The Guardian • Issue #2018

Wages do not cause inflation

Maritime Branch of the CPA article

  • The Guardian
  • Issue #2018

Inflation has now risen to 6.1 per cent nationally and workers are feeling the pinch. At the same time corporations and big capital are making huge profits and have done so throughout the pandemic while working people are told to tighten their belts. Shipowners and the big stevedores are making a fortune as are the bosses across a range of industries. In an annoying and false narrative, the bosses and right-wing forces push the line that increased wages will cause higher levels of inflation. This is not true and has never been true, but it is a convenient lie for those who wish their super profits to keep rolling in.

Some snippets from the media and a range of organisations paint a much more precise and realistic reasoning for current inflation levels. The same arguments cut across all capitalist economies.

Here are some of those views, facts and figures which may be of interest to readers of the Maritime Bulletin.


Current price estimates for the March quarter 2022:

  • Company gross operating profits rose 10.2 per cent seasonally adjusted; and
  • Wages and salaries rose 1.8 per cent seasonally adjusted


Unite prepared a report, Unite Investigates: Corporate profiteering and the cost of living crisis, in it are some key findings:

Profit margins for the UK’s biggest listed companies (FTSE 350) were 73 per cent higher than pre pandemic levels in 2019.

UK-wide company profits jumped 11.74 per cent in the six months from October 2021 to March 2022, according to the most recent Office for National Statistics data.

In the same period, labour income only rose 2.61 per cent; and fell by 0.8 per cent after accounting for inflation.

This recent profit jump is responsible for 58.7 per cent of inflation in the last half year – as opposed to just 8.3 per cent due to labour costs.

The UK appears to be following the pattern of inflation profiteering noted in the US, albeit some months behind the curve.

This isn’t just about oil companies or a few “bad apples”. Even excluding energy firms, FTSE 350 company profits increased by 42 per cent between 2019 and 2021.


In the report, released on Monday, the institute analysed national accounts data to show that rising corporate profits had been a major factor in inflation and that wages had “no contribution” to inflation in the 2019-20 and 2020-21 financial years, and contributed just 0.6 per cent of Australia’s inflation in this current financial year.

“Australia isn’t experiencing a wage-price spiral, it’s at the beginning of a price-profit spiral,” said Australia Institute chief economist, Dr Richard Denniss.

“The national accounts show it is rising profits, not rising costs, that are driving Australia’s inflation. While workers are being asked to make sacrifices in the name of controlling inflation, the data makes clear that it is the corporate sector that needs to tighten its belt.”


Higher wages DO NOT cause inflation. It is a lie. In 1865, Karl Marx called this idea an “antiquated and exploded fallacy.” Marx outlined this in deeper detail in Wages, Price, and Profit.

Alex Gordon President of the RMT in the UK commented on social media:

“Indeed, in 1865 Marx exposed the fallacy of the so-called ‘Iron Law of Wages’ proposed by John Stuart Mill (that there was a finite quantity of money in circulation for wages and therefore if one worker gained an increase another worker must suffer a detriment).

“This was the fallacy behind the proposition of one Citizen Weston, an English Chartist and member of the General Committee of the First International when he argued that the International should not support strikes for wage increases, but should restrict itself to arguing for political reform.

“Marx delivered two lectures to the GC disproving the ‘Iron Law’ fallacy and showing that the relationship between wages and profits was one mediated by class struggle. Workers can increase their wages by increasing the share of surplus value they create through their labour power at the expense of the capitalist’s profits. This is the method of class struggle trade unionism. It is precisely the argument that my union RMT is making in our current dispute with the rail bosses in Britain.

“More than ever we need to be fighting. Unions leading workers in struggle is one of the most reliable ways to increase the share of wealth in society toward working people. We know workers will never get their full due and the fruits of their labour under capitalism. Only a socialist society can stop the gouging corporate monsters from robbing the people. This struggle for higher wages is still necessary. We must also keep in our minds the political struggle which is critical if we are to ever get out of the exploitative and unfair capitalist system.

“Capitalism will never deliver for working people as the corporate greed outlined above demonstrates. We know we are being robbed and while taking some of the wealth back, it is our ongoing responsibly to fight also to remove the system that perpetuates and allows this corporate criminality to continue.

“Socialism is our objective and that fight must continue until we can eradicate this disproportionate greed that is fundamental and innate to capitalism. The system can’t just be reformed but must be thrown in the scrap-bin of history.”

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