Profits are driving inflation, not wages. The left should be repeating this line until we are blue in the face. After a decade of wage stagnation and a pandemic that pushed millions into poverty, we simply cannot allow the right to spread a narrative that blames the cost of living crisis on workers attempting to resist pay cuts.

The narrative also has the benefit of being true. Research from IPPR and Common Wealth has shown that the profits of the UK’s largest non-financial companies were up 34 percent on pre-pandemic levels. With growth and investment low, these profits are not coming from jobs creation or innovation; they are coming from monopoly power.

IPPR and Common Wealth found that 90 percent of the increase in profits over the past few years was accounted for by just 25 companies. These corporations are using their market power to push down wages, raise prices and gouge suppliers to maximise their profits. They effectively act as rentiers; like landlords, they can simply skim returns off value created elsewhere in the economy.

Oligopolistic firms don’t reinvest these earnings in expanding output or innovating. Instead, most of the profits they have made have been distributed to shareholders or used to buy back shares. The seven largest oil companies are poised to return a staggering $38bn to shareholders after a bumper year for profits.  

Share ownership is highly unequally distributed, with a small portion of investors holding the vast majority of the country’s financial wealth. Pension funds also own a lot of shares, but pensions wealth is also unequally distributed. Rentier corporations are expropriating workers and dishing out the proceeds to the wealthy.  

And it’s not just shareholders who are doing well in the current economy. Boris Johnson is reportedly considering removing caps on pay in the City of London. And wages are rising much faster at the top end of the income spectrum than at the bottom, where many workers are experiencing real terms pay cuts. 

The wealthy are then able to go out and spend this cash on either luxury goods, or on yet more assets, driving up the prices of both. House prices, for example, have not fallen nearly as much as you might expect given pervasive economic decline because there are plenty of wealthy investors on hand to snap up any available properties. 

And luxury goods brands are faring extraordinarily well in a difficult economic climate. Watches of Switzerland, which is the largest retailer of Rolex watches, reported sales up nearly 50 percent in the first three months of this year, while LVMH, which owns brands like Louis Vuitton and Dior, reported an increase of nearly 30 percent in the same period. 

Meanwhile, inflation is running at higher rates for those on low incomes because they spend a greater portion of their earnings on basic necessities like food and fuel that have seen significant price increases. And the Bank of England’s decision to raise interest rates now means that those who have been forced into debt to make ends meet will be paying more to banks. 

In fact, there is some evidence that high corporate profits are being driven by large firms using their market power to price gouge consumers. When prices are increasing across the board, companies can simply claim that any price increases are due to increasing costs, when in fact they may be increasing prices more than the increases in their costs. In sectors like energy with high barriers to entry and little competition, consumers have no option other than to take the prices offered to them. 

The problem is quite clear: there is too much money stuck in the pockets of wealthy shareholders and executives. Those at the top of the economy are using their economic and political power to suck wealth up from those at the bottom. We’re not living through a wage-price spiral, we’re living through a profits-price spiral. 

Working people deserve wage increases in line with inflation. Anything else would be a pay cut, which would push millions more people into poverty, debt and homelessness. Workers are right to take any action they can to protect their wages from inflation. 

But unless profits fall commensurately, prices will simply continue to rise, further eroding workers’ real incomes. As well as demanding the maintenance of their wages, we need to demand tax increases on corporations and the wealthy, a clamp down on tax avoidance and evasion, and curbs on monopoly power to stop big businesses from gouging consumers.

We can’t let Conservative politicians and their wealthy friends shift the costs of this crisis onto working people the way they did the last one. We have to get behind workers in all sectors who are fighting not just to maintain their wages, but to take back power in an economy that is dominated by the wealthy few.