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Corporations are booking record profits. Is it thanks to price gouging?

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Inflation has been the economic theme of 2022. Companies say supply chain issues, rising wages and expensive fuel have forced them to push prices up at the fastest rate in decades. But a lot of these same companies are reporting record profits, and that has many wondering if corporate greed is actually the driving force behind inflation right now. We sent NPR's Stacey Vanek Smith to see what's going on.

STACEY VANEK SMITH, BYLINE: Fact - inflation is up more than 7.5%. Fact - corporate profits have been at record highs this year. So it seems like the ever-higher prices we're all paying aren't just offsetting expenses for companies but might be beefing up bottom lines? Rakeen Mabud is chief economist for the progressive think tank Groundwork Collaborative.

RAKEEM MABUD: So while some of that price increase might have been justifiable, you know, a lot of it wasn't.

VANEK SMITH: Mabud says companies are padding prices.

MABUD: We know that there were sort of record profits over the last year and on the backs of families who are already struggling to get by.

VANEK SMITH: Mabud has listened to hundreds of corporate earnings calls and says CEOs talk openly about this. She points to grocery giant Kroger, which has seen billions in profits over the last couple years. On a recent call with investors, the CEO said the plan is to keep raising prices.

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RODNEY MCMULLEN: We view a little bit of inflation as always good in our business, and we would expect to be able to pass that through.

VANEK SMITH: AutoZone saw earnings jump 13%. Here's the CFO.

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JAMERE JACKSON: And as I've said before, you know, inflation has been a little bit of our friend in terms of what we see in terms of retail pricing.

VANEK SMITH: Hostess has seen profits jump more than 12%. The CEO had this to say.

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ANDY CALLAHAN: We're also seeing the consumers experience a lot of disruption. And they haven't fully recognized there were absorbed pricing.

VANEK SMITH: Et tu, Twinkie?

JUSTIN WOLFERS: Corporations have celebrated higher prices in their earnings calls ever since the history of the earnings call.

VANEK SMITH: Economist Justin Wolfers of the University of Michigan says even if companies are padding prices a little right now, it is not the source of inflation.

WOLFERS: Blaming inflation on greed is like blaming a plane crash on gravity. Corporations have always tried to raise prices whenever they could.

VANEK SMITH: The reason they usually don't, says Wolfers, is that they're competing for our business.

WOLFERS: Still greed, but that greed forces them to offer low prices 'cause they're trying to outmuscle their competitor.

VANEK SMITH: So if corporate greed is nothing new, then what's changed? For one thing, costs. Two of the main expenses for companies are raw materials and worker pay. Raw materials have gotten a lot more expensive. The prices of the raw materials that companies use to make the stuff we buy have been rising at about 8% a year. That is a faster pace than the price tags we've seen in the store. Worker pay, though, is another story, says Wolfers.

WOLFERS: Most economists are a little puzzled that wages haven't kept up a little more.

VANEK SMITH: So far this year, wages have risen about 5%, and prices have risen more than 7 1/2%. Companies are not raising wages as fast as they're raising prices. And that gap could be where some of these profits are coming from. Why haven't we asked for bigger raises? After all, companies say they are desperate to hire, and workers have a lot of power right now.

WOLFERS: Many of us have recently renegotiated the terms of our jobs to a degree that we've never seen before. This, of course, is the movement to working from home.

VANEK SMITH: Wolfers suspects workers might be negotiating for things other than pay, so companies have been able to get away with offering lower wages. But with prices rising as fast as they are, wages will probably rise pretty soon, says Wolfers. As soon as that happens, most of those record profits CEOs are bragging about will likely go into workers' paychecks, and profits will go back to normal.

WOLFERS: What's happening in the interim is there's a bit of money that we might hope should go to workers, but it's staying in the boss's pocket instead.

VANEK SMITH: Is it just, like, this little moment before things kind of catch up?

WOLFERS: Yeah, absolutely.

VANEK SMITH: Wolfers expects companies will drag that moment out as long as they can. As far as rising prices, that will keep happening as long as we keep paying them. Until our buying slows down, which it hasn't, companies will push prices up as much as they can. Blame gravity. Stacey Vanek Smith, NPR News. Transcript provided by NPR, Copyright NPR.

Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.