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> Supply-and-demand theory once made sense. That was before employers gained so much power. Except power itself is determined by supply and demand. Employers h

> Supply-and-demand theory once made sense. That was before employers gained so much power. Except power itself is determined by supply and demand. Employers have gained more power precisely because of the increased labor supply (more women, more robots, more foreign workers) that is also responsible for stagnant wages. The power, of course, comes from the need for others to have association with that person/business. In the current market, if one employee doesn't like the terms and conditions of the job, there are many others who will be quite happy to take their spot. This gives the employer leverage as employees want to be employed. However, if there were actually more employers than employees, then the reverse would be true. Employees would be free to treat employers however they wanted, and force them to pay more money, without repercussion since if the employer walks away, there would be many more willing to take the worker. This gives the leverage to the employees as employers want employees.

brightball 9y ago
Exactly. The article implies that bargaining position is the deciding factor here. Bargaining position is ENTIRELY defined by economics. How many options does the company have to fill the role you are applying for? How many jobs do you have the ability to fill? What is the compensation level for those jobs? In a pool of workers, on a sheer measurable and presentable skill set...do you stand out? Networking, creates a connection that helps you stand out so when a company is taking job applicants they have a supply of people who stand out and a supply of "general workforce". Standing out can just mean an existing relationship, a recommendation from a trusted person, or some other type of quality that makes you a preferred candidate. There is a more limited supply of "preferred" candidates and those folks will be more aggressively sought after (and compensated). We'd like for it to be all about skill, but businesses are run by people and many people place a high value on trust. When it comes to the more general pool of candidates, that pool is a whole lot bigger and if you haven't worked your way into the preferred group for the company then you do have very little bargaining power...meaning there is an ample supply of people who can fill the role. This article, despite the title...doesn't actually do anything to change the reality any more than publishing an article titled "2 + 2 is not actually 4" disproves it. The content has to prove the headline...and it doesn't.
- crdoconnor 9y ago
  >Bargaining position is ENTIRELY defined by economics. In theory it is, but I haven't seen much if any economic research that actually analyzes, say, desperation as a factor in aggregate wage levels. Much like the effect of raising the minimum wage on profits (ridiculously under researched), there are apparently some topics economists simply don't like looking at.
  - brightball 9y ago
    IMO that is the type of thing that could/should be studied in conjunction with basic income.
dougmany 9y ago
My summary of the article would be: If supply and demand were working, a minimum wage increase would cause a loss of jobs. We studies minimum wage increases and jobs were not loss. The conclusion was therefore that Supply and demand were broken. Then then want on to say how they found a link between having a small number of employers in a field and lower wages.
- randomdata 9y ago
  > The conclusion was therefore that Supply and demand were broken. Which seems like a rather bizarre conclusion. Minimum wage is a form of supply management. You do not have to lose any jobs, but you have eliminated the competition, at least on factors of price, as it is illegal for someone else to do the job for less. With a smaller labor supply, effectively speaking, price is able to rise.
  - forkLding 9y ago
    Sounds informally like a logical contradiction at work, thus the assumptions must be wrong
  - TheCoelacanth 9y ago
    That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour. You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. Lower demand for labor should lead to fewer jobs, if it doesn't that indicates that there are more factors at play than a monotonic supply and demand curve.
    - randomdata 9y ago
      > No one is going to say "I was willing to work for $6/hour but not for $7/hour". I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less. If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think you are turning to? There isn't any! You have already hit equilibrium (where supply meets demand) at the level of minimum wage. Someone who wants $12/hr. for a minimum wage job is not supply in that market. Supply isn't all people who are willing to work just as demand isn't all people who want something. If you have $100 in your pocket and say you want to buy a new Ferrari with it does not mean you demand a Ferrari. Demand requires that you be willing and able to offer a price that actually gets what you want. > You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. That can be true, but minimum wage work is often providing an inelastic service. People aren't going to stop eating because minimum wage for agricultural workers went up. They'll just accept the higher price. What choice do they really have? Eating is somewhat essential. It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.
cosmic_ape 9y ago
>>Except power itself is determined by supply and demand. not necessarily. consider what would have happened if the workers were unionized, for example. You might still have had the same number of jobs, but a different distribution of profits to employees/owners.
- randomdata 9y ago
  Unionization is a form of supply management (as is minimum wage[1]). A union does not change the rules of supply and demand, it exploits the rules of supply and demand for the benefit of the employees by artificially limiting the supply. With the reduced supply of workers, the power of the workers increases as I described in the final paragraph of my previous comment. [1] https://news.ycombinator.com/item?id=16775810 https://news.ycombinator.com/item?id=16775810
  - cosmic_ape 9y ago
    ok, we can define it like that. but its useful to distinguish between these different ways supply and demand can act then, under your definition. One is concerned with just the number of available jobs, and concerns the "efficient market" situation where employers simply can not increase wages and stay profitable. This is the more common "supply and demand" notion, afaik. The other is artificial - workers can unionize, and what the employers can do is described in the article.
    - randomdata 9y ago
      > One is concerned with just the number of available jobs I am given the impression that you may still have some misconceptions about what supply and demand means. Supply and demand, in the labor market, does not mean the number of jobs available. The best way I can describe supply and demand in a short comment on the internet is that supply and demand is about competition. The supply is those willing (and able) to offer something better to those who want what you have. In labour this could mean doing a better job, or simply offering to do it for less money. The demand is those willing (and able) to offer something better to suppliers. In labor this could mean a business offering free lunches, or simply more money. When there is nobody willing to offer more, and nobody willing to give for less, you have reached equilibrium. To be abundantly clear, someone saying that they have a job is not demand. For argument's sake, if we say all programmers are paid $30/hr. and a business wants to hire a programmer for $10/hr., there is no incentive for anyone to take that job. As far as supply and demand goes, that job does not exist. I will point out that this is also why the formal definition of shortage, not the colloquial one you sometimes see used on HN, is a situation where an external mechanism, such as government intervention, prevents price from rising. The $10/hr. programming job does not increase the demand for programmers. It is not a shortage because the business couldn't find anyone at $10/hr. The business trying to offer $10/hr. is not in the market to begin with.

brightball 9y ago

Exactly. The article implies that bargaining position is the deciding factor here. Bargaining position is ENTIRELY defined by economics. How many options does the company have to fill the role you are applying for? How many jobs do you have the ability to fill? What is the compensation level for those jobs? In a pool of workers, on a sheer measurable and presentable skill set...do you stand out? Networking, creates a connection that helps you stand out so when a company is taking job applicants they have a supply of people who stand out and a supply of "general workforce". Standing out can just mean an existing relationship, a recommendation from a trusted person, or some other type of quality that makes you a preferred candidate. There is a more limited supply of "preferred" candidates and those folks will be more aggressively sought after (and compensated). We'd like for it to be all about skill, but businesses are run by people and many people place a high value on trust. When it comes to the more general pool of candidates, that pool is a whole lot bigger and if you haven't worked your way into the preferred group for the company then you do have very little bargaining power...meaning there is an ample supply of people who can fill the role. This article, despite the title...doesn't actually do anything to change the reality any more than publishing an article titled "2 + 2 is not actually 4" disproves it. The content has to prove the headline...and it doesn't.

crdoconnor 9y ago
>Bargaining position is ENTIRELY defined by economics. In theory it is, but I haven't seen much if any economic research that actually analyzes, say, desperation as a factor in aggregate wage levels. Much like the effect of raising the minimum wage on profits (ridiculously under researched), there are apparently some topics economists simply don't like looking at.
- brightball 9y ago
  IMO that is the type of thing that could/should be studied in conjunction with basic income.

dougmany 9y ago

My summary of the article would be: If supply and demand were working, a minimum wage increase would cause a loss of jobs. We studies minimum wage increases and jobs were not loss. The conclusion was therefore that Supply and demand were broken. Then then want on to say how they found a link between having a small number of employers in a field and lower wages.

randomdata 9y ago
> The conclusion was therefore that Supply and demand were broken. Which seems like a rather bizarre conclusion. Minimum wage is a form of supply management. You do not have to lose any jobs, but you have eliminated the competition, at least on factors of price, as it is illegal for someone else to do the job for less. With a smaller labor supply, effectively speaking, price is able to rise.
- forkLding 9y ago
  Sounds informally like a logical contradiction at work, thus the assumptions must be wrong
- TheCoelacanth 9y ago
  That's a rather bizarre interpretation of supply and demand. A minimum wage would not decrease labor supply. No one is going to say "I was willing to work for $6/hour but not for $7/hour". If anything you would expect more people to be willing to work at $7/hour than at $6/hour. You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. Lower demand for labor should lead to fewer jobs, if it doesn't that indicates that there are more factors at play than a monotonic supply and demand curve.
  - randomdata 9y ago
    > No one is going to say "I was willing to work for $6/hour but not for $7/hour". I am not sure this is a correct interpretation of what supply actually means. For all intents and purposes, supply is the people willing to do job for less. If minimum wage is $7/hour, there is nobody going to say "I will do it for $6". If you, a business owner, want to pay less than $7/hour in this scenario, what supply do you think you are turning to? There isn't any! You have already hit equilibrium (where supply meets demand) at the level of minimum wage. Someone who wants $12/hr. for a minimum wage job is not supply in that market. Supply isn't all people who are willing to work just as demand isn't all people who want something. If you have $100 in your pocket and say you want to buy a new Ferrari with it does not mean you demand a Ferrari. Demand requires that you be willing and able to offer a price that actually gets what you want. > You would expect it to decrease labor demand because people who would be willing to pay $6/hour for a certain job might not be willing to pay $7/hour. That can be true, but minimum wage work is often providing an inelastic service. People aren't going to stop eating because minimum wage for agricultural workers went up. They'll just accept the higher price. What choice do they really have? Eating is somewhat essential. It is true that the definition of demand says that all else equal, a higher price results in less demand, but in the real world not else is equal when the price rises due to minimum wage increases. A higher price does not always mean less demand.

cosmic_ape 9y ago

>>Except power itself is determined by supply and demand. not necessarily. consider what would have happened if the workers were unionized, for example. You might still have had the same number of jobs, but a different distribution of profits to employees/owners.

randomdata 9y ago
Unionization is a form of supply management (as is minimum wage[1]). A union does not change the rules of supply and demand, it exploits the rules of supply and demand for the benefit of the employees by artificially limiting the supply. With the reduced supply of workers, the power of the workers increases as I described in the final paragraph of my previous comment. [1] https://news.ycombinator.com/item?id=16775810 https://news.ycombinator.com/item?id=16775810
- cosmic_ape 9y ago
  ok, we can define it like that. but its useful to distinguish between these different ways supply and demand can act then, under your definition. One is concerned with just the number of available jobs, and concerns the "efficient market" situation where employers simply can not increase wages and stay profitable. This is the more common "supply and demand" notion, afaik. The other is artificial - workers can unionize, and what the employers can do is described in the article.
  - randomdata 9y ago
    > One is concerned with just the number of available jobs I am given the impression that you may still have some misconceptions about what supply and demand means. Supply and demand, in the labor market, does not mean the number of jobs available. The best way I can describe supply and demand in a short comment on the internet is that supply and demand is about competition. The supply is those willing (and able) to offer something better to those who want what you have. In labour this could mean doing a better job, or simply offering to do it for less money. The demand is those willing (and able) to offer something better to suppliers. In labor this could mean a business offering free lunches, or simply more money. When there is nobody willing to offer more, and nobody willing to give for less, you have reached equilibrium. To be abundantly clear, someone saying that they have a job is not demand. For argument's sake, if we say all programmers are paid $30/hr. and a business wants to hire a programmer for $10/hr., there is no incentive for anyone to take that job. As far as supply and demand goes, that job does not exist. I will point out that this is also why the formal definition of shortage, not the colloquial one you sometimes see used on HN, is a situation where an external mechanism, such as government intervention, prevents price from rising. The $10/hr. programming job does not increase the demand for programmers. It is not a shortage because the business couldn't find anyone at $10/hr. The business trying to offer $10/hr. is not in the market to begin with.