A survey of more than 1,300 U.S.-based CEOs by the professional services network KPMG revealed that an overwhelming majority of corporate leaders expect the economy to slide into a recession over the next year — and they’re planning to preemptively lay off employees and make cuts to environmental, social and governance (ESG) programs in response. Of course, none of this should come as a surprise considering that the Federal Reserve’s recent rate hike was inspired by its insistence that curbing “red-hot demand” — and not corporate greed — is the key to cooling record-high inflation.
And, while the Fed appears fine with unemployment reaching 4.4 percent in the process, its manufactured recession completely ignores the fact that continued increases in consumer spending likely have more to do with the artificially inflated cost of basic goods than excessive demand. If anything, the move is a corporate giveaway — allowing CEOs to take back the measly increases they were forced to accede in order to attract workers during the 2021 rebound all the while keeping their skyrocketing profits.
The disconnect between narratives is palatable at this point. Over the summer, economist and former U.S. Treasury Secretary Larry Summers called for painful levels of joblessness. At the same time, employers and conservative pundits alike continue to spout off about how “no one wants to work anymore.” But how can Americans be refusing to work at the same time that the economy needs fewer of them to take home a paycheck? How can both of these contradictions be true at once?
Simply put, they can’t be. Of course, lamentations about lack of work ethic are really just code for employers who don’t want to pay a competitive wage. After all, the COVID-19 pandemic sparked an actual labor shortage, leaving many without enough staff. A mere 6 million workers were available to fill 10 million vacancies in August of this year. Through this lens, layoffs and hiring freezes make sense: If there are fewer jobs available, it is easier to put workers back in their place, giving employers back the upper hand. Naturally many CEOs appear to be all-in on such a plan, with 51 percent already aiming to cut labor (additionally, 59 percent are gunning for ESG). As Business Insider reported, executives have essentially made it clear that 2023 is going to be pretty awful.
But will sacrificing working families to a recession really bring inflation down? It’s unlikely considering the source of rising prices. Wage gains made by in demand workers have already been eaten up by what the AFL-CIO union federation coined “Greedflation,” leading to an overall 2.4 percent drop in real wages. According to the Economic Policy Institute, less than 8 percent of recent inflation is due to rising labor costs. For reference, that is a miniscule amount compared to the historical rate of 61.8 percent. Rather, the biggest recent driver has been runaway corporate profits at 53.9 percent. To put just how explosive these increases have been into context, normally corporate profits are responsible for just 11.4 percent of inflation.
At least one expert is warning corporate leaders not to proceed as planned. KPMG’s CEO Paul Knopp is concerned that employers who lay off too heavily now will be in a bad position to rehire when the economy ticks back up again — especially considering that 92 percent of the CEOs surveyed also expect an overall increase in their total labor force within three years. Of course, the fact that his concern lies with the possibility of workers regaining similar bargaining power to what they found in 2021 only reiterates the point of the Fed’s manufactured recession — to lower real wages even further while entrenching sky-high corporate profits.
Image credits: Nicola Barts via Pexels
Riya Anne Polcastro is an author, photographer and adventurer based out of the Pacific Northwest. She enjoys writing just about anything, from gritty fiction to business and environmental issues. She is especially interested in how sustainability can be harnessed to encourage economic and environmental equity between the Global South and North. One day she hopes to travel the world with nothing but a backpack and her trusty laptop.