Exposing the inflation myth – Bosses’ pay rockets while workers get poorer 

Philip Stott

The usual suspects have been continuing to peddle the myth that workers fighting for pay rises are contributing to stubbornly high levels of inflation. On the back of the Office of National Statistics (ONS) figures that showed wages increased by 7.8% in the April-June quarter of 2023, the highest rate of growth since 2001, although still less than rising prices, Tory MPs and economic analysts were queuing up to point the finger at ‘wage inflation’.

They were utterly silent of course when the bosses of the UK’s 100 largest listed companies were found to have pocketed an average £500,000 pay rise in 2022. FTSE 100 chief executives received an average pay rise of 16% last year, taking their median pay to £3.9m, up from £3.4m in 2021, according to research by the High Pay Centre thinktank.

Pascal Soriot, the CEO of the drug company AstraZenica was the highest paid last year, collecting £15.3m, up from £13.9m the previous year. Charles Woodburn, the boss of the arms manufacturer BAE Systems, was the second highest paid, collecting £10.7m. Third was Albert Manifold, the top boss of the building supplies company CRH, who was paid £10.4m. Oil and gas companies BP and Shell were also among the top earners. The BP chief executive, Bernard Looney, was paid just over £10m, while Shell’s former CEO Ben van Beurden was paid £9.7m.

The median FTSE 100 CEO is now paid 118 times the median UK full-time worker, an increase from 108 times in 2021 and 79 times in 2020. The average salary for full-time UK workers is £33,000, according to the ONS.

As every workers knows, demands for higher pay and the wave of strike action we have seen in Britain over the past year were a response to rocketing inflation, not the cause of inflation. 

Marx

Pay improvements won by workers taking strike action have no direct impact on rising prices. As Karl Marx explained, the value of a commodity is ultimately determined by the amount of socially necessary labour time put into its production.

The capitalist takes the commodities produced by workers and sells them in the market place, which then releases the surplus value contained within it. Surplus value – profit – is produced by the worker in the process of production.

But the working class do not receive in wages the full value of their labour power. In that context, a wage rise for workers in one industry simply cuts the amount of surplus value that goes to the capitalist – it does not alter the amount of labour time in the production of the commodity, therefore the value or price remains unaltered.

Whether the capitalist tries to increase the price of the goods or services in the market to maintain its profit margin – which undoubtedly does happen – is not directly related to the wage rise for workers at all. 

Profiteering by big business in a world economy dominated by a handful of multinational companies underlines the need for their nationalisation under democratic workers’ control and management. 

While headline rates of inflation – always an underestimate of the real rising costs for the working class – are falling in the UK and to some extent in the advanced capitalist countries, the reality is workers’ incomes are still falling. Research from 2022 by the TUC showed that it was the worst year for real wage growth in half a century. Food inflation is a key factor in that, alongside energy costs. 

Food inflation 

In the UK food prices rose 17.4% in the year through June 2023. Global food prices are 36% higher than they were in 2020. The Ukraine war has disrupted grain production, environmental factors also play a role in impacting the supply chains of food production, including flooding, removing arable land as sea levels rise. Record heat also undermines production and can push up prices as availability falls. 

At the same time the domination of the industry by a handful of multinational food companies allow them to push up prices to boost profits. Four companies control an estimated 70-90% of the global grain trade. Four other corporations control more than 50% of the world’s seeds. 10 companies globally have a stranglehold on the food and drink we buy at the shops and supermarkets. 

This stranglehold on the economy by big business screams out for the need for public ownership and a socialist plan of production to remove the profit-mongering of the parasitic capitalist class.

As it is, inflation may be falling, slowly, but that does not mean that prices are falling. On the contrary they are still rising, albeit more slowly than before. That’s why trade unions must continue the fight for wage rises that fully cover the cost of living and oppose all attempts to make workers pat for the bosses’ crisis. 

Chaos

Inflation is a by-product of the chaos and unplanned nature of the capitalist system itself. It does not have a singular cause but has multiple causal factors. Without doubt the enormous accumulation of debt – bailouts, quantitative easing (electronic money) etc – utilised by the various national capitalist classes to bail out their system following the 2007/08 financial crash, then the cost of the pandemic, has contributed to inflationary pressures.

As has the disruption to the supply chains and the dislocation of the economy generally arising from the economic shutdown during Covid and then the opening up afterwards which exposed shortages of commodities and of labour. 

Too much money chasing too few commodities in some sectors also added to inflation. As did rising energy costs, reflecting increased demand for energy. Protectionist measures, for example by the US on China, and features of deglobalisation are all accelerating and will add to disruptions to the world economy. 

The remedy for inflation disease, as far as the bourgeois are concerned, is to use interest rates as a blunt weapon to drive inflation out of the economy. This only adds to the pressures on the working and middle class as debt on credit cards and mortgages becomes ever more expensive. It also risks triggering a new global recession. With the World Bank, the World Trade Organisation and the IMF all predicting world growth dropping to less than 2% in 2023, a new recession could become a quick reality. 

What choice do the working class have but to organise. To join and become active in the trade unions. To use the strike weapon to fight for inflation-proof pay rises. And to draw the conclusion that the rule of capitalism has to end if we are to resolve instability, poverty and environmental catastrophe. That means a fight for socialism.