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A shortage, by definition, requires a situation where the price cannot rise. Of course, if the price is rising, then the poorer businesses are priced out of the

A shortage, by definition, requires a situation where the price cannot rise. Of course, if the price is rising, then the poorer businesses are priced out of the market and no longer need developers. As long as price can rise, a shortage is impossible. Even if there was only one developer in the entire world, the services would eventually go to the highest bidder and everyone else would be priced out of the market, leaving no demand for other developers. That leaves me wondering what force is preventing price from rising in the case of developer talent?

pravda 10y ago
>That leaves me wondering what force is preventing price from rising in the case of developer talent? Well, it's not Steve Jobs. Not anymore.
deleted 10y ago
[deleted]
dv_dt 10y ago
It's because many companies are overly oriented towards cost accounting and labor is classed as a cost. Some people might just say that's just a normal business calculation, and to some extent it is. But there is a another aspect to it which could be viewed through more of a class-conflict viewpoint (not necessarily a upper vs middle sense but a capital vs labor sense). This isn't just in the STEM areas - if one looks at real wage growth vs productivity, STEM areas are one of the few employment areas that are given a more generous allocation of produced benefits to labor ... leading to language of a "shortage". Edit: clarified real wage to real wage vs productivity.
- Swizec 10y ago
  We make things, we don't manage people. As such we are below the people setting wages. Yes, engineers are professionals and all that, but we are seen as the executors. The final rung on the ladder who finally executes and builds the thing. So our wages do not scale that great with value of output. In many cases we are factory workers, maaaybe artisans, in a feature factory --> https://hackernoon.com/12-signs-youre-working-in-a-feature-factory-44a5b938d6a2#.kn3tutvxz https://hackernoon.com/12-signs-youre-working-in-a-feature-f...
  - squozzer 10y ago
    To the suits, we are little better than chimps.
  - gumby 10y ago
    If it makes you feel better, in MBA speak you're a "direct contributor" (unlike everyone else who has to justify the value they supposedly provide) and all those suits are stuck in the "overhead" bucket (i.e. "a burden, not contributing to revenue in any way").
  - dv_dt 10y ago
    Doctors and lawyers are direct executors in a sense. Do they have a similar problem? And I would differ with your assessment that tech wages scale poorly with productivity. Better than many other areas, engineers can leverage their productivity extremely well - especially in software, but even moreso in the future with information and mechanical automation becoming ever more capable.
    - dilemma 10y ago
      Doctors and lawyers have controls in place to limit the supply of labor.
jandrese 10y ago
This is the kind of logic only an economist could love. People still gotta get work done at the end of the day and they gotta stay in budget. Perfectly elastic markets are a fictional construct about as real as a perfectly round sphere oscillating in a perfectly sinusoidal fashion. Go on any job site and you will see tons of openings for people with 5 years experience in <every buzzword tech in the book> for $50k/year. These employers will always struggle to find acceptable talent and will always complain.
logfromblammo 10y ago
Managers have to earn more than their underlings.
eli_gottlieb 10y ago
>That leaves me wondering what force is preventing price from rising in the case of developer talent? A religious belief that labor prices must be kept as low as possible, lest communism ensue.
pdonis 10y ago
> A shortage, by definition, requires a situation where the price cannot rise. This is not correct. A shortage is a situation where demand exceeds supply. The only definite statement you can make about such a situation is that it means the market in question cannot be in equilibrium. But there are multiple possible reasons for that. Prices being controlled is actually not one of them: the effect of price controls will not be market disequilibrium but a shifting of the equilibrium. So the question you should actually be asking is, what is preventing the market from reaching equilibrium? Here are two possible answers: - Demand is growing faster than supply can keep up. - Transaction costs (for example, difficulties in employers evaluating candidates' actual potential) are preventing efficient matching of supply to demand.
- Terr_ 10y ago
  I find that the whole terminology/model falls apart when you get people putting the price into the definition of the thing... Whether explicitly or as an unspoken part of their argument. "The world has a severe shortage of large diamonds I can buy for pennies."
- deleted 10y ago
  [deleted]
- randomdata 10y ago
  > A shortage is a situation where demand exceeds supply. Demand is characterized by price. Simply saying you want something does not mean you demand something. I'd love to find programmers for $1/hr, but I haven't increased the demand for programmers by saying that. I have to offer something a programmer is actually willing to take to be considered demand. And so, again, as long as price is rising, you cannot have a shortage. Every time the price goes up, there will be buyers dropping out of the market not willing to pay the new high. The result is that only those who can afford programmers will be able to hire programmers, and the supply will exactly equal the demand.
  - pdonis 10y ago
    > Demand is characterized by price. No, demand is characterized by the quantity demanded at a given price. More precisely, the demand curve is a curve of quantity demanded vs. price. > I'd love to find programmers for $1/hr, but I haven't increased the demand for programmers by saying that. Not by just saying it, but you could post a want ad for programmers at $1/hr in order to investigate the potential supply of programmers at that price. Of course you would find that it was zero, but that just means there's no supply of programmers at that price, not that there's no demand. > Every time the price goes up, there will be buyers dropping out of the market not willing to pay the new high. Now you're assuming that there is supply--programmers available at higher prices--but not demand--clients don't want to pay the offered price. (A more precise analysis would say that the quantity supplied at that price is greater than the quantity demanded--some clients will pay that price but not enough to hire all available programmers.) You're right that this is not a shortage, but that's because it's a surplus instead--supply exceeds demand, instead of demand exceeding supply. You're also ignoring other possibilities. Programmers could decide to accept lower wages instead of higher ones. "Price" is not something magically set by higher authority; it's the output of the market, not an input to it. In the first case above, if you want a programmer you will have to raise your offered price until you find one that is willing to work at that price. In the second case above, if programmers wanted work they would have to lower their prices (on average) until enough clients were willing to hire all of them.

pravda 10y ago

>That leaves me wondering what force is preventing price from rising in the case of developer talent? Well, it's not Steve Jobs. Not anymore.

deleted 10y ago

[deleted]

dv_dt 10y ago

It's because many companies are overly oriented towards cost accounting and labor is classed as a cost. Some people might just say that's just a normal business calculation, and to some extent it is. But there is a another aspect to it which could be viewed through more of a class-conflict viewpoint (not necessarily a upper vs middle sense but a capital vs labor sense). This isn't just in the STEM areas - if one looks at real wage growth vs productivity, STEM areas are one of the few employment areas that are given a more generous allocation of produced benefits to labor ... leading to language of a "shortage". Edit: clarified real wage to real wage vs productivity.

Swizec 10y ago
We make things, we don't manage people. As such we are below the people setting wages. Yes, engineers are professionals and all that, but we are seen as the executors. The final rung on the ladder who finally executes and builds the thing. So our wages do not scale that great with value of output. In many cases we are factory workers, maaaybe artisans, in a feature factory --> https://hackernoon.com/12-signs-youre-working-in-a-feature-factory-44a5b938d6a2#.kn3tutvxz https://hackernoon.com/12-signs-youre-working-in-a-feature-f...
- squozzer 10y ago
  To the suits, we are little better than chimps.
- gumby 10y ago
  If it makes you feel better, in MBA speak you're a "direct contributor" (unlike everyone else who has to justify the value they supposedly provide) and all those suits are stuck in the "overhead" bucket (i.e. "a burden, not contributing to revenue in any way").
- dv_dt 10y ago
  Doctors and lawyers are direct executors in a sense. Do they have a similar problem? And I would differ with your assessment that tech wages scale poorly with productivity. Better than many other areas, engineers can leverage their productivity extremely well - especially in software, but even moreso in the future with information and mechanical automation becoming ever more capable.
  - dilemma 10y ago
    Doctors and lawyers have controls in place to limit the supply of labor.

jandrese 10y ago

This is the kind of logic only an economist could love. People still gotta get work done at the end of the day and they gotta stay in budget. Perfectly elastic markets are a fictional construct about as real as a perfectly round sphere oscillating in a perfectly sinusoidal fashion. Go on any job site and you will see tons of openings for people with 5 years experience in <every buzzword tech in the book> for $50k/year. These employers will always struggle to find acceptable talent and will always complain.

logfromblammo 10y ago

Managers have to earn more than their underlings.

eli_gottlieb 10y ago

>That leaves me wondering what force is preventing price from rising in the case of developer talent? A religious belief that labor prices must be kept as low as possible, lest communism ensue.

pdonis 10y ago

> A shortage, by definition, requires a situation where the price cannot rise. This is not correct. A shortage is a situation where demand exceeds supply. The only definite statement you can make about such a situation is that it means the market in question cannot be in equilibrium. But there are multiple possible reasons for that. Prices being controlled is actually not one of them: the effect of price controls will not be market disequilibrium but a shifting of the equilibrium. So the question you should actually be asking is, what is preventing the market from reaching equilibrium? Here are two possible answers: - Demand is growing faster than supply can keep up. - Transaction costs (for example, difficulties in employers evaluating candidates' actual potential) are preventing efficient matching of supply to demand.

Terr_ 10y ago
I find that the whole terminology/model falls apart when you get people putting the price into the definition of the thing... Whether explicitly or as an unspoken part of their argument. "The world has a severe shortage of large diamonds I can buy for pennies."
deleted 10y ago
[deleted]
randomdata 10y ago
> A shortage is a situation where demand exceeds supply. Demand is characterized by price. Simply saying you want something does not mean you demand something. I'd love to find programmers for $1/hr, but I haven't increased the demand for programmers by saying that. I have to offer something a programmer is actually willing to take to be considered demand. And so, again, as long as price is rising, you cannot have a shortage. Every time the price goes up, there will be buyers dropping out of the market not willing to pay the new high. The result is that only those who can afford programmers will be able to hire programmers, and the supply will exactly equal the demand.
- pdonis 10y ago
  > Demand is characterized by price. No, demand is characterized by the quantity demanded at a given price. More precisely, the demand curve is a curve of quantity demanded vs. price. > I'd love to find programmers for $1/hr, but I haven't increased the demand for programmers by saying that. Not by just saying it, but you could post a want ad for programmers at $1/hr in order to investigate the potential supply of programmers at that price. Of course you would find that it was zero, but that just means there's no supply of programmers at that price, not that there's no demand. > Every time the price goes up, there will be buyers dropping out of the market not willing to pay the new high. Now you're assuming that there is supply--programmers available at higher prices--but not demand--clients don't want to pay the offered price. (A more precise analysis would say that the quantity supplied at that price is greater than the quantity demanded--some clients will pay that price but not enough to hire all available programmers.) You're right that this is not a shortage, but that's because it's a surplus instead--supply exceeds demand, instead of demand exceeding supply. You're also ignoring other possibilities. Programmers could decide to accept lower wages instead of higher ones. "Price" is not something magically set by higher authority; it's the output of the market, not an input to it. In the first case above, if you want a programmer you will have to raise your offered price until you find one that is willing to work at that price. In the second case above, if programmers wanted work they would have to lower their prices (on average) until enough clients were willing to hire all of them.