In 2023, German economist Isabella M. Weber published one of the most serious investigations revealing that in the United States there has been what she calls “supplier inflation.” [sellers’ inflation, en inglés]”. Their findings confirmed that companies were passing on cost increases (notably energy costs) in sales prices, thereby increasing their profit margins and amplifying the inflationary crisis. However, from their work, Jorge Uxó, Eladio Febrero and Nacho Álvarez have shown that this inflation due to greed also occurred in our country.
His “article” was published this week. It is entitled “Prices, margins and wages: inflation and its distributive consequences in Spain, 2021-2023” and is based on information from the Observatory of Business Margins. This tool cross-references the data [de la mayoría de las empresas no financieras] and methods of the Tax Agency, the Bank of Spain and the Ministry of Economy. It was created in mid-2023, in accordance with a commitment from the coalition government, and, undoubtedly, to the great dismay of employers.
“We calculated the evolution of company margins at the sectoral and aggregate level, and the respective contributions of labor costs. [de los salarios y las cotizaciones sociales] and from profits to price growth,” explain the three economists. “The most important factor in explaining inflation is ‘pass-through’: the transfer of costs to consumers by businesses,” they observe.
Precisely, this factor explains 85% of average inflation from 2021 to 2023. Meanwhile, “the direct increase in margins [de beneficio] explains 14%” of this same data. Finally, “the impact of labor costs is very limited,” they continue.
“Based on these data, we cannot say that we are witnessing ‘profit inflation’ in Spain, if by this term we mean that the price increases come directly and mainly from the increase in company margins. However, we can speak of “profit inflation” in a “low” sense: inflation occurs when companies increase their prices to protect their profits against higher production costs, without workers being able to compensate for it with salary increases,” the study explains.
The economic cabinet of the Commissions Ouvrières (CCOO) insists on this same conclusion. In one of its latest reports, it states that “the ability of companies to defend their margins has consisted of being able to pass on the increase in costs in sales prices, a decisive factor in explaining the high inflation of the Spanish economy which reduced purchasing power. .” of houses.
“However, the increase in relative margins implies that the process goes beyond simply defending pre-existing margins. The process is heterogeneous depending on the sector of activity: while in 2022 energy activities largely explained the increase in margins, in 2023 other activities such as commerce and hotels and restaurants will take over. The process is also uneven depending on the size of the company [las más grandes son las que más han exprimido la inflación y el dinamismo de la economía en general]», Analyzed this team of union experts.
Maximum benefits
In August, the Margins Observatory updated its data until the end of the second quarter of this year and confirmed that non-financial companies in our country continue to benefit from the price crisis and have increased their profits in maximum.
The latest update of this tool includes a projection of corporate profits in 2024 which places them above 200 billion euros for the first time since 2009, as far as this Observatory’s calculations extend.
The Ministry of the Economy took advantage of the birth of the tool to ask companies to “moderate” their profit margins in order to complete the process of lowering inflation. “We must hope that in the coming months he will be transferred [a los precios] the fall in energy prices, for example,” estimated the Observatory’s first report, in June 2023.
Concern about the economy was not accompanied by concrete measures and came late for workers. While prices increased by 15% between the first quarter of 2021 and the fourth quarter of 2023, according to the IPCA (Harmonized Consumer Price Index), “the average salary per full-time equivalent job increased by 8.4%. “. As a result, in Spain, real wages suffered a loss of purchasing power of 6% accumulated over these three years. “Only in the last two quarters of 2023 did annual wage growth outpace price growth. »
This reality allows us to give another name to the price increases of recent years: “conflict-induced inflation”. After the initial energy shock, which began with bottlenecks in global supply chains and was exacerbated by the Russian invasion of Ukraine, “the rise in prices was explained by unequal demands of men businesses and workers regarding the growth of their respective incomes. highlight Uxó, Febrero and Álvarez.
“The distributive consequences are obvious: companies have passed on the increase in costs to final prices, maintaining (or even increasing) their margins. But workers have not benefited from wage growth that offsets this effect of inflation,” they say.
The final conclusion of their “article” is that “given the deterioration of workers’ bargaining power, we did not see second-round effects on wages.” These “second round effects” are also known as an inflationary spiral and refer to the risk that wages rise and drive out the IPCA, impacting on it. But “real wages have not been a source of inflationary pressures, but have acted as a shock absorber against the shock of rising prices”.
Uxó, Febrero and Álvarez make a final calculation of the wage growth that companies could assume without increasing prices, maintaining their initial participation in national income. “We obtain cumulative wage growth of 4.5 points, which would not be inflationary and achievable in Spain,” they conclude from the end of 2023.
