Inflation Amid Re-evaluation

Numbers may reflect a deeper reconsiderations that emerged from the pandemic

Inflation Amid Re-evaluation

Publishing lurches from crisis to self-defined crisis. The most familiar “crisis” is the supposed financial one we’ve been in since about 2000. Blamed on rapacious publishers with egregious gross profit margins, the true sources of the pressures have become clearer over time — a huge influx of new science from China, without commensurate market uptake; increased demands for disclosure, review, and speed adding complexity to editorial workflows; additional complexity introduced by disparate and often redundant efforts to increase access; universities spending on lavish facilities and salaries for administrators instead of educational materials and broader admissions; and, of course, the escalating costs of complex technology and its associated overheads.

This crisis has occurred during a period of overall low consumer and producer price inflation. Interest rates have been low for decades.

In our industry, price increases have exceeded inflation for a variety of legitimate reasons. According to EBSCO, the total 5-year price increase for journals from 2016-2020 was right around 24%. Despite its labeling, only four years of increases were measured, putting the average at about 6% per year. (Even with these data, EBSCO projected a 2-3% price increase in 2021. That may have been due to pandemic-related price freezes many publishers self-imposed.)

But now, inflationary worries are stirring across the broader economy, with sources both many and varied — from wages and salaries as employees come out of the pandemic having done some soul-searching and some math; as demand grows for goods and services, while supply is uneven or constrained; and, as cash saved during the pandemic by businesses and individuals floods back into the market, creating opportunities for price increases.

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Just where this is going isn’t certain, and economists are notoriously all over the map when it comes to projections — as the joke goes, economists anticipated 55 of the last six market corrections. Things are no different with the post-pandemic action.

Recent tuition increases are all over the map as university administrators try to figure out what’s going on. The latency in decision-making is key — boards meet infrequently and with incomplete information. Given how quickly the economy is changing, everyone is throwing darts. Oakland University appoved a 4.2% tuition increase last week, while BYU approved a 2.5% increase in April, for instance. Will BYU regret its decision? Or will Oakland?

For publishers and libraries, the rubber meets the road with site licenses and APCs. With price increases budgeted far in advance, any problems get solved over multiple years and multiple renegotiations. Whoever bears the brunt, the roller coaster will be more exciting than usual over the next 3-5 years, I think.

Aside from inflation, universities face other funding issues. Enrollments are down, in many cases more than tuition increases can offset, as reassessments many families and individuals made during the pandemic shifted educational goals away from standard 4-year paths or graduate degrees. Some spell seems to have broken around higher education in some circles.

And this is what interests me more — signs that some underlying re-evaluation occurred during and continues after the pandemic. These new attitudes themselves may drive inflation. The way people are thinking about wages, quality of life, mortality, relationships, and long-term commitments seems to have shifted. Part of it is a sense of burnout, as noted in a recent Washington Post article:

Employers across the country, from Fortune 500 companies such as PepsiCo and Verizon to boutique advertising firms and nonprofit organizations, are continuing pandemic benefits such as increased paid time off and child- or elder-care benefits as well as embracing flexible work schedules and remote work in recognition that a returning workforce is at high risk of burnout. . . . About 40 percent of Americans say they felt burned out while working at home this past year, according to a March Ipsos poll. Some 42 percent said they would look for another job if required to return to the office full-time, and 72 percent said they wanted more flexibility regarding going back into work.

Affinity with workplaces dropped during the pandemic, as office time, commute habits, and work relationships vanished or downshifted. We’re all hearing or seeing ads for hiring bonuses and higher hourly wages from unexpected places — Amazon, McDonald’s, etc. The overheads for restaurants and supermarkets will increase as they have to support the added complexity of curbside pickup, delivery, and dine- or shop-in options simultaneously. Expectations have increased, driving options and complexity. And complexity is expensive.

There are also the new expectations around diversity, equity, and inclusion, which are quickly permeating organizations. In purely financial terms, these add expenses at many levels — management of the programs, more robust hiring processes, beefed up HR departments and trainings, and more.

Changes in expectations around governments’ roles in our lives could also fuel some degree of inflation, as Heather Cox Richardson wrote yesterday in reference to President Biden’s infrastructure plans:

. . . it signals a return to the sort of government both Democrats and Republicans embraced between 1945 and 1980. In that period after World War II, most Americans believed that the government had a role to play in regulating business, providing a basic social safety net, investing in infrastructure, and promoting civil rights.

Such a shift will make tax cuts, consolidation of wealth, and monopolistic behavior less politically tenable. A strong movement toward anti-trust — despite some recent setbacks — also may increase costs as more companies create more competition for employees, who themselves are setting the bar higher.

The 1918 pandemic, occurring as it did in conjunction with World War I, became a time when women were able to move into jobs and positions of power in record numbers. Voting rights soon followed, and while progress has been slow and halting at times, women are becoming more influential and powerful as old biases get chopped away.

The 2020 pandemic may be unleashing a similar experience for other underclasses, like those euphemistically dubbed “essential workers.” With many feeling like “expendable workers,” the aftertaste has been bitter and the lesson clear — oligarchs exist in America, and we see them now. In response, the degree of change in hiring practices, social mobility, justice reform, and other measures of influence has been relatively swift, and overdue. The pandemic accelerated this aspect of social rebalance.

Keeping prices down kept people down — that’s a key point, and it appears the essential bargain of low wages for stability has been reviewed and found lacking.

We’re headed into a time of inflation, but the reasons seem compelling. Expectations have changed, a spell has been broken, and people are feeling the injustice of the status quo. They want more. To some extent, the level of inflation will depend on how hard the status quo works to maintain margins. This includes universities and governments. If they join in a shift toward lower margins and greater equity, inflation may be low and lingering — and that can pay off for everyone in the long run. If they try to throttle change, inflation could spike unpredictably.

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