9 ms·

Public service announcement: There is no such thing as a labor shortage. Having trouble hiring developers? Offer a salary of $1 million per year. Your new probl

by scott00 10y ago

Public service announcement: There is no such thing as a labor shortage. Having trouble hiring developers? Offer a salary of $1 million per year. Your new problem will be job applicant crowd-control. Whenever an employer reports a labor shortage they mean they can't find enough people to take jobs AT THE WAGE THEY ARE WILLING TO PAY. Lest you brand me a red shirt-wearing Das Kapital-waving pinko commie, let me lay another one on you: there is no such thing as a job shortage. Whenever anyone reports a shortage of jobs they mean they can't find anyone willing to employ their skill set AT THE WAGE THEY ARE WILLING TO ACCEPT. Any discussion of the labor market that focuses on quantity supplied, or quantity demanded, without addressing the necessarily-related price issues is ignorant at best, and very likely intentionally deceptive.

Eridrus 10y ago
This seems like an argument that can be used to argue that shortages cannot exist for anything you can buy. The same rough argument could be used to argue that food shortages cannot exist. I'm pretty sure the word shortage already implies that there is a shortage at the market price, not at an arbitrary price.
- dragonwriter 10y ago
  > I'm pretty sure the word shortage already implies that there is a shortage at the market price "Shortage at the market price" seems to be a somewhat incoherent concept. The market price is the price point at which the supply and demand curves intersect. Other than a discontinuity in either supply or demand such that the curves pass without intersecting (which makes the market price ill-defined), demand equals supply at the market price.
  - Eridrus 10y ago
    I agree that it's poorly defined, but I would argue that a shortage at the market price implies that buyers would buy more at the market price if more of it was available. We're pretty comfortable talking about shortages in consumer markets when we would buy things at the stated price, but can't because it is sold out (eg Pixel phone shortages), so I'm not sure why we can't say a similar thing about labour.
    - dragonwriter 10y ago
      > I would argue that a shortage at the market price implies that buyers would buy more at the market price if more of it was available. That can just be a current price below the equilibrium market price; I'd argue that a shortage is a specialized instance of that resulting from a transitory decrease from long-term supply (or increase from long-term demand) that is expected to revert to normal. But if you need annual supplements of labor for the same field over a period of decades, that's not a labor shortage, its price being artificially suppressed (and inhibiting market signals that would develop domestic supply faster.)
      - dllthomas 10y ago
        > But if you need annual supplements of labor for the same field over a period of decades, that's not a labor shortage, its price being artificially suppressed Theoretically, couldn't it also be that demand is consistently growing faster than anticipated (even after whatever corrections are made upon discovery that it previously grew faster than anticipated)?
- richardlong 10y ago
  Right, GP is leaving out A. necessary skills, and B. the size of the labor pool (multiplied by the labor force participation rate). For any given skill there is a labor pool with some participation rate, of people who currently have that skill, such that it is accurate to say that the market has a shortage. Answers to the shortage must solve for either the size of the labor pool, the rate of participation, or the amount of people who have that skill. Those answers vacillate between importing labor to solve the problem now, or forcing the market to educate people by blocking imported labor. The problem with importing labor is that it reduces market incentives to educate people. The problem with not importing people is that it means you'll have a labor shortage until the market adjusts and people re-educate. Easy answers, on either side, are snake oil.
- scott00 10y ago
  I see your point, and thinking about it helped clarify my thinking, so first, thank you for that. I think another way of phrasing my opinion is that the US labor market is a large, reasonably efficient market; that it's reasonably well modeled by a simple supply and demand model; and that discussing it in other terms obscures the important issues. The notion of a shortage is fundamentally incompatible with a simple supply and demand model of a market. The market price in such a model is, by definition, the price at which supply and demand are balanced. So if you're talking about a shortage in the US labor market, you're either claiming that supply and demand is a poor model of the labor market, or you're talking nonsense. I think either is misleading or at best confusing. So to an extent I really am saying that shortages can't exist for anything you can buy on a large efficient market. Of course not every market is a large efficient market. If you're talking about a price-regulated market, by all means, discuss shortages. Another good situation where discussing a shortage would be appropriate is markets that have very or perfectly inelastic supply over a relevant time period. Say, a vaccine that costs $1 but that takes 6 months to produce due to the biology involved, combined with a major epidemic in the relevant disease. It's fair to call that a shortage.
  - Eridrus 10y ago
    I think labour markets are some of the least efficient markets that exist. Without immigration it takes at least 4+ years for extra supply to become available based on increasing prices. And when you hire someone you really don't know what you're getting, particularly in software. Constraining supply increases salaries precisely because it takes supply so long to incorporate information. On top of that, supply and demand is a pretty leaky abstraction, I don't expect it to be very accurate in such a nonideal market.
klipt 10y ago
What if family doctors charged $10,000 / hour? Wouldn't you call that a doctor shortage? Just because a service exists at some (arbitrarily high) price point doesn't mean society isn't suffering from a shortage of that service.
- supercanuck 10y ago
  You actually used evidence that contradicts your point. If Family Doctors could charge $10K/hour, that most certainly does point to a shortage. His point was, offer Family Doctors $5/hour and see how many family doctors show up, which is 'equivalent' of what is happening now.
splintercell 10y ago
Labor shortage does not mean what you think it does. If we use the logic you presented, then we can say "There is no such thing as a shortage of Cabs, try offering $100 for a cab ride and there will be people pulling their personal cars next to you to take you where you want to go". Well Duh. A shortage of a good means that there if there can be pending buy and sell orders in a market book, then there are a lot of pending buy orders, but just not for the price at which sellers are willing to sell. What SV is saying that there are a lot of people who would buy a lot of goods, if they can be produced cheaply (and it isn't because they're poor, it's just because the consumers don't value that good that much). If Netflix raised their fees to $90 per month then it means that a lot of people would cancel their subscription (and not all would do because at $90 they will be unable to meet their rent).
- crdoconnor 10y ago
  What SV magnates are saying by "labor shortage" or "skills shortage" is that they want higher profits. What SV workers are saying by "no skills shortage" is that they want the same or higher wages. If Netflix magically halved their wage bill they would likely keep their price the same since how much a Netflix devops engineer gets paid doesn't change how much a family in Peoria is prepared to pay for a Netflix subscription.
dgudkov 10y ago
Higher wage won't necessarily increase number of qualified candidates. To illustrate the point: you could offer piles of gold for a decent C++ programmer in the ancient Roman Empire and get no one simply because they didn't exist.
- xiaoma 10y ago
  Higher wages definitely influence graduating STEM students who are choosing between SV and finance. They also cause bootcamps to pop up all over the country and bring people from other industries into tech. In general the market will follow the money. It is a good point that the market can't achieve the impossible. C++ bootcamps probably wouldn't spring up in your hypothetical ancient Rome and offering millions of dollars today for employees with skillsets that modern humans can't achieve wouldn't work either. The question is whether you or not the current bar of a "qualified candidate" is impossible. I would say no. Given the right financial incentives, the candidates will exist.
bobdole1234 10y ago
This assumes that labour is perfectly re-locatable and everyone has perfect pricing information. Google literally does offer $1 million salaries for the right positions, the problem is that most of the people who could make that work have already been recruited. Which is why they pay interns six figures to show up for what amounts to a long job interview, to make sure they get all the new talent the moment it's minted. If you make it more difficult to recruit people from untapped populations abroad, they won't pay lower tier people more, they'll open offices aboard to capture their acceptable talent. So yes, there is a shortage of talent that meets the bar. While everyone trained as a book keeper can almost certainly fill any book keeper role, not everyone trained as an engineer can actually fill any role. Not just because some people are shitty engineers, it's because engineering involves spending long periods of time learning domain knowledge that isn't transferrable, even setting aside the fact there are literally thousands of types of engineer.
- scott00 10y ago
  What positions at Google pay $1M/year? FWIW, my rant was not intended as a rant against immigrants, just a rant against people that spin their personal or corporate financial interests as a national crisis.
  - bobdole1234 10y ago
    There's a surprisingly large cross section of people paid extremely well in Google. The company is heavily automated and very profitable, which means they can attribute those profits to the humans largely responsible for them with accuracy that isn't often seen outside finance. The bonus structure is extremely kind to the highly productive.
    - scott00 10y ago
      I'd really like to hear some specifics on this. What kind of job descriptions do they have? Roughly how many are there? Are they executives, managers, or individual contributors? Does this only happen in bonus form for extraordinary performance, or can new hires start with the expectation of comp at this level? I regularly hear stories about non-executives getting 7 figure paydays in trading and investment banking. I hear stories about non-executive tech people getting 7 figure pay days due to startup liquidity events. This is the first I've ever heard of something like this at an established tech company.

by scott00 10y ago

Eridrus 10y ago

This seems like an argument that can be used to argue that shortages cannot exist for anything you can buy. The same rough argument could be used to argue that food shortages cannot exist. I'm pretty sure the word shortage already implies that there is a shortage at the market price, not at an arbitrary price.

dragonwriter 10y ago
> I'm pretty sure the word shortage already implies that there is a shortage at the market price "Shortage at the market price" seems to be a somewhat incoherent concept. The market price is the price point at which the supply and demand curves intersect. Other than a discontinuity in either supply or demand such that the curves pass without intersecting (which makes the market price ill-defined), demand equals supply at the market price.
- Eridrus 10y ago
  I agree that it's poorly defined, but I would argue that a shortage at the market price implies that buyers would buy more at the market price if more of it was available. We're pretty comfortable talking about shortages in consumer markets when we would buy things at the stated price, but can't because it is sold out (eg Pixel phone shortages), so I'm not sure why we can't say a similar thing about labour.
  - dragonwriter 10y ago
    > I would argue that a shortage at the market price implies that buyers would buy more at the market price if more of it was available. That can just be a current price below the equilibrium market price; I'd argue that a shortage is a specialized instance of that resulting from a transitory decrease from long-term supply (or increase from long-term demand) that is expected to revert to normal. But if you need annual supplements of labor for the same field over a period of decades, that's not a labor shortage, its price being artificially suppressed (and inhibiting market signals that would develop domestic supply faster.)
    - dllthomas 10y ago
      > But if you need annual supplements of labor for the same field over a period of decades, that's not a labor shortage, its price being artificially suppressed Theoretically, couldn't it also be that demand is consistently growing faster than anticipated (even after whatever corrections are made upon discovery that it previously grew faster than anticipated)?
richardlong 10y ago
Right, GP is leaving out A. necessary skills, and B. the size of the labor pool (multiplied by the labor force participation rate). For any given skill there is a labor pool with some participation rate, of people who currently have that skill, such that it is accurate to say that the market has a shortage. Answers to the shortage must solve for either the size of the labor pool, the rate of participation, or the amount of people who have that skill. Those answers vacillate between importing labor to solve the problem now, or forcing the market to educate people by blocking imported labor. The problem with importing labor is that it reduces market incentives to educate people. The problem with not importing people is that it means you'll have a labor shortage until the market adjusts and people re-educate. Easy answers, on either side, are snake oil.
scott00 10y ago
I see your point, and thinking about it helped clarify my thinking, so first, thank you for that. I think another way of phrasing my opinion is that the US labor market is a large, reasonably efficient market; that it's reasonably well modeled by a simple supply and demand model; and that discussing it in other terms obscures the important issues. The notion of a shortage is fundamentally incompatible with a simple supply and demand model of a market. The market price in such a model is, by definition, the price at which supply and demand are balanced. So if you're talking about a shortage in the US labor market, you're either claiming that supply and demand is a poor model of the labor market, or you're talking nonsense. I think either is misleading or at best confusing. So to an extent I really am saying that shortages can't exist for anything you can buy on a large efficient market. Of course not every market is a large efficient market. If you're talking about a price-regulated market, by all means, discuss shortages. Another good situation where discussing a shortage would be appropriate is markets that have very or perfectly inelastic supply over a relevant time period. Say, a vaccine that costs $1 but that takes 6 months to produce due to the biology involved, combined with a major epidemic in the relevant disease. It's fair to call that a shortage.
- Eridrus 10y ago
  I think labour markets are some of the least efficient markets that exist. Without immigration it takes at least 4+ years for extra supply to become available based on increasing prices. And when you hire someone you really don't know what you're getting, particularly in software. Constraining supply increases salaries precisely because it takes supply so long to incorporate information. On top of that, supply and demand is a pretty leaky abstraction, I don't expect it to be very accurate in such a nonideal market.

klipt 10y ago

What if family doctors charged $10,000 / hour? Wouldn't you call that a doctor shortage? Just because a service exists at some (arbitrarily high) price point doesn't mean society isn't suffering from a shortage of that service.

supercanuck 10y ago
You actually used evidence that contradicts your point. If Family Doctors could charge $10K/hour, that most certainly does point to a shortage. His point was, offer Family Doctors $5/hour and see how many family doctors show up, which is 'equivalent' of what is happening now.

splintercell 10y ago

Labor shortage does not mean what you think it does. If we use the logic you presented, then we can say "There is no such thing as a shortage of Cabs, try offering $100 for a cab ride and there will be people pulling their personal cars next to you to take you where you want to go". Well Duh. A shortage of a good means that there if there can be pending buy and sell orders in a market book, then there are a lot of pending buy orders, but just not for the price at which sellers are willing to sell. What SV is saying that there are a lot of people who would buy a lot of goods, if they can be produced cheaply (and it isn't because they're poor, it's just because the consumers don't value that good that much). If Netflix raised their fees to $90 per month then it means that a lot of people would cancel their subscription (and not all would do because at $90 they will be unable to meet their rent).

crdoconnor 10y ago
What SV magnates are saying by "labor shortage" or "skills shortage" is that they want higher profits. What SV workers are saying by "no skills shortage" is that they want the same or higher wages. If Netflix magically halved their wage bill they would likely keep their price the same since how much a Netflix devops engineer gets paid doesn't change how much a family in Peoria is prepared to pay for a Netflix subscription.

dgudkov 10y ago

Higher wage won't necessarily increase number of qualified candidates. To illustrate the point: you could offer piles of gold for a decent C++ programmer in the ancient Roman Empire and get no one simply because they didn't exist.

xiaoma 10y ago
Higher wages definitely influence graduating STEM students who are choosing between SV and finance. They also cause bootcamps to pop up all over the country and bring people from other industries into tech. In general the market will follow the money. It is a good point that the market can't achieve the impossible. C++ bootcamps probably wouldn't spring up in your hypothetical ancient Rome and offering millions of dollars today for employees with skillsets that modern humans can't achieve wouldn't work either. The question is whether you or not the current bar of a "qualified candidate" is impossible. I would say no. Given the right financial incentives, the candidates will exist.

bobdole1234 10y ago

This assumes that labour is perfectly re-locatable and everyone has perfect pricing information. Google literally does offer $1 million salaries for the right positions, the problem is that most of the people who could make that work have already been recruited. Which is why they pay interns six figures to show up for what amounts to a long job interview, to make sure they get all the new talent the moment it's minted. If you make it more difficult to recruit people from untapped populations abroad, they won't pay lower tier people more, they'll open offices aboard to capture their acceptable talent. So yes, there is a shortage of talent that meets the bar. While everyone trained as a book keeper can almost certainly fill any book keeper role, not everyone trained as an engineer can actually fill any role. Not just because some people are shitty engineers, it's because engineering involves spending long periods of time learning domain knowledge that isn't transferrable, even setting aside the fact there are literally thousands of types of engineer.

scott00 10y ago
What positions at Google pay $1M/year? FWIW, my rant was not intended as a rant against immigrants, just a rant against people that spin their personal or corporate financial interests as a national crisis.
- bobdole1234 10y ago
  There's a surprisingly large cross section of people paid extremely well in Google. The company is heavily automated and very profitable, which means they can attribute those profits to the humans largely responsible for them with accuracy that isn't often seen outside finance. The bonus structure is extremely kind to the highly productive.
  - scott00 10y ago
    I'd really like to hear some specifics on this. What kind of job descriptions do they have? Roughly how many are there? Are they executives, managers, or individual contributors? Does this only happen in bonus form for extraordinary performance, or can new hires start with the expectation of comp at this level? I regularly hear stories about non-executives getting 7 figure paydays in trading and investment banking. I hear stories about non-executive tech people getting 7 figure pay days due to startup liquidity events. This is the first I've ever heard of something like this at an established tech company.