Economics/Class Relations

Why Does Business Want a Recession?

Workers, angry and resentful after decades of frozen real wages and merciless downsizing, are becoming demanding.
LA Progressive

Give Jerome Powell credit for candor: the Fed chairman admits that his policy of increasing interest rates to fight inflation might push the economy into a recession. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be,” he recently told reporters.

If it does, one sector won’t be entirely displeased: employers.

According to the Deloitte accounting firm, a typical Fortune 500 company spends $1 to $2 billion a year on payroll, averaging between 50% and 60% of total spending. Controlling labor costs, unsurprisingly, is a top priority for employers.

In the boom-bust cycle of labor-management negotiations, the post-pandemic Great Resignation has triggered a labor shortage, a phenomenon we rarely witness and tends to fizzle out fast. Workers are quitting and retiring early, tanking the labor force participation rate. Those who remain enjoy the upper hand at interviews that feel like the job prospect is sizing up the company rather than the other way around. Labor shortages are driving up salaries, shortening hours, prompting signing bonuses and forcing bosses to accommodate people who prefer to work at home. Just 8% of office workers in Manhattan are back in the office a full five days a week.

The most recent data published, for June, finds that wages and salaries soared 16.8% on an annualized basis as benefit costs went up 14.4%.

Workers, angry and resentful after decades of frozen real wages and merciless downsizing, are becoming demanding. This reversal of a power dynamic in which workers were supplicants and bosses called the shots has also strengthened labor unions that had been losing membership for years.

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