New Words for Your Vocabularies

Posted on Mar 31, 2023. by NTI

Three new words for your vocabularies:

Greedflation: defining a situation where supermarkets, food manufacturers and shipping companies are among hundreds of major firms who have improved their profits and protected shareholder dividends, giving an extra lift to prices, while the cost of living crisis has meant workers face the biggest fall in living standards in a century.

Excuseflation: a synonym for the above, where companies with market power seize on publicly reported disruptions to create legitimate justifications to increase prices.

Bigfatgitnous: a polite way of describing those companies who indulge in either of the above, to screw those less well off than themselves at the worst possible time. [See also: 'slippery road to hell'.]

Observers of corporate behaviour and profits have noted that even with supply chains bottlenecks, strains on global shipping and disruptions in the supply of energy and commodities, corporate profits have surged. How can this be? The headwinds have been almost historically strong; most factors that point towards corporate performance have been very negative. 

The answer appears to be that companies passed higher input costs on to their customers (bad people, BAD) and then went further (terrible dreadful people - appalling people): margins reached record highs. Earnings before interest and taxes peaked in the course of 2022 at nearly 18 per cent of revenues on average for the largest US listed companies and more than 15 per cent for Europe’s biggest listed groups.

However, while they remain historically high, profit margins have started to shrink in the past two quarters and companies are warning investors of tougher times ahead. Partly this is because consumers, whose savings had grown during lockdowns making them more willing to pay higher prices, are becoming less amenable. Many are also having to budget for higher mortgage payments because of rising interest rates.

'Price gouging' is not a word, but a term you can add to your already extended vocabulary. This is, colloquially, smacking the consumer with higher and higher interest rates to suppress profit margin inflation.

We all need fatter wage packets to deal with this. There is some good news about this today (Friday 31 March). Low-paid workers will receive a pay rise set to match inflation as the UK’s minimum wage increases to £10.42 per hour from April, the Low Pay Commission said this morning. This 92 pence rise in the horly main rate of the national living wage represents a 9.7 per cent increase on 2022 and means 2 million workers will now be paid at or close to the statutory earnings floor. By the way, the 'statutory earnings floor' is what we expect you fell onto having read about 'greedflation' and 'excuseflation' above.

It is considered that the main adult hourly rate will need to rise to £11.16 to meet a Government goal of raising it to two-thirds of median earnings. It may already be too late, as even after this April’s increase, the real value of the minimum wage will be below the peak it reached in April 2021, before high inflation battered us all into submission over the last 12 months. Seeing this from an employer's perspective, the boost to the lowest wages for those at the bottom end of the pay-scale will have knock-on effects, as employers seek to ensure that jobs higher up the pay scale remain attractive. This could benefit a further 5 million workers who may soon be able to afford gruel as well as stale bread with their weekly grocery shop.

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