For all who road-tripped this summer, the most common complaint was the gouging at the gas pump. The same gripe goes for anyone making the less glamorous road trip to work each day. Add to that grocery and consumer goods price hikes, and many folks are grumpy, if not fearful, on the razor’s edge of covering expenses.
Over the last 12 months, the energy index rose 41.6 percent, with the gasoline index increasing 59.9 percent (the largest 12-month increase since March 1980), according to the US Bureau of Labor Statistics. The BLS reports that in the same time period, the Consumer Price Index for All Urban Consumers increased 9.1 percent before seasonal adjustment.
The Federal Reserve announced its second .75 percent rate hike in July in an effort to slow runaway inflation and avoid a recession. On the home front, experts anticipate inflation will continue to impact Utahns.
Is all of this inflation the result of corporate greed? What can be done to alleviate the financial strain—and what can Utah businesses do to maintain profitability while bolstering their employees through these wild times?
As CNBC reports, “The rising cost of fuel, especially diesel, means that anything transported on a truck, train or ship is affected. Energy costs are a major contributor to the decades-high inflation numbers showing up, as prices for all manner of goods and services march higher.”
That correlation between energy costs and inflation has spurred debate and discord over the past few months. In June, for example, President Biden issued a letter to oil companies censuring them for their role in inflation.
Citing the disparity between increased profits and decreased crude oil prices, the letter says, “At a time of war, historically high refinery profit margins being passed directly onto American families are not acceptable….[C]ompanies must take immediate actions to increase the supply of gasoline, diesel, and other refined product.” The oil companies responded with a letter of their own, explaining the many reasons they are not to blame for soaring energy costs.
A July report by the Joint Economic Committee Republicans also rebuts the corporate greed argument. The report released by Utah Sen. Mike Lee, who serves as a ranking committee member, denies the claims that gas and oil companies are using market disruptions to raise prices and instead blames the administration.
“It’s no coincidence that Big Oil is producing record-breaking profits after they’ve spent months blatantly price gouging American consumers,” says Jordan Schreiber, director of energy and environment at Accountable US, as reported by GOBankingRates. “Frankly, the justifications for their predatory pricing fall flat. Even when the price of crude oil fell, the industry dragged its feet to lower its historically high prices and the industry tried to blame the Biden administration for not providing opening up public land for extraction, but the reality is President Biden has approved more drilling permits in his first year than Trump, and the industry is sitting on 9,000 unused permits right now.”The corporate greed argument extends to consumer goods as well. As a Washington Post article recently cited, Americans are feeling the pinch on everything from diapers to laundry detergent and razors, with corporations blaming multiple variables as the cause.
A U.S. News & World Report article says, “Furious about surging prices at the gasoline station and the supermarket, many consumers feel they know just where to cast blame: On greedy companies that relentlessly jack up prices and pocket the profits.”
However, US secretary of the treasury Janet Yellen countered at a recent New York Times event, saying, “Demand and supply is largely driving inflation.”
“Companies raise prices whenever they want. That’s what they have always done and will continue to do so for years to come,” says Dr. Abe Bakhsheshy, a professor of organizational behavior and director of the Daniels Fund Ethics Initiative at the University of Utah. “Inflation could certainly be associated with rising oil prices, supply chain, the war in Ukraine, and shifting consumption patterns due to the pandemic, but greed in making more money and lack of concern for consumers could give corporate executives legitimate excuses to offer their products at a much higher price. They may not be violating the laws by raising their prices whenever they want, but is that really ethical?”When it comes to business ethics, Dr. Bakhsheshy offers advice for avoiding one of the common casualties of inflation, supply chain issues, and economic upheaval: layoffs.
“You’re supposed to treat your most valuable assets, meaning your employees, like partners,” Dr. Bakhsheshy says. “You’re supposed to watch and make changes so you can respond appropriately, so the employees relying on you don’t end up suffering.”
A handful of Utah companies have seen layoffs in the past year, and the personal toll is real. One laid-off employee, who chooses to remain anonymous, says that despite her years of tech experience and recent networking efforts, she has yet to find a new job. Compounding things, she was newly pregnant when she was laid off. While able to cover expenses solely on her husband’s income for now, she worries that if she doesn’t land a new position soon, finances and job hunting will be even harder after the baby arrives.
A worker from another Utah company says it took him a few months to find another job after being laid off. Single and in his early 20s, he was able to get through the financial dry patch, but he worries about the fallout for his co-workers with families.
Dr. Bakhsheshy says there are several ways companies can avoid layoffs, which can be an all-too-easy solution for businesses facing a decline in profits. He says to start by asking your organization: “Is it possible to freeze new hires? Is it possible to ask employees to volunteer to take time off? Is it possible to sell excess inventory? Is it possible to completely eliminate overtime? Is it possible to offer severance for employees who may want to work for other companies or who are close to retirement?”
If it looks like layoffs are inevitable, he says it’s important to consider providing cross-training for employees that will be let go.
On the flip side, raising workers’ pay is an ethical way to support employees during turbulent economic times and retain staff during a tight labor market. The Utah State Legislature, for example, recently appropriated more than $210 million from the General and Education Funds (GF/EF) for salary changes, in addition, to benefit cost increases, for staff and contractors in several government sectors.
However, the US and Utah eventually tackle inflation, supply chain issues, and other disruptors; the hope is that government and business can come together to alleviate the financial pressure for the rest of us.