How do official figures showing wage rises averaging 6% – well below the 10.7% consumer prices index?
How does pay settlement data, which tracks the big deals offered this year by major employers across the public and private sectors, reveal a trigger for runaway prices when it shows those deals average just 4%?
There are hundreds of products in the shops that have benefited from falling shipping costs, lower raw materials costs and labour costs yet prices continue to climb.
Paul Donovan, chief economist at UBS Global Wealth Management, has analysed the situation in America, where more detailed information about the corporate sector is available. He examined the rise in wage costs across the hotel sector, adjusted for productivity since the end of 2019, and found it was between 5% and 6%. Restaurant and hotel prices had risen 16%. Donovan found hotel operators were using fewer staff to improve productivity, limiting the impact of wage rises. This rise in efficiency was being channelled to shareholders, not consumers, who were fed a story that prices needed to rise to cope with rising wage bills.
Corporations in the US made quarterly profits of almost $3tn in the three months to the end of September, up from $2.4tn two years earlier and an average $2tn in the eight years before the pandemic.
Analysis by the Unite union of Britain’s largest 350 companies revealed a similar trend – profit margins were 73% higher in 2021 than 2019. “Even though sales were down in 2021, profits still rocketed,” said the union’s general secretary, Sharon Graham. “Even removing energy companies from the tally, average profit margins still jumped an astonishing 52%.”