“It’s not a Democrat or Republican thing. It’s a worker’s issue.”

The Pitch: Economic Update for May 12th, 2022

(The Pitch is a weekly economics newsletter written by Zach Silk. Follow here on Medium or sign up for free on Substack.)

Friends,

In a virtuosic editorial for the New York Times, Lindsay Owens wrote about the corporate profiteering that has spiked prices for ordinary Americans. “Companies that historically might have kept prices low to pick up profit by gaining additional market share are instead using the cover of inflation to raise prices and increase profits,” she writes. “Consumers are now expecting higher prices at the checkout line, and companies are taking advantage. The poor and those on fixed incomes are hit the hardest.”

We’ve been writing about corporate price-gouging in this newsletter for a while now, but Owens takes her argument a step further, showing that it puts the lie to one of the most basic tenets of Econ 101 classes everywhere: The fallacy that the all-knowing market can solve any problem created by unconstrained capitalism. If you were to ask your Econ 101 professor what would happen if a corporation decided to raise prices to the point that customers could no longer afford their goods, the professor would respond, as Owens put it, “​​If sellers take price hikes too far, customers will just go to a competitor across the street.”

Owens responds to that hypothetical solution with a question that captures the perversity of this inflationary moment: “But what if there are no competitors?” What if every seller of necessary items like food and fuel raises their prices in lockstep? That’s when government has to step in. Owens highlights some steps that leaders are taking, including a proposed “federal price-gouging statute” that allows leaders to intervene when profiteering runs out of control, as it has in this moment. And an excess profits tax, which Owens points out lawmakers employed as recently as the 1980s, would likely discourage the out-of-control price hikes we’ve seen.

I’ve read a lot of pieces about price hikes in the past few months, and if you’re a regular Pitch reader, you have too. But it’s always refreshing to see a writer like Owens grab hold of a much-discussed issue and break it down to its parts using clear, cogent, and passionate language. When you truly understand a problem inside and out like this, as Owens does, that makes the problem easier to understand, and ultimately easier to solve.

The Latest Economic News and Updates

The April jobs report is packed with good news

The monthly jobs report released last Friday was full of unalloyed good news for the second month in a row, with 428,00 jobs added to the economy, and nearly 80,000 of those jobs in the beleaguered leisure and hospitality sector. Black unemployment finally ticked below 6 percent for the first time since the pandemic began, with the all-time low of 5.5 percent in sight.

In another heartening sign, the number of Americans who have been unemployed for more than 27 weeks is declining, showing that even long-term unemployed Americans are finally reentering the workforce.

How overtime pay went from a right to a rarity

This week the folks at Capital & Main began releasing a four-part series on overtime protections and the opportunity the Biden administration has to restore overtime protections for millions of salaried Americans. It’s a great series and the first few entries have been picked up by a number of outlets, from MSN to Fast Company.

Those of you who have followed our work for a few years now will know that restoring overtime protections is one of our top policy priorities. With partners, we were successful in getting Washington state’s Department of Labor & Industries to restore overtime protections in our state a couple years ago, and with a recent piece published in TIME by our founder Nick Hanauer, we’re all in on encouraging President Biden to do the same nationally.

For our parents’ generation, overtime pay was a basic expectation of work, in place since the Fair Labor Standards Act was passed in 1938. It set a salary threshold, under which salaried American workers were required to be paid time-and-a-half overtime pay for every hour they worked over 40 hours a week. So when our parents stayed late at the office or went into work on weekends, they were likely paid extra for it.

But since the 1970s we’ve let overtime protections fall woefully behind. In 1975 more than 60 percent of workers had overtime protections. Today, that number is 15 percent. It’s not because Americans are working less — in fact, the average American salaried worker works 49 hours a week. They’re just not getting paid for it. By raising the overtime threshold to $85,000 a year, Biden can restore overtime protections for millions of middle-class American workers. And the best part: he can do it without Congress.

I highly recommend giving Nick’s TIME piece a read if you missed it the other week, and you’ll certainly hear more from us on overtime.

Is the great wage spike over?

But no matter what the topline jobs numbers say, Elise Gould at the Economic Policy Institute reminds us that inflation is eating into the wage growth that workers have seen since the pandemic began. When you take all factors into account, wage increases have mostly flattened this year after explosive growth in 2020 and 2021.

If there’s anything positive to be learned from Gould’s research, it’s the fact that we now have proof that inflation is not being caused by the wage increases, as some on the right have claimed. If anything, Gould writes, “it appears that wage growth continues to dampen price growth rather than feed it.”

How lawmakers can ease Big Livestock’s chokehold on America’s agriculture market

Assuming you’re not a vegetarian, you have undoubtedly noticed the skyrocketing price of meat on your most recent trips to the grocery store. What’s less evident to consumers is that agriculture has become an increasingly worker-hostile field, with giant companies paying criminally low wages to workers they consider to be expendable. Michael Kades at the Washington Center for Equitable Growth has written an in-depth report explaining that lawmakers can employ a 100-year-old law to help break up monopolies that have driven up meat prices for all Americans and reduced wages for farm workers. The report seems especially relevant today, as we learn from reporting by Taylor Telford of The Washington Post that the biggest corporations in the meat industry “hyped baseless shortage” claims early in the pandemic to pressure the Trump White House to keep their plants running in spite of COVID shutdowns, putting workers at risk.

“Allegations are growing that meatpackers are conspiring to lower the prices they pay for cattle. Big commercial ‘aggregators’ of chicken meat face more widespread allegations,” Kades writes. “Other concerns are related to market abuses, such as deception and unfair acts and unjustly discriminatory actions.”

These big businesses have ridiculous amounts of power over the market. For instance, their size allows them to pit small chicken farms against each other for shares of an ever-shrinking pool of money in a so-called “tournament system” that’s more like the Hunger Games than the World Series:

Kades offers multiple regulatory and policy outlines to help curb Big Livestock’s abuses, which “present a growing threat not only to our nation’s ranchers and chicken growers, but also to the resiliency of our food supply chains and to congressionally mandated and funded programs to promote small producers and protect the supply chain.”

These policy prescriptions would not just bring down the price of meat at grocery stores — they would also raise wages for agricultural workers and level the playing field for small farm owners and other small businesses. It should go without saying that these would be remarkably popular actions in rural areas around the country, regardless of party preference.

Democrats are better for the economy. Why doesn’t anyone know that?

Timothy Noah writes for the New Republic that Democrat presidents are better at managing the economy than Republican presidents by virtually every economic metric available. But polling reliably demonstrates that the American public, by a large margin, believes the opposite to be true.

Noah has a theory about why the American people think Republican presidents are better at running the economy: Messaging. “Why don’t Democrats talk more about their superior record on economics? Partly because some of that record is based on doing things, like raising taxes, that aren’t especially popular. Partly because Democrats fear coming across as pointy-headed coastal elites.”

I have my own ideas for why that might be. Republicans are generally better at explaining their theories about how the economy works — even when they’re promoting demonstrably untrue arguments like the idea that raising wages kills jobs. And Republicans are really disciplined in talking about how their policies will help the average person. No, I’m not kidding. If you read what they say when they’re fighting for tax breaks for corporation and the 1%, it sounds like a good deal for the average American. Republicans claim (again, falsely) that those tax breaks will trickle down in the form of better jobs with higher wages for everyone else. Bush talked about how his tax plan would save the average household thousand per year, and Trump (always looking to take everything up another notch of ridiculousness) famously said his tax plan would lead to a $4,000 raise for the average worker. Of course, these things turned out to be false. But their confidence and their repetition convinces voters that the things they’re saying must be true. And to be sure, it helps that they have an entire academic apparatus created almost solely to use flawed economic models to cook up results that support their assertions.

That’s why President Biden’s relentless focus on working Americans has been so refreshing. His calls to build the economy from the middle out don’t sound like any other living Democratic president. At every opportunity, he talks about growing wages and rewarding work and not the accrual of wealth, and he explains why the middle class is the most important part of the American economy. If more Democratic candidates learn from his example and center working Americans in every economic comment they make, the American people will likely begin to see Democrats as the party of economic strength.

Mr. Smalls goes to Washington

But it’s always better to educate through positive examples than it is to criticize, so I hope Democratic leaders were taking notes last week when Amazon Labor Union head Christian Smalls testified before Congress. Smalls spoke directly to Senator Lindsay Graham’s claims that Smalls’ appearance was somehow a “dangerous” act of “political bias” against companies like Amazon and Boeing. First, Smalls chastised Graham for prioritizing “companies and businesses in your speech, but you forgot that the people are the ones who make these companies operate — and that we’re not protected.”

“I’m here to represent these workers who make these companies go,” Smalls continued. “It’s not a left or a right thing. It’s not a Democrat or Republican thing. It’s a worker’s issue. And we are the ones that are suffering in the corporations that you’re talking about.”

Smalls concluded his opening statement by addressing Graham directly: “You should listen, because we represent your constituents as well. The people are the ones who make the corporations go — not the other way around.”

That’s how you talk about economics: By putting the people first, and relentlessly centering people, not corporations or the wealthy, at the heart of the economy. Trickle-downers like Graham have forgotten that people power the consumer demand that builds those corporations. Smalls expertly reminded Graham who really makes the economy run.

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

• On Civic Action Live this week, we’ll discuss steps our leaders can take to slash corporate price-gouging, why our leaders need to be better at economic messaging, and how we can rein in Big Agriculture — and win over rural voters. Tune in at 10:30 am on Friday to join the conversation.
• On the Pitchfork Economics podcast this week, Niko Lusiani, the Director of Corporate Power at the Roosevelt Institute, joined Nick and Goldy to discuss what he considers to be the three most important economic developments in President Biden’s budget — a proposal to limit the immediate profits corporate executives can draw from stock buybacks, increased funding to the organizations that rein in corporate power, and a tax on the unrealized profits of a handful of the wealthiest Americans.
• And in his Business Insider column, Paul dug deep into extractive private equity firms, which latches onto dying industries like brick-and-mortar retail and newspapers and sucks them dry, killing jobs. In recent years, private equity has begun to move into the healthcare industry — a chilling development that has wiped out hospitals, hospice care providers, and other medical facilities around the country.

Closing Thoughts

Last week, a Wall Street Journal report found that non-fungible token sales “sales fell to a daily average of 19,000 this week, compared to 225,000 seven months ago,” marking an astonishing 92 percent decline in NFT sales. “Data from Google Trends also shows that online search interest in the technology — which allows assets like digital artwork to be traded and stored through online ledgers — has plummeted by 89 percent since peaking in January 2022,” writes Anthony Cuthbertson at Yahoo.

You may have noticed that we haven’t talked about NFTs or cryptocurrency at all in this newsletter — and that’s by design. The world of finance is always chasing after one fad or another, and unless the craze transforms into a bubble that threatens the health of the whole economy, they just don’t affect the economic lives of real Americans that much at all.

But there was an undercurrent to NFTs and the bizarre GameStop stock surge of last year that could have a dramatic impact on the world: The very real trend of ordinary people were investing in meme stocks, NFTs, obscure cryptocurrencies, and other nontraditional investments in order to signal their distaste for the rigged economic system, or to turn a quick profit from a system that they understand is corrupt.

Young people, especially, who have lived their whole lives in a time of growing income inequality likely feel they will never be able to change their circumstances. Political leaders of both parties have refused to take any serious action against a system that ensures the rich get richer and the poor get poorer — so why not dump your life savings into a digital currency modeled on a cartoon character? That makes about as much sense as any other investment the ordinary person could make, especially when the media has highlighted success stories of people making millions of dollars by buying a digital drawing of an ape at just the right moment. But it turns out, investing in NFTs was an act of economic hopelessness disguised as an act of hope.

The dramatic collapse in NFT value is likely going to leave thousands of young people even worse off financially than they were before, and feeling even more depressed about the rigged economic system. This is an opportunity for great economic communicators to step in and explain to these wannabe investors that they’re not crazy — the system is, in fact, rigged. But the answer isn’t a digital finance fad, it’s remaking the system so that prosperity is shared among the vast majority of Americans again, the way it was through most of the 20th century. It’s harder to believe in the political process than it is in a flashy digital investment, but if enough of us do commit to making that change, millions of lives will be improved.

Be kind. Be brave. Get vaccinated — and don’t forget your booster.

Zach