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Employees aren't a manufactured product. The claim is the supply is inelastic in the short term. You can outbid your competitors for talented developers but a r

Employees aren't a manufactured product. The claim is the supply is inelastic in the short term. You can outbid your competitors for talented developers but a rise in average salaries won't make weak developers better or get lawyers to take a code bootcamp. The only short term ways to increase supply are immigration and outsourcing.

randomdata 10y ago
> The only short term ways to increase supply are immigration and outsourcing. Which is why the parent says that rising price eliminates any superfluous demand. Demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease demand, and vice versa. If we take it to the logical extreme and assume there is only one good developer in a local area, the business most willing to pay the price will get that person. Those not willing to pay the price are not demand, and thus don't necessitate supply. A shortage, by definition, is a scenario where price is unable to rise. For instance, where the government enforces a price ceiling. In my local jurisdiction that happens for medical care providers. A shortage of doctors is very much possible. It is less clear what could cause a shortage of developers. Having said that, there is another way to increase the supply: Attract others (back) into industry. There are plenty of people who find themselves doing other, perhaps more lucrative, things that would be suitable for the kinds of jobs these companies seek. For the right amount you can attract them into these jobs, but without better offers there is no incentive for them to stop doing what they are already doing.
xaa 10y ago
> The claim is the supply is inelastic in the short term. That is correct, and it may be true. The reason I'm very skeptical is that we have been hearing this same spiel for 5 years at least. If companies are unwilling to raise salaries short-term, it will not incentivize long-term migration into this sector. If you substitute "programmers" with "widgets", it is obvious what is going on here. Companies want "trade" (immigration) barriers lowered so they can get their widgets more easily and at a lower price. They don't care whether their widgets come from endogeneous US production or from abroad, so long as it is at a minimal price. Best of all for them if there are tons of widgets available both domestically and internationally, so that the price will be minimal.
- geebee 10y ago
  Agreed. My big problem with the H1B isn't that increases immigration, but that it does this in a very narrow way that distorts markets. For instance, suppose that land can be used to grow either lemons or avocados. Avocados suddenly become very popular and fetch a high price. Land that was formerly used to grow lemons is now used to grow avocados. So the price of a lemon now reflects the opportunity cost of not growing an avocado. Because people can no longer get lemons at the price they used to pay, or at a 50% markup, they claim there is a "shortage" of lemons. They create an immigration system where someone is allowed to come into the US and farm land - on the condition that they grow lemons. The immigrant is not allowed to grow avocados, nor is the immigrant allowed to do something other than farming. You're here to grow lemons buddy, because there's a shortage of lemons. Ok, fine, grow lemons for 7 years, and we'll give you freedom, but only after you've made a massive investment in setting up a lemon operation and costs of changing would be high. What this does is ensure that absolutely nobody with the freedom to decide what to grow will ever grow lemons. It will also ensure that the price of lemons will never reflect the opportunity cost, so the market signals that would bring prices back into equilibrium, encouraging people who can choose to grow avocados instead will now be suppressed. This is why a lot of people have no problem with immigration, but are opposed to "employer sponsored" (corporate controlled) immigration designed to fill specific shortages. What these programs end up doing is creating market distortions that make long term problems even worse, all while limiting personal freedom. It's not that hard to solve, just say that immigrants are free to study what they wish and work in what fields they wish. Employers don't get a say in this. If they aren't offering pay and work conditions strong enough to draw immigrants into programming, any more than for people born here, fine. I see absolutely no reason let corporations tell immigrants they have to be programmers rather than real estate agents, lawyers, nurses, drywall installers, or sandwich shop owners, just so employers can get to hire programmers at salaries that aren't good enough to draw people with freedom into the field.
  - xaa 10y ago
    Very interesting argument. While the "serfdom" aspect of this is definitely morally repugnant, the most optimistic interpretation I can see for the H1B program is that it is supposedly a way to encourage or select for immigrants with high economic value. It absolutely does distort the market, but if we are under a political constraint that we can only have X immigrants per year, it does make sense to take the ones that will be working in high-wage sectors, if we are out to maximize GDP. > It will also ensure that the price of lemons will never reflect the opportunity cost, so the market signals that would bring prices back into equilibrium Hm, I'm not sure. It seems like restricted immigration would basically move the supply curve for lemons to the right by decreasing cost of wages for lemons (only). Then because avocados are competing for the same land, avocado supply curve will move left. The result will be more lemons at a lower price and less avocados at a higher price, but they will both still be in "equilibrium". In either case, the rate of return per unit land should be equal for both avocados and lemons, yes? It seems the main effect of interest to us would be that wages for avocado-growing employees would be higher and lemon-growing employees lower under a restricted immigration policy vs an unlimited one. So, back to reality, I have never thought about the fact that H1Bs are actually good for everyone else's wages (outside the affected sectors) compared to unrestricted immigration. If we concerned about "fairness", we could note that it might therefore also be more morally sound to restrict immigration to high-wage jobs because it would actually compress wage inequality and the low-wage natives would benefit. The losers in this scenario are high-skill natives and low-skill foreigners.

randomdata 10y ago

> The only short term ways to increase supply are immigration and outsourcing. Which is why the parent says that rising price eliminates any superfluous demand. Demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease demand, and vice versa. If we take it to the logical extreme and assume there is only one good developer in a local area, the business most willing to pay the price will get that person. Those not willing to pay the price are not demand, and thus don't necessitate supply. A shortage, by definition, is a scenario where price is unable to rise. For instance, where the government enforces a price ceiling. In my local jurisdiction that happens for medical care providers. A shortage of doctors is very much possible. It is less clear what could cause a shortage of developers. Having said that, there is another way to increase the supply: Attract others (back) into industry. There are plenty of people who find themselves doing other, perhaps more lucrative, things that would be suitable for the kinds of jobs these companies seek. For the right amount you can attract them into these jobs, but without better offers there is no incentive for them to stop doing what they are already doing.

xaa 10y ago

> The claim is the supply is inelastic in the short term. That is correct, and it may be true. The reason I'm very skeptical is that we have been hearing this same spiel for 5 years at least. If companies are unwilling to raise salaries short-term, it will not incentivize long-term migration into this sector. If you substitute "programmers" with "widgets", it is obvious what is going on here. Companies want "trade" (immigration) barriers lowered so they can get their widgets more easily and at a lower price. They don't care whether their widgets come from endogeneous US production or from abroad, so long as it is at a minimal price. Best of all for them if there are tons of widgets available both domestically and internationally, so that the price will be minimal.

geebee 10y ago
Agreed. My big problem with the H1B isn't that increases immigration, but that it does this in a very narrow way that distorts markets. For instance, suppose that land can be used to grow either lemons or avocados. Avocados suddenly become very popular and fetch a high price. Land that was formerly used to grow lemons is now used to grow avocados. So the price of a lemon now reflects the opportunity cost of not growing an avocado. Because people can no longer get lemons at the price they used to pay, or at a 50% markup, they claim there is a "shortage" of lemons. They create an immigration system where someone is allowed to come into the US and farm land - on the condition that they grow lemons. The immigrant is not allowed to grow avocados, nor is the immigrant allowed to do something other than farming. You're here to grow lemons buddy, because there's a shortage of lemons. Ok, fine, grow lemons for 7 years, and we'll give you freedom, but only after you've made a massive investment in setting up a lemon operation and costs of changing would be high. What this does is ensure that absolutely nobody with the freedom to decide what to grow will ever grow lemons. It will also ensure that the price of lemons will never reflect the opportunity cost, so the market signals that would bring prices back into equilibrium, encouraging people who can choose to grow avocados instead will now be suppressed. This is why a lot of people have no problem with immigration, but are opposed to "employer sponsored" (corporate controlled) immigration designed to fill specific shortages. What these programs end up doing is creating market distortions that make long term problems even worse, all while limiting personal freedom. It's not that hard to solve, just say that immigrants are free to study what they wish and work in what fields they wish. Employers don't get a say in this. If they aren't offering pay and work conditions strong enough to draw immigrants into programming, any more than for people born here, fine. I see absolutely no reason let corporations tell immigrants they have to be programmers rather than real estate agents, lawyers, nurses, drywall installers, or sandwich shop owners, just so employers can get to hire programmers at salaries that aren't good enough to draw people with freedom into the field.
- xaa 10y ago
  Very interesting argument. While the "serfdom" aspect of this is definitely morally repugnant, the most optimistic interpretation I can see for the H1B program is that it is supposedly a way to encourage or select for immigrants with high economic value. It absolutely does distort the market, but if we are under a political constraint that we can only have X immigrants per year, it does make sense to take the ones that will be working in high-wage sectors, if we are out to maximize GDP. > It will also ensure that the price of lemons will never reflect the opportunity cost, so the market signals that would bring prices back into equilibrium Hm, I'm not sure. It seems like restricted immigration would basically move the supply curve for lemons to the right by decreasing cost of wages for lemons (only). Then because avocados are competing for the same land, avocado supply curve will move left. The result will be more lemons at a lower price and less avocados at a higher price, but they will both still be in "equilibrium". In either case, the rate of return per unit land should be equal for both avocados and lemons, yes? It seems the main effect of interest to us would be that wages for avocado-growing employees would be higher and lemon-growing employees lower under a restricted immigration policy vs an unlimited one. So, back to reality, I have never thought about the fact that H1Bs are actually good for everyone else's wages (outside the affected sectors) compared to unrestricted immigration. If we concerned about "fairness", we could note that it might therefore also be more morally sound to restrict immigration to high-wage jobs because it would actually compress wage inequality and the low-wage natives would benefit. The losers in this scenario are high-skill natives and low-skill foreigners.