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Well, if Labor is a function of supply and demand, then it tells us that supply of willing labor is happy to work at all, even if wages aren't rising. Turned ar
by abakker 9y ago
Well, if Labor is a function of supply and demand, then it tells us that supply of willing labor is happy to work at all, even if wages aren't rising. Turned around, in a market where people are desperate for work, corporations have no incentive to raise wages.
Still, this is overly simplistic. The problem in my mind is that unemployment rate is reflective only of those looking for work, and labor force participation rate is low. https://data.bls.gov/timeseries/LNS11300000 https://data.bls.gov/timeseries/LNS11300000
The result is that as employers' needs for people rise, they can siphon off those looking for work at current market rates, and then, (maybe), people from the non-participating group can gradually replenish the unemployed pool.
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My own experience tells me that there is limited wage stagnation in modern high-skill jobs and that there is low unemployment there as well. In that market, wages seem to be rising, and talent seems to be scarce. (Read some recent earnings transcripts from companies like CDI that do staffing in these industries.)
On the lower or outdated skill market, though, companies have more people to choose from, likely lower transaction costs (non-benefits/salary jobs enable more employee turnover), and also slimmer margins. Why pay any more than they absolutely have to?
Where this becomes a real problem, though is that low-skill jobs are not even keeping place with inflation. As a result, real earning potential in many of these jobs is through the floor.
Personally, I look to the huge run in returns on capital in the equities market over the last few years as the primary cause. In many cases, historically low interest rates and fast growing equities prices have diverted efforts from business growth and innovations in the "core" to financial growth and innovations for the balance sheet. This will revert, at some point. But, as we have seen elsewhere in HN over the last few days, there is a large entrenched "Business Class" that knows far more about financial optimization and asset allocation than they do about the businesses that they actually run.
- usmeteora 9y agoThis is true, high skilled employers have lots of trouble finding high skilled workers, and one of the main economic incentives driving gender and ethnic equality in high tech work places is the disadvantage of not being able to have the maximum amount of resources to pool skilled workforces from. They can't get enough qualified people.
- jazzyk 9y ago>They can't get enough qualified people... ...for the price they are offering. There, fixed it for ya :-)
- usmeteora 9y agohmm, Well, I was specifically referencing the top 5 biggest tech companies, and the pay may seem low to the people who have been working there fresh out of college but its still relatively high pay compared to most other industries with people of the same academic and skill level but in a different industry. They interview alot of people and the people don't turn down the jobs because the pay isn't enough, they don't get the jobs because theres not enough qualified people. So I don't know how your statement is relevant but I don't think they don't get hired and rejected from their interviews because they applied and changed their mind that the pay wasnt high enough.... That being said, given that the skill level sought out is hard to find, and the people with those skill levels are in such high demand with many many options at their fingerprints, including but not limited to never having to work in an office if they don't want to, that there is an argument the pay should be higher for the people that do have this skill level, and work long hours, despite the rest of the world protesting at the inequality of tech valley and not seeming to understand how much of a meritocracy it is RELATIVE to other high earning places like wallstreet and politics, where the old boys club is much more relevant than tech valley (all relative here) (and i dont disagree, people with niche skill who earned it and are needed should be evaluated appropriately) but this is not the situation I was talking about. I'm talking about the situation where people get turned down from any of these jobs where they even have the luxury to complain a software engineer salary at a top 5 company is too low, because they don't have the expertise to get the job in the first place.
- ptr_void 9y agoI think jazzyk was hinting that - with enough pay, people will do what they can to make themselves qualified. There's also the option of choosing the best people they get and start training them internally to make them qualified.
- roymurdock 9y agoIf you are interested in learning how labor markets are taught in macro today, check out these slides from Acemoglu of MIT: http://economics.mit.edu/files/10284 http://economics.mit.edu/files/10284 Labor market models are much more about flows, and frictions to those flows, rather than "static" views of labor supply and demand. When I was studying econ, I found some of these models and equations to be the most well thought-out and powerful tools presented whereas a lot of the other things I had to learn were toy models or very, very far removed from reality.
- abakker 9y agoThanks - I appreciate the reference. Mankiw's treatment in the intro to econ book that I studied is definitely painful.
- TylerH 9y agoA lot of Mankiw's work is like that
- ue_ 9y agoMarx's "Wage Labour and Capital" is also a rather short and easily readable work on the Marxian perspective of the labour market.