and energy prices by 25 percent, driven by higher gas prices.
While some analysis has pointed to supply chain disruptions to explain the jump in prices, analysis by the Groundwork Collaborative and the American Economic Liberties Project points to an additional culprit: the growing power of and consolidation of industries by giant corporations.
One vivid example is the story of grocery behemoth Kroger and food prices. Kroger is the third largest retailer in the country, behind Walmart and Amazon. As part of its expansion strategy, it bought out formerly independent local chains, including QFC, Fred Meyer, and Ralphs. During the pandemic, as restaurants shut down and workers stopped traveling to the office, households spent more at the grocery store. Kroger has seen record earnings, with more than $2.9 billion in operating profits through the middle of 2020, an increase of $1.2 billion compared to the year before that. The corporation has continued to see huge profits into 2021.
In a global pandemic, we all have to pull together and help each other out, right? Kroger could have invested its record profits in its workers through better pay and benefits, and into the communities served by its stores through lower prices. Kroger instead chose to run in the opposite direction. For instance, when Seattle’s City Council passed a bill for hazard pay for grocery workers, Kroger closed two Seattle area stores, citing the need for an “even playing field” and “razor thin margins.” Its corporate balance sheet tells a different story. Instead of investing in its workers and keeping stores open, Kroger sent millions to investors via dividend payments and has done over $1.4 billion in stock buy backs between April 2020 and July 2021.
What about food prices? In the summer of 2021, Kroger’s CEO said on a call with analysts that, “A little bit of inflation is always good in our business,” as the groceries stores can simply raise prices, passing on costs to consumers who, according to McMullen, “don’t overly react to that.” Kroger didn’t use its record profits to keep prices low or track with inflation, but sought to rake in even more profits by passing on inflation — plus a bit more — to its shoppers.
Consolidation undermines worker and consumer power, eliminating competition for both. A 2018 study revealed that 75 percent of US industries experienced an increase in concentration, meaning fewer and larger firms control more market share over time. The study demonstrates that increased concentration leads to increased profits for the dominant firms, but that those profits are arising from increased markups rather than greater efficiency. The paper points out that profits have flowed to investors rather than investments in capital or workers, reflecting the real-world example of Kroger described above.
While Kroger provides a stark example, it’s by no means the only example; food delivery apps, such as Uber Eats and DoorDash (which acquired Postmates in 2020), are another. Despite cities passing legislation to cap how much these companies can charge restaurants to use their apps to reach customers, the companies have disregarded these caps, exploiting local restaurants desperately trying to stay open during the pandemic. In addition to these exploitative practices on the restaurant side, the Office of Labor Standards in Seattle dealt with cases of workers’ rights law violations by Postmates and DoorDash in the summer of 2020, for failing to abide by the Seattle Gig Worker Premium Pay ordinance. A recent Reuters investigation showed that Amazon has been using its internal data on sellers and their products to create and promote knock-off products.
The story is the same across these industries: in a year of record corporate profits, corporations paid investors, bought back shares, raised prices, and exploited both consumers and workers, through a variety of mechanisms, in the relentless drive to make even more profit.
None of this is surprising, but it is especially disturbing that pandemic profiteering is happening at a time of increasing economic insecurity among the American people. A sobering report from NPR and the Harvard School of Public Health reveals that in the past few months 38 percent of households faced serious financial problems, with 59 percent of those with annual incomes below $50,000 reporting facing serious financial problems, compared with 18 percent of households with annual incomes of $50,000 or more. To put this in perspective, the US median income was $68,703 in 2019. Incredibly, 19 percent of U.S. households report losing all of their savings during the pandemic. When broken down by race, the pandemic’s disparate impacts and our nation’s history of oppression are starkly visible, with half of Latinos, Black people, and Native Americans experiencing serious financial problems, compared with only 29 percent of White people reporting the same.
When so much of our public infrastructure is privatized and profit-driven due to systematic and chronic underfunding by state and federal governments, financial hardship can easily cascade into health problems, mental and emotional stress, and housing insecurity. In Washington, despite our state’s wealth, households are struggling to meet basic needs. The Census Household Pulse Survey shows that as of early October, 29.6 percent of households were facing either somewhat or very likely eviction from their homes in the next two months. In this survey, 7.2 percent of Washington households faced food scarcity, in which there wasn’t enough to eat, and nearly a quarter (23.7 percent) were having difficulty paying for household expenses.
With all of this in mind, it’s clear that corporate power and consolidation must be addressed through both state and federal policies. Two key ways to address corporate power are through stronger labor laws with robust enforcement, and through tax policy. The AFL-CIO has been leading the advocacy for passage of the PRO act to address workers’ rights in the era of gig work and industry consolidation. At the state level, the Washington State Labor Council has advocated for addressing the woeful lack of resources to enforce workplace rights’ violations through passage of the Worker Protection Act, among other advocacy to grow worker power and rights.
We need national corporate tax reform to prevent situations in which companies make huge profits and pay no or little income tax through the various deductions and accounting mechanisms that exist. The Institute for Taxation and Economic Policy has identified 55 S&P 500 corporations that reported large profits but paid no federal corporate income taxes in 2020. Multiple corporate tax reforms and the reining in of profiteering on prescription drugs were included in the Build Back Better proposal, but those provisions, along with the investments in childcare, paid family leave, health care affordability, college, and addressing climate change that would shore up working families, are under intense attack by special interests seeking to guard their wealth and power.
At the state level, Washington has the most unfair tax code in the country, with low- and middle-income families paying proportionally much more than millionaires and billionaires. At the same time, our state’s reliance on the sales tax has encouraged under-funding of education, health, and housing due to the structural deficit created by our changing economy. Large corporations have been able to lobby for extremely generous tax breaks in the B&O and other taxes, and have a large influence in blocking policies that would benefit and empower workers and families. The increasing power of corporate America over all areas of our life is reflected in the austerity budgets of state and federal governments and the disturbing levels of food, housing, health, and economic insecurity among the American people. Our federal and state governments must boldly address both sides of the equation through holistic tax reform for a fair and sustainable system that enables ample investment in our people, and communities in which we all can thrive.
More To Read
October 22, 2021
Increased corporate power and consolidation may be a driver behind the rise in inflation
January 24, 2020
How one clause created a statewide budget shortfall
January 19, 2019
Corporate and billionaire giving helps their image more than it helps us