Inflation battle requires more context rather than panic

With Americans fixated on the cost of their Thanksgiving suppers and the release of the latest inflation reports, news services last week were full of headlines about rising food costs.

It provided a juicy tomato for opposition politicians to throw at governments, allowing them to allege that the elites don’t care about the struggles of the working person to put food on the table, particularly with other expenses such as fuel also rising.

It’s easy politics, but it’s not fair to think that a government of any political stripe could wave a wand and quickly and unilaterally fix the wide range of inflation-causing problems arising from the once-in-a-generation turmoil caused by the COVID-19 pandemic.

Inflation is a common problem this fall. In Canada in October it was running at 4.7 percent, in the United States it was 6.2 percent, in the United Kingdom 4.2 percent and in Germany 4.5 percent, to name a few.

Each segment of the economy has its own problems contributing to inflation, from petroleum producers struggling to keep up with fast-rising demand, to ports and transportation systems overwhelmed by a flood of imported products to manufacturers and processors desperately searching for enough parts and workers to keep production at full capacity.

Agriculture and food has the additional problem of global weather challenges, which caused crop and feed shortages that ultimately drove up grocery prices.

All these situations are serious, but we must also not blow things out of proportion. Instead, we must realize it will take the efforts of government, industry, business and individuals to solve them.

For example, an American agricultural economist posted interesting data that gives context to food prices.

Many might be surprised to learn that some key items are more affordable today than they were decades ago.

Jayson Lusk, head of Purdue University’s Agricultural Economics Department, turned to the U.S. Bureau of Labor Statistics (BLS) to get food prices and median weekly earnings over time to see how many hours a person had to work to pay for certain items. If it took fewer hours of labour to pay for an item, it was more affordable. The report can be found at bit.ly/3E5pNij.

He found that in 1980 a worker making the median salary had to put in 175 minutes of labour to buy a 20 pound turkey.

It took only 80 minutes to buy the bird in 2019, the year the BLS unfortunately stopped tracking turkey prices.

In 1991 it took 170 minutes to earn enough to buy a 10 lb. ham, but in the last year it took only 113 minutes.

Staples such as bread and potatoes were more stable over the decades, with less affordable periods posted in the 2008-15 period but with affordability improving in following years.

However, the data showed beef in the past year was one of the least affordable times. It took 102 minutes of labour to buy four lb. of sirloin steak recently, whereas it was less than 80 minutes back in 2010.

COVID is one reason for the recent increase in beef.

Outbreaks forced temporary closures, increased absenteeism and a lot of changes to processing protocols.

This resulted in reduced processing speeds that pressured cattle prices lower but pushed beef prices higher.

This also resulted in excellent profits for processors, which sparked the U.S. House of Representatives’ agriculture committee to hold hearings this summer looking into the impact of concentration in the packing business and looking for ways to ensure cattle producers receive fair prices.

There are lots of arguments about this, but Tyson, one of the largest meat packers, says its leading problem is a labour shortage.

It said 10 percent of its factory positions are unfilled due to absenteeism and worker shortages, and it is taking six days to do what it can normally do in five.

Meat packing does not have a history of good working conditions, but Tyson is changing to attract and retain workers.

It has raised the average wage to $24 an hour, introduced child-care benefits as well as full health benefits, retirement plans and sick pay. It has hired a chief diversity officer and is investing in automation to eliminate the more difficult, hard-to-fill tasks.

These benefits add to Tyson’s costs but could also over time solve its labour problems and restore efficiency.

Improving labour benefits is one example of how businesses across the economy are changing operations to succeed in the new post-COVID environment.

We are also seeing investments to improve self-sufficiency in critical components and resources, make supply chains more resilient and control COVID.

It will take months, and in some cases years, for these investments to solve the problems that are generating inflation, but eventually they will, and in the process build a more resilient and fair economy.