When soaring housing costs are taken into account, living standards have been falling for most working-age households since 2002.
House prices have risen 20% since the start of the pandemic and are at a record high, both in absolute terms and relative to earnings.
This leaves growing numbers of people trapped in the private rented sector, where about a third of their income is gobbled up by rent alone. Average rents have risen 8.6% in the past year and now stand at over £1,000 a month. This comes on top of a decade where rents already rose far faster than wages.
Of course, renters’ losses are landlords’ gains. Attracted by these outsize returns, buy-to-let investors have swallowed up a substantial chunk of available homes in recent years.
We see the same patterns elsewhere.
Britain’s childcare system is the third most expensive in the world: bad news for parents but good news for the private equity investors buying up nurseries.
Meanwhile, about £1 in every £10 spent on social care is extracted from the system by highly financialised companies that own and control assets within it – contributing to an eye-watering 30% increase in costs for self-funded care since 2012.
Rail fares have risen 20% in real terms since privatisation
And water bills 40% – with excess profits inflating the latter by an estimated £2.3bn a year.
Meanwhile, as the thinktank Common Wealth points out, the monopoly owners of the electric grid are achieving 40% profit margins, and pay out over £1bn a year to shareholders.
High energy costs may have millions wondering how they will heat their homes, but BP’s chief executive boasted unashamedly that they turn his company into a “cash machine”. BP’s and Shell’s profits soared to a combined $32bn last year, with BP shareholders standing to benefit from a $1.5bn share buyback.
In the US, where corporate power is even more concentrated than in the UK, the real danger is not a wage-price spiral but a “profit-price spiral”.
US corporate profit margins are at a 70-year high, and have risen 37% in the past year alone.
In one survey, more than half of retailers admitted to raising prices by more than their increase in costs – with larger firms most likely to be doing so. The narrative about inflation offers a convenient smokescreen for fattening margins, as investors brazenly admit.
In the words of one asset manager: “What we really want to find are companies with pricing power. In an inflationary environment, that’s the gift that keeps on giving.”
Morgan Stanley recently argued, it’s profits that must shrink to absorb the pain of inflation – making up for decades in which capital has increased its share at the expense of workers and consumers alike.
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