Post-Pandemic Inflation

There’s no secret in the surge of people resigning, changing jobs and eschewing older levels of pay. Except for certain technology professions, union shops and preset government civil service pay, most Americans are facing post-pandemic wage/salary cuts of 15% on average. Lower-end jobs, particularly in the hospitality/restaurant/retail sector, filling vacancies is proving difficult and frustrating for employers who simply do not recognize that their pay scales need a dramatic upward adjustment. 

Republicans claim that extending unemployment benefits and providing stimulus checks simply demotivate jobseekers; they apparently believe that, notwithstanding that Americans work the longest hours in the developed world, we are inherently a lazy people. All this as income inequality has escalated even further; the disparity between the richest in the land from “the rest” has never been so wide. What the GOP also fails to recognize is that prices everywhere, from home rentals based on overpriced real estate to gasoline at the pump, from used cars to tuition costs. But even the food-clothing staples are experiencing higher costs at every level.

“Global food prices rose for the 12th month in a row in May, up nearly 40% year over year, according to the United Nations' food price index. Last month was also the sharpest monthly rise in average food prices in over a decade, spiking 4.8% from April to May.

“Abdolreza Abbassian, senior economist for the UN Food and Agriculture Organization, says surprising demand for corn in China, an ongoing drought in Brazil and increased global use of vegetable oils, sugar and cereals has caused prices to surge rapidly around the globe… ‘The demand, really I would say, is almost surprising everyone,’ Abbassian told CNN Business. ‘This demand requires a strong supply response.’

“Global inflation is raising prices on virtually everything, from food to steel to lumber and energy. In countries that belong to the Organization for Economic Cooperation and Development, prices surged in April to the highest rate since 2008… 

“US food prices haven't yet returned to normal this year after pandemic grocery buying caused them to skyrocket a year ago. Overall food prices in the US were up 2.4% in April from the same period a year ago, while fruit and vegetable prices rose 3.3%.” CNN.com, June 4th. Meat and milks have been particularly rampant culprits. But it’s not just food.

Writing for the June 17th FastCompany.com, Elizabeth Segran addresses the rise in the cost of clothing: “The price of clothing in the U.S. has gone up 5.6% over the last year, according to the consumer price index released by the Labor Department last week. And that’s across the board, from mass-market retailers all the way up to luxury brands… There’s no single, straightforward reason for these increases, and when it comes to clothing, the causes of inflation are particularly complicated… [but…]

“WE STOPPED BUYING CLOTHES… The problem started during the pandemic. In March 2020, when stay-at-home orders first went into effect in the U.S., Americans changed their shopping habits drastically. With nowhere to go and a possible recession on the horizon, apparel purchases ground to a standstill. In April 2020, clothing sales fell 79%, which is the largest-ever recorded decline.

“Fashion labels began to panic. It was unclear how long the pandemic would last and, by extension, how long consumers would continue to not buy clothes. So many brands radically changed their operations, starting with worker layoffs and slashed prices on merchandise to unload existing inventory. Many canceled orders for the rest of the year, leaving overseas factories in a lurch. In turn, many factories had to fire garment workers…

“[But s]tarting this summer, life in the States has started to return to normal, and there’s a lot of pent-up demand for clothing. But brands can’t suddenly flip the switch and increase their supply. Some are still short-staffed. And many clothing factories around the world are still shuttered. ‘Most brands do their manufacturing offshore, so it is not a very nimble supply chain,’ says Lauren Bitar, head of insights at the analytics firm RetailNext. ‘So now, there’s enormous demand and not enough supply. Hence prices are going up.’

“THE PANDEMIC ISN’T OVER OVERSEAS… While the U.S. and some European countries are beginning to bounce back from the pandemic, there are many countries around the world that are facing new waves of COVID-19 cases. This makes the situation even more difficult for brands because their partner factories are located in countries like India, Bangladesh, and Cambodia, where governments have imposed lockdowns… ‘Retailers are working as best they can with their suppliers and have been for the better part of a year now,’ says Jon Gold, VP of supply and customs policy at the National Retail Federation… The ongoing COVID-19 crisis—coupled with the spike in demand from consumers in the U.S. and Europe—is contributing to shortages of materials around the world…

“SHIPPING DISASTERS… Brands are also facing massive shipping delays. The pandemic wreaked havoc on global shipping, leading to a shortage of shipping containers and an imbalance in where they were stuck versus where they were needed…

“RETAIL STAFF WANT BETTER PAY… ‘Retail has traditionally paid very little, forcing workers to work unpredictable hours, and not provided a solid career path,’ Bitar says. ‘A lot of workers got burned from being unceremoniously laid off or furloughed during the pandemic, so they may be looking for a different kind of work.’…To get the workers they need, Bitar says retailers will have to offer better pay and benefits. And this is yet another cost that may lead to an increase in clothing prices.” 

Generally, the rate of these price increases exceeds most salary/wage increases (and certainly salary/wage cuts). In the end, the pandemic reshaped and continues to reshape every nook and cranny of daily existence, with some changes being just transitory while others represent permanent shifts. Political instability coupled with the rise of job-replacing artificial intelligence, with a big dose of climate change, make such changes not only inevitable but massive and never-ending. Life at the top has gotten so much better; life in the middle and the bottom has moved in the opposite direction. “Make America Affordable Again”?

I’m Peter Dekom, and while such huge and across-the-board changes are difficult to live with, we better get used to a future that resists any attempt to restore the past.