News Release

Inflation Caused by Supply Constraints and Soaring Corporate Profits Far More than Wages

Biden is traveling to Ohio on Wednesday to talk about the economy.
PIA MALANEY, pmalaney@ineteconomics.org, @piamalaneyMalaney is senior economist at the Institute for New Economic Thinking.She said today: As the Fed debates further interest rate hikes to control a ‘wage-price spiral’ it is becoming increasingly clear that it is not wages that are driving today’s high inflation. Real wages have in fact been falling.“The Fed’s solution could bring down inflation over time, but not without real economic pain for those least able to bear it.“Tackling inflation effectively demands that the administration focus on the real pressures — supply constraints and soaring corporate profits. As monopoly power of large corporations has increased, so too has their ability to raise prices. Evidence from corporate earnings calls finds senior executives bragging about the ability to use inflationary pressures to raise prices above their rising input costs, finding that inflation is good for their bottom line. Corporate profits have contributed to more than 50 percent of current inflation, as compared to wage increases, which have contributed less than 10 percent.”