The United States Federal Reserve Bank has been hiking interest rates to combat runaway inflation, but there’s another force adding to higher prices—corporate greedflation.
“Greedflation” is a relatively new pejorative term accusing companies of leveraging their power to price-gouge and reap excessive profits. Some of the largest S&P 500 companies in the U.S. have openly acknowledged that they’re benefiting from increased prices, according to a recent report by Accountable.US. The study shows that many of America’s biggest consumer companies reported their net profits increased year over year, rewarding shareholders with billions of dollars.
In addition to greedflation, Americans face job insecurity, record inflation and rising interest rates, as they struggle to make ends meet. With 60% of people in the U.S. living paycheck to paycheck, households are turning to credit cards for consumer spending. Credit card debt has topped a record $1.03 trillion, according to the Federal Reserve Bank of New York.
Profiteering From Inflation
The consumer discretionary sector has been a leading driver of profits for S&P 500 companies since the fourth quarter of 2022, the New York Times reported. With increased profit margins, corporations allocated $922.7 billion on stock buybacks and $564.6 billion in dividends, which richly rewarded shareholders.
Simply put, business leaders ratchet up prices because they can. In their 2023 quarterly earnings calls, Kimberly-Clark, PepsiCo, General Mills, Tyson Foods and Ulta Beauty are among the corporations that lauded their pricing power to shareholders and revealed how their price surges have positively impacted their top-line growth. Companies are also getting away with charging the same or higher sticker price for downsized packaging and product quantity, known as “shrinkflation.”
According to the New York Times, these large corporations plan to continue elevating prices, or at least keep them at their current high levels. While greatly benefiting the organizations and their respective C-suite executives, this business model has a deleterious effect on propping up inflation, leading to job cuts.
How Corporate Greed Impacts Workers
With greedflation masked as runaway inflation, the Fed could continue raising interest rates, believing it will help bring down costs.
Workers in the U.S. are still reeling from the economic downturn that started taking place in mid-2022. In the ongoing fiscally restrictive environment with dramatically higher interest rates, companies have enacted massive layoffs, implemented hiring freezes, allowed attrition without replacement and rescinded job offers.
Even major corporations that saw revenue growth from their price increases lay off staff to minimize labor costs and maximize profits. Instead of citing “corporate greed,” they use “economic uncertainty” to justify letting go of employees.
Source: Forbes
