“If the burgeoning bargaining power of less-skilled workers comes at middle-class consumers’ expense in the short run, almost everyone stands to benefit from rising working-class wages in the long term.
Middle-class households can more easily afford servants in many developing countries than they can in the United States. Yet America’s middle class is nevertheless far wealthier than its counterparts in India or Pakistan. Even the privileged are generally better off in an economy with high levels of labor productivity than in one with a large pool of hyper-exploitable workers.
And there’s reason to believe that rising working-class wages are a key driver of productivity gains. When workers’ time is cheap, businesses have little incentive to develop labor-saving technologies or production methods. As wage bills rise, by contrast, innovation often becomes imperative.
Ironically, conservatives often cite this reality as an argument against increasing the minimum wage. Specifically, right-wing economists and commentators have often warned that raising the wage floor will cause employers to automate jobs away. Yet this is another way of saying that minimum wage hikes increase investment in productivity-enhancing technology (which is the ostensible aim of just about every Republican tax cut plan).
In any case, it is true that when wages rise at the bottom of the labor market, firms invest in labor-saving technology. In 2018, Grace Lordan and David Neumark demonstrated this empirically. Those economists reviewed 35 years of government census data, identified jobs that could be automated given existing technology, and found that after minimum wage increases were enacted, “the share of automatable employment held by low-skilled workers” declined. In other words, minimum wage hikes spurred capital investment and increased productivity by mechanizing tasks that did not require uniquely human skills.
The notion that high wages spur productivity gains is consistent with the American economy’s broader historical record. As Neil Irwin observed in 2018, productivity booms have tended to follow labor market booms, while deep recessions have given way to productivity slumps.
This relationship between wage gains and productivity can be witnessed within today’s food service industry. As Bloomberg’s Justin Fox notes, as restaurant wages jumped between 2020 and 2021, the sector’s output per worker hour soared by 21 percent.
In the short term, these productivity gains have not been sufficient to reduce restaurants’ operating costs and, thus, prices. But in the long term, when businesses increase the labor efficiency of their production processes, their wares tend to become more affordable.
A world of cheap burgers and high working-class wages is therefore possible. Middle-class consumers need not see the rising fortunes of less-skilled workers as a threat to their standard of living.
For the moment, though, there is a genuine tension between boosting compensation for America’s most vulnerable workers and minimizing the cost of labor-intensive services for the nation’s consumers. Precisely how liberals can best navigate this tension isn’t easy to say. At the very least, though, we should not encourage our fellow Americans to mistake the symptoms of rising worker power for those of a deepening economic crisis.”
“Inflation has been a nasty grinch for the past few years—seemingly stealing away our hard-earned dollars while we sleep.
But the rising prices throughout much of the economy make it a little easier to appreciate the things that seem to be inflation-proof.
Like video games. When The Legend of Zelda: Ocarina of Time was released in 1998, it cost $69.99 to order through the Sears catalog. Another Zelda game, Tears of the Kingdom, was released this year—25 years later—and it retailed for $70. That actually made it one of the most expensive games of the year, since most new Nintendo games these days sell for about $60.
Do the math. If Zelda games had kept pace with inflation, the new one should have cost about $130 today.
Sure, games today achieve some cost-savings because they’re digital downloads. That means production companies like Nintendo don’t have to pay for a physical game cartridge or CD-ROM, packaging, or shipping. But games today are also far, far more advanced than anything you could have bought for any amount of money a quarter-century ago.
It’s not just video games that have defied inflation’s steady creep. Toys in general are less expensive today, even before adjusting for inflation, than they were a few decades ago. That’s despite the fact that wages have grown significantly over the same period of time. The average worker in the United States made about $13 an hour in December 1998, compared to about $29 dollar per hour now.
This is true over longer periods of time too. As I wrote earlier this year, the amount of work necessary to buy a single new Barbie has fallen quite a bit since the doll was introduced. According to what University of Central Arkansas economist Jeremy Horpedahl has termed the “Barbie Price Index,” the average American woman has to work about 30 minutes to afford a Barbie—down from about two hours in 1959, when the doll first appeared on store shelves.
In fact, toys are so much cheaper today that some columnists say it’s a problem. “A toy that cost $20 in 1993 would cost only $4.68 today,” writes Katie Notopoulos, a senior correspondent at Business Insider.”
“a Kroger-Albertsons merger would not create a monopoly in the grocery market. According to a recent report by Retail Info Systems, Walmart remains the nation’s largest grocer, controlling 17 percent of the grocery market. The second and third largest grocers are Amazon and Costco. Kroger and Albertsons are only a distant fourth and sixth with market shares of 4.4 percent and 2.2 percent, respectively.
Grocery stores have experienced a declining market share, while superstores and online competitors have grown. For example, like many traditional grocers, Kroger’s market share has declined in recent years while Walmart’s has increased. Even if Kroger and Albertsons were to merge, it’s not clear that their combined market share wouldn’t continue to decline. The merger would simply enable Albertsons and Kroger to bulk up and compete with larger competitors, like Walmart.
In addition, Kroger’s decision to sell stores in overlapping markets where Albertsons operates means the merger would not increase concentration in any market. This has traditionally been enough for the FTC.
The national grocery market is also becoming more competitive, not less. No longer limited to brick-and-mortar supermarkets and independent grocery stores, the grocery market now includes a growing assortment of e-commerce stores, like Amazon, discount grocers like Aldi and Lidl, and delivery providers like FreshDirect and Instacart. These newer market entrants have fundamentally altered grocery shopping.
The merger will heighten competition among larger competitors, which will drive down prices for consumers. While a merger would not make Kroger and Albertsons the dominant industry players, it would allow them to compete more effectively with others, putting pressure on all major retailers to keep prices low as they fight to preserve their customer base. In fact, Kroger and Albertsons have indicated that the merger will generate $500 million in new cost savings for them that they plan to use to cut consumer prices. In addition, they plan to expand their lineup of affordable store brand products and spend $1.3 billion on improving customer service at Albertsons stores.”
“The actual problem here is prices.
They’re not going up nearly as much as they were in, say, the middle of last year, but they’re by and large not declining en masse, either. And in most cases, they won’t get back to where they were in the Before Times.
“Inflation in the US is falling relatively quickly compared to all of our other peer countries, and we have the strongest growth out of the recession,” said Felicia Wong, president and CEO of the Roosevelt Institute, a progressive think tank. “But people don’t just want falling inflation numbers, they actually want deflation.”
Deflation probably isn’t in the cards (and the rub is we don’t want it to be). Higher prices might just be the sort of thing we’ve all got to get used to. The truth is we’re never going back to how things were in 2019 — we won’t be returning to the office at the same levels, we’ll never hear “corona” and only think of beer, and that night on the town is going to cost us more than it did before.”
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“Basically, if I get a raise at work, I think it’s because I’m awesome. That may be partly true, but that’s not all that’s going on — it’s also that the labor market is tight and wages broadly are going up. My current employer doesn’t want to lose me, and my future employer would have to pay me a little more to lure me away.
While many people see their employment situations (good or bad) as something they’ve earned, they see inflation as something that’s happening to them and that it’s the government’s fault. “The reality is inflation takes away and it gives back. It takes away, prices go up, and it gives back, wages catch up,” said Justin Wolfers, an economist at the University of Michigan. “But you code what it takes away as inflation’s fault but what it gives back as your own genius.””
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“The rate of inflation really is slowing (and, if all goes well, will continue to do so), and the disorienting nature of what’s happened in the economy over the past few years will likely fade. Post-pandemic prices will eventually feel normal, and post-pandemic wages should make those prices more feasible — or at least not significantly less feasible than they were before. Sooner or later, sticker shock will feel a little less shocking.”
“The series of subsidies and tariffs that the federal government uses to artificially inflate sugar prices in the United States cost consumers between $2.5 billion and $3.5 billion every year, according to a timely Government Accountability Office (GAO) report released today. Those protectionist policies aren’t the cause of the recent spike in sugar or candy prices, of course, but prices would absolutely be lower without them.”
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“Those higher prices get baked—quite literally—into the cost of everything from Milky Ways to Sour Patch Kids. And, as the GAO also points out, this is a classic case of concentrated benefits for a special interest that results in huge, but very diffused, costs for everyone else: “Because the program guarantees relatively high prices for domestic sugar, sugar farmers benefit significantly, and sugar farms are substantially more profitable per acre than other U.S. farms.””
” The new study..compared the prices hospitals posted online (as required under new federal regulations) with the prices obtained in phone calls conducted by the team posing as potential patients.
They contacted 60 hospitals across the country, a mix of top-ranked facilities, hospitals that primarily serve low-income people, and the other hospitals in between. They asked about two procedures for which comparison shopping is more common: vaginal childbirth and a brain MRI.”
…
“It was rare for the advertised price on the web to be the same as the price quoted over the phone. Less than 20 percent of hospitals provided the same price through an online price estimator as they did when someone spoke to a member of the billing department. In many cases, the disparity was significant, with more than a 50 percent price difference depending on whether you checked on a website or called for a quote.
And in a handful of cases, the price more than doubled depending on how you asked. At two hospitals, MRIs were listed online at $2,000, but “patients” were given a price of more than $5,000 when they called. Five hospitals offered a price of $10,000 for vaginal childbirth over the phone, but the price posted online were twice that much.
There didn’t seem to be a clear pattern of which quotes were higher. Sometimes they were higher over the phone, sometimes higher on the website.
The researchers said they took pains to make sure they were getting apples-to-apples comparisons, going so far as to give specific billing codes during their scripted calls with hospital staff. It didn’t matter.”
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“Research had already found prices for the same services vary wildly at different hospitals. The top-line findings of this new study reveal that it can be difficult to even determine what the price for a given service is at a given hospital. That is a problem both for the 10 percent of the US population that is uninsured as well as people enrolled in high-deductible health plans, which are becoming more common.”
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“the researchers made one other note in their study: They found poor correlation between brain MRI and vaginal childbirth prices within an individual hospital. In other words, some facilities would have high MRI prices compared to others but low prices for delivering babies — with no discernible economic reason for that disparity. It’s chaos.”
“Later this year, the federal government is supposed to start a serious attempt to rein in drug prices: For the first time, Medicare will negotiate with pharmaceutical companies over the prices it’s willing to pay for a short list of drugs. It’s a long-awaited change that is supposed to save the government and patients billions of dollars over time.
But the drug industry is now launching a legal fight aimed at stopping Medicare’s negotiations over prescription drug prices before they begin. The stakes are higher than just a drug price reform: The case could set an important precedent for the government’s authority to try to constrain health care prices.”
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“The Merck lawsuit focuses on the Constitution’s takings (or compensation) clause in the Fifth Amendment, which protects private owners from having property taken without “just compensation” by the government. It also raises First Amendment claims centered on the law’s requirements that drugmakers not disclose information they receive from the government as part of the negotiations. The Chamber of Commerce’s case rests on a constitutional right to due process, arguing that, because the Medicare negotiations are exempt from review by the courts under the IRA, drugmakers are being denied due process.
Taken together, the lawsuits give any judges predisposed to side with private industry over the federal government a few options for a legal foundation upon which to base a decision in pharma’s favor.
A number of legal experts say they are skeptical of these arguments. Merck’s takings clause case turns on defining a patent — an issuance from the government — as private property subject to the just compensation clause, said Robin Feldman, a law professor at UCSF, a difficult assertion. She also said the premise present in both cases — that the federal government as a health care purchaser through Medicare can’t say no to the companies it purchases drugs from and can’t dictate prices as the consumer — is “problematic.”
“It can’t be that the government as a buyer has to pay whatever a seller wants to charge,” she said. “That the government could be forced to spend itself into bankruptcy.”
Regarding the chamber’s due process claim, several legal experts have pointed out that Medicare’s various contracts with health care providers are already often generally exempted from judicial review. It is understood that this is necessary to allow the program to function; the government, as the administrator of the program, needs that authority without each of its decisions being subject to litigation.”
“An avian flu outbreak devastated the poultry industry throughout 2022. By the end of the year, according to the U.S. Department of Agriculture (USDA), there were 43 million fewer egg-laying hens than in February 2022. Egg inventories fell 29 percent from January to December. When demand outstrips supply, prices go up.
A similar outbreak in late 2014 affected more than 50 million birds. According to Fed data, egg prices rose from $1.96 a dozen in May 2015 to $2.96 in September 2015 before falling for more than a year afterward.
The 2022 outbreak, by contrast, persisted into 2023. At the same time, general inflation was unusually high: 6.5 percent in 2022, compared to 0.7 percent in 2015. “Like consumers,” the American Feed Industry Association noted in January 2023, “feed manufacturers are feeling the effects of inflation on the economy and are paying increased rates for energy, shipping, labor and ingredients.” So even as the number of hens dropped, the cost of feeding them rose.
The good news is that egg prices began falling after January’s high. Average egg prices fell from $4.82 a dozen in January to $4.21 in February and $3.45 in March. The USDA predicted that, barring an avian flu resurgence, prices would continue to fall throughout the year.”