Not only does inflation lead to higher prices, but it also leads to higher profits. Now is the time to realign the power in the relationship.
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| [Inflation in Europe: Who bears the burden] |
The rate of inflation in Europe is skyrocketing. Politicians are now confronted with a choice: they can either make working people the only bearers of the expense of this crisis in the cost of living, or they may share the weight of it throughout society as a whole. In light of this context, neoliberals are now sounding the alarm about a "wage-price spiral" with a great deal of fuss. Therefore, members of the labor force will need to be willing to take pay cuts in real terms in order to forestall additional increases in overall costs.
In point of fact, though, we are dealing with what is known as a "profit-price spiral." The dominating corporations boost their prices to levels that are higher than the rates of inflation and then give their record profits to those who are already in a better financial position. A new survey conducted by the British trade union Unite reveals that the earnings of the most profitable corporations in the United Kingdom have climbed by a staggering 73% in 2021. Barbara Teiber, chairperson of the Austrian trade union GPA, made the following statement not too long ago: "Despite the recession, the super-rich have gained even wealthier. The most recent information and research all point in the same direction."
The breakdown of global supply networks as a result of the epidemic and Russia's invasion of Ukraine are clearly key drivers of inflation; yet, we cannot directly control all of the variables that have contributed to the rise in prices. On the other hand, the issue that is making the cost of living so difficult to manage is not salaries but profits.
One particular illustration: UNI Europe recently conducted an investigation into the circumstances at a firm known as Metsa Board, which manufactures cardboard packaging. The profit margin of this firm has almost doubled in the previous two years, reaching an all-time high in the first quarter of 2022, when the company reported the biggest quarterly profit in its entire existence. During this same time period, the proportion of total expenditures that was allocated to human expenses decreased by 7.7 percent, going from 13 percent in 2020 to 12 percent in 2021.
It would be economically unsustainable as well as socially immoral to redistribute money away from the working population and toward the accumulation of profit and riches for a select few. In the example of Metsa Board, an increase in labor expenses of fifteen percent would only result in an increase of one point eighteen hundredth of one percent in overall costs, while the employees affected would continue to spend their money in their respective local areas. On the other side, if we give businesses permission to slash real wages, we will see a reduction in demand, which would further destabilize our economy.
Because of the ongoing financial crisis, Europe is in a worse situation than it has ever been in during the post-war era to produce results that are socially fair. The capacity of employees in Europe to establish collective agreements has been the target of many attacks and undermining efforts during the last two decades. In Ireland and Romania, legislation that were similar to one another have been revoked. Even in the union strongholds of northern Europe, firms and corporations are attacking the practice of collective bargaining, which has traditionally secured a greater distribution of income and a greater amount of wealth overall. When the management of the global forest products corporation UPM unilaterally abrogated collective bargaining agreements with employees, for instance, Finnish workers accused the company's management of treason.
Certainly, there are a few bright spots to be found, like the following: Recently, in Germany, building cleaning employees and their union, IG BAU, battled for salary increases that compensate for inflation for 700,000 individuals working in this industry. The salary increases for employees making the least amount of money are the highest, coming in at 12.6%. The most vulnerable members of society bear the brunt of rising prices; this illustrative scenario highlights the significance of collective bargaining as a means of putting solidarity at the forefront of Europe's response to the problem in the cost of living. Unfortunately, the situation in Germany is more representative of the exception than it is of the norm.
It seems that both the number of strikes and the frequency of those strikes will rise throughout Europe. This is especially true in those nations in which employees' ability to negotiate for better wages and working conditions has been severely eroded. People are, very reasonably, hesitant to take full responsibility for the inflationary situation, especially as others are making record profits off of their backs. At a time when inflation is spiraling out of control, low salaries have already caused turmoil at airports throughout Europe. It seems possible that this is only the beginning if we are unable to achieve a more equitable balance of power and power.
The battle for justice cannot be left only to the responsibility of the working class and the unions that represent them. The following benchmark has been established in the proposed EU rule on sufficient minimum wages: It's heartening to see that all member states have a coverage rate of 80 percent for collective bargaining. But the widespread dissatisfaction that has been growing in the workforce has to be confronted head-on, and improving collective bargaining needs to be the top political priority. This is something that needs to be done immediately. Workers primarily have the ability to negotiate greater salaries for themselves via the process of collective bargaining and agreements. As a result, they are in a position to make a significant contribution to the equitable distribution of the burden caused by the present crisis.
The fact that public spending supports and fuels the race to the bottom for participation and democracy at work is particularly regrettable, however. Weak EU rules on public procurement create incentives for businesses to suppress collective bargaining. This is one of the many reasons why public spending is so problematic. Because cost is always the most significant factor in making a decision, public institutions in effect reward businesses that are ready to limit employees' involvement and take advantage of them to the greatest extent feasible.
Now is the time for the EU to set a good example. The use of procurement is the simplest technique to improve the effectiveness of collective bargaining. A staggering 14 percent of the GDP of the EU is made up of public expenditures on products and services provided by private businesses. At the moment, this money is contributing to the undermining of collective bargaining. This is supported by the public procurement regulations of the EU, which prioritize the lowest possible price above all other considerations for awarding contracts.
Instead, the regulations that govern public procurement in the EU should ensure that all workers of private companies who are given public contracts are treated with at least some degree of respect. This would be accomplished by a simple but fundamental modification in the regulations, which would stipulate that in order for a company to be eligible for public funding, it must be one in which the staff has signed collective agreements. In this manner, the working class would be given back the means and tools it need in order to cope with the present crisis in regards to the expense of living. Growing support for such a solution is being voiced not just by labor organizations but also by individuals serving in the European Parliament. It is unacceptable to utilize taxpayer dollars, which are funds contributed by employees in the form of taxes, to subsidize and prop up businesses that are harmful to both the economy and the working population as a whole.
Inflation is a burden that can only be shared if the balance of power is restored to its original state. The phrase "stronger together" is used to describe the mission of the European Union. It is time to put words into action by increasing the effectiveness of collective bargaining and agreements throughout the EU.
The author Oliver Rothig has served as the regional secretary for UNI Europa, the European services union that has 7 million members since 2011,. Additionally, he holds the position of Vice-President of the European Trade Union Confederation (ETUC).