Labor costs point to corporate profit as main inflation driver
1–10 of 30 posts
Re: Labor costs point to corporate profit as main inflation driver
#2> The continued drop in labor costs
Odd way to start the article when later on
> Earlier this week, Donavan said the slowing labor cost growth underscored “how little of the current inflation is labor related.”
Not arguing with the overall premise, but labor costs are still going up.
Re: Labor costs point to corporate profit as main inflation driver
#3"private sector profits as a main driver of inflation"
How can profits drive inflation. Profits have no form. They're just an accounting thing, a calculated value: the difference between revenue and costs.
Re: Labor costs point to corporate profit as main inflation driver
#4"private sector profits as a main driver of inflation" How can profits drive inflation. Profits have no form. They're just an accounting thing, a calculated value: the difference between revenue and costs.
The article states plainly they mean margin expansion.
Comments like this always perplex me. Did you read the article? If yes, what other possible interpretation is there? If no, why comment a question like this that would most likely be clarified in the article?
Re: Labor costs point to corporate profit as main inflation driver
#5Turn up prices when expenses rise, leave them up and profit when expenses fall. That’s it.
Competition is inadequate and incentives don’t exist to price well.
Re: Labor costs point to corporate profit as main inflation driver
#6"private sector profits as a main driver of inflation" How can profits drive inflation. Profits have no form. They're just an accounting thing, a calculated value: the difference between revenue and costs.
> How can profits drive inflation
If every business decides to arbitrarily double their profit margin, then prices will rise, but none of that price rise goes to salaries, nor cost of materials, or anything else but a corporate bank account.
This effectively drains money from consumers, without returning anything to them via salaries.
Re: Labor costs point to corporate profit as main inflation driver
#7I can't tell what this article is saying. The first paragraph says "The continued drop in labor costs", but the Fed data says it hasn't dropped, it's been going up continuously.[1]
The a later paragraph says "Since the labor share [of inflation] is declining" which entirely different than "drop in labor costs".
So what's actually happening is labor costs are going up. They just aren't going up as fast as profits. Why can't they just write that?
And the examples given "oil and gas" is an odd one, since profits vary wildly. When oil costs are down, profits are down. When oil costs go up, profits go way up. It's a capital intensive industry, and that's how it's paid for. Oil is never sold at some small profit margin.
Re: Labor costs point to corporate profit as main inflation driver
#8This line of argument is utter nonsense and propaganda.
Review the history of what happened.
Covid landed. Then the federal reserve printed tons of money (shows up clearly in the percentage of government spending as share of US GDP and M2 money supply).
Then there was a delay and then inflation began to increase.
Inflation is always and everywhere a result of printing.
Re: Labor costs point to corporate profit as main inflation driver
#9"private sector profits as a main driver of inflation" How can profits drive inflation. Profits have no form. They're just an accounting thing, a calculated value: the difference between revenue and costs.
> How can profits drive inflation If every business decides to arbitrarily double their profit margin, then prices will rise, but none of that price rise goes to salaries, nor cost of materials, or anything else but a corporate bank account. This effectively drains money from consumers, without returning anything to them via salaries.
Setting aside the almost impossible feat that every business could collude to arbitrarily double their profit margins, even if your assumption is granted, it would ultimately have no effect on consumers as a whole.
So, assuming businesses are more profitable, they ultimately have 2 things they could do with that extra profit:
1. Hoard it and do nothing with it
2. Invest it
In the case of 1, doing this is tantamount to taking money out of circulation (i.e. lowering supply). When the supply is lowered then everyone else’s purchasing power increases which is a benefit to them.
In the case of 2, investing it, either by starting new businesses or loaning it, means that they are effectively redistributing that money to others in the form of wages. Which is beneficial to workers who also happen to be consumers.
Re: Labor costs point to corporate profit as main inflation driver
#10Earlier quoted context omitted.
> How can profits drive inflation If every business decides to arbitrarily double their profit margin, then prices will rise, but none of that price rise goes to salaries, nor cost of materials, or anything else but a corporate bank account. This effectively drains money from consumers, without returning anything to them via salaries.
Setting aside the almost impossible feat that every business could collude to arbitrarily double their profit margins, even if your assumption is granted, it would ultimately have no effect on consumers as a whole. So, assuming businesses are more profitable, they ultimately have 2 things they could do with that extra profit: 1. Hoard it and do nothing with it 2. Invest it In the case of 1, doing this is tantamount t…
All of this is true is a company rises prices without affecting the behavior of others.
When suppliers notice their customers raising prices, they raise prices to capture some of that increase. Likewise, workers will try to increase wages.
The result is a profit-price spiral that gets misdiagnosed as wage-price spiral.