On Sept. 14, 2023, the president of the United Automobile Workers union, Shawn Fain, announced that the organization would be unleashing a coordinated strike on “the big three” American automobile manufacturers: General Motors, Ford Motor and Stellantis. Simultaneously striking all three has never been done, and Fain states the move will give negotiators “maximum leverage and flexibility in bargaining.”
The negotiators’ demands? The biggest is centered on a 36% worker wage increase over the next four years. This increase would come amid a period where wages have failed to keep up with inflation while executive pay and corporate profits have increased.
That being said, there is evidence to suggest that corporate profits have also driven inflation over the years. It is possible that these recent strikes could initiate a balancing act where wage workers get paid what they deserve while potentially decreasing inflation rates as well. Before diving into these intricacies, it is helpful to contextualize further with recent organized labor events.
This summer has been marked by numerous organized labor movements, including the SAG-AFTRA and Writers Guild of America strikes, which are still ongoing. With SAG-AFTRA, the labor union that represents America’s actors, the demands are centered around wages as well. The average pay for an actor — a job where work is not guaranteed — is $27.73 an hour. This also does not take into account taxes and agent fees. To compensate for this, actors typically rely on residuals, payments that actors receive for the amount of times a production is viewed.
The emergence of streaming services has complicated the nature of residuals, with actors carrying most of the burden. This has been a focal point of the contract negotiations, but Hollywood executives have not budged, maintaining that wage increases are not in the budget. Bob Iger, CEO of Disney, stated that the actor’s demands “are unrealistic.”
Streaming services have been struggling to make a profit, Netflix being the only service that managed to make money last year. Disney is one of these struggling service providers, yet if they expect contracted creatives to pay for their business models, then it would only seem fair that executives would pay for their lack of success as well. Unfortunately, this is not the case. This year Bob Iger is eligible for up to $5 million in bonuses, an increase of $3 million when compared to last year.
These labor conflicts coincide with other economic phenomena that are likely related. For one, inflation has been a hot topic in the past years in politics, and for good reason. Last month saw inflation rise to 3.7%, which is not great but still far from the 9.1% peak reached in 2022. These inflation rates have financially harmed low-wage workers in particular, especially when considering that wages have not adjusted to the increase in living costs.
Meanwhile, the past couple of years have also seen record-breaking profits for corporations. Following the dips in 2020, corporate profits surged from $1.2 trillion to $2 trillion, an 80% increase, in 2022. One of the biggest winners of this profit increase was Big Oil, doubling its profits to $219 billion in 2022. Simultaneously, consumers were breaking the bank to fill up their cars as gas prices became the greatest victim of inflation in the same year.
How is it that these two trends have coincided? Most likely because irresponsible corporate profit margins have driven inflation, which is what many experts have alluded to over the past couple of years.
The cost of everything you purchase can primarily be broken into three main categories. First is the cost of the labor needed to produce a given product. The second category, nonlabor inputs, includes costs such as the purchase of materials to produce a product. Finally, the “mark-up” of the product consists of the profit that goes to who is providing the product or service.
The end of 2021 saw an average rate of inflation around 6.1%. So which categories related to cost were most responsible? 58% of the increase in costs in 2021 is attributed to the third category, the “mark-up” costs, with only 8% being attributed to the first category of labor costs. To a certain extent, these irresponsible “mark-up” costs are the culprit behind recent inflation and record-breaking corporate profits.
Two things need to happen. Profit margins must shrink and the share of profits going to labor compensation must increase. This is where the recent labor strikes come into play.
The focal point of the two major labor strikes currently taking place are centered around increasing wages, or in other terms, increasing the amount of profit that goes to the labor compensation process. For inflation to truly decrease as a result of this, wages must increase all over the board, not just for actors and manufacturing workers. This summer has been a good start to this process.
In the meantime, viewing labor strikes as a large-scale response, and hopefully a potential remedy, to the dynamics listed out so far is a useful way of appreciating organized labor. We live in a polarized political climate, and as a result, it is unlikely that our gridlocked policymakers will fix the economic issues like the ones we’ve got.
Fixing economic issues requires policy, and when new policies are not a possibility, sometimes you have to rely on non-governmental political organizations. Unions are an option to fix economic issues that affect all of us, and until Congress can pass legislation, it is one of the only options we have in relation to systemic levels of low wages and inflation.
