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Companies struggling to fill jobs 'should try paying more,' Fed's Kashkari says

545 points by SQL2219 8y ago

trhway 8y ago
the productivity in the US has been stagnating/decreasing for more than a decade already. Tight labor market requires to pay more to employees which in turn requires the businesses to increase productivity and efficiency - i.e. the more expensive the labor the less waste of that labor can the business afford. Add to that the tax cuts which automatically made the employees even more expensive (actual cost of employee = cost paid - tax on profit, i.e. $100 employee salary comes down to just $70 in actual cost with 30% profit tax rate whereis it is $80 with 20% profit tax rate). Even more automation/computerization/robotization/etc. to come.
- daveFNbuck 8y ago
  How does giving companies more money automatically make employees more expensive? That's extremely counter-intuitive.
  - dragonwriter 8y ago
    > How does giving companies more money automatically make employees more expensive? Giving companies more money by itself (e.g., “here, have $100,000 no strings attached”) doesn't. OTOH, taxing retained profits at a lower rate does (it increases the after-tax cost of any reduction in before-tax retained profits; any expense is, considered on its own, a reduction in before-tax retained profits.) In exactly the way deductibility of charitable donations subsidizes such donations at the taxpayers marginal tax rate deductibility of business expenses subsidizes such expenses at the businesses marginal tax rate, and cutting the tax rate cuts the subsidy.
    - daveFNbuck 8y ago
      I think I get what you're saying. The savings from not paying the employee are increased when the profits are taxed less. This makes sense if the employee is a net negative on pre-tax profit. If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper?
      - trhway 8y ago
        >If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper? in a situation of rigid linear connection between expenses and revenues - i.e. when adding additional work units immediately and proportionally increases your revenue. In real life there is usually elasticity between expenses and revenues - while increasing/decreasing expenses has immediate direct effect on the bottom line there is no such effect on the top line. The situation is even worse when you need to hire or do capital investment today (and thus take the hit today) while the related revenue increase would come only some years down the road.
        daveFNbuck 8y ago
        So this is part of a more general effect where low taxes on profits deter investment? It makes a little more sense to me phrased that way. You don't need to worry about increasing your future profits as much when they're higher now.
  - usrusr 8y ago
    It's intuitive iff you believe that paying taxes on profits is worse than not even having any profits to tax. (I don't share that belief)
    - trhway 8y ago
      whatever one's beliefs are, it is very intuitive to everybody what is going to happen to charitable contributions if the tax deduction is removed. In accounting grand scheme of things employee salaries, materials, depreciation of capital assets, etc is just the same thing as charitable contributions - just deductions.
      - usrusr 8y ago
        That would only be a meaningful comparison if we were talking about wether or not money a business doesn't have because it was spent on wages should nonetheless be counted as taxable earnings.
        trhway 8y ago
        >money a business doesn't have because it was spent on wages should nonetheless be counted as taxable earnings. that is exactly how it works. All business revenue is counted as taxable earnings unless that amount is reduced by deductions. Money spent on wages is just a such a deduction. Charitable contributions is just another such a deduction. No difference.
        usrusr 8y ago
        And that's the point, nobody is challenging that, for good reason. Changing the deductibility of charitable contributions would be just like that, a redefinition of the tax base. The tax base is orthogonal to the tax rate, which is why decreasing the corporate tax rate does not make employees more expensive. (well, occasionally the idea of gross revenue taxation sparks up, but I have not seem that anywhere in this discussion, and it never survives the first mentioning of vertical integration anyways)
- rebuilder 8y ago
  Don't know why you're getting downvoted. This is a problem all wealthy countries face. As GDP increases, you have to pay workers more or they will find more profitable work, as is being suggested in the article. That, or a lot of workers must not be allowed to reap the benefits of economic growth, and that will be tremendously destablilizing. The problem is, growing wages make domestic production less and less competitive with foreign production. So wealthy countries import goods from places with lower production costs. So, as wealth increases, if you're trying to maintain any semblance of income equality, anything requiring human labour must increasingly get outsourced to cheaper countries. Wealthy countries can only competitively produce high-value goods and services that require e.g. massive capital investments and high levels of technical skill and education. It follows that wealthy countries will eventually face a labour crisis: They have, as a historical leftover, a large class of labourers who no longer have employable skills, and can't even theoretically be re-trained into more current working roles, as there simply aren't enough of those to go around. "Productivity increase" is just another way of saying "more unemployment". I'd like to propose a kind of trilemma here: High median wage, High employment, large population - Pick two. Having all of these can not be sustained IMO, and I think the current political upheavals in the west largely stem from this. You either have tremendous income inequality among workers, you have a large unemployed class, or you have a population consisting largely of highly-skilled specialists.
  - nicoburns 8y ago
    This is precisely the problem that a basic income would solve...
    - rebuilder 8y ago
      Yes, it's the problem a basic income proposes to solve. I'm intrigued by the idea, but I do wonder about the long-term economic effects of it. It seems to me that at it's core, basic income would involve a transfer of wealth from companies and wage-earners to the unemployable. Isn't that just looking at the issues I described and going "oh well"? It doesn't seem to solve the competitivity problem. Optimistically, basic income might enable enough workers to re-educate themselves into new roles that the result would be a net positive, but apart from that, I'm not really seeing how it changes the big picture.
- mooreds 8y ago
  > the productivity in the US has been stagnating/decreasing for more than a decade already. Here's a chart which shows this statement is incorrect: https://www.bls.gov/lpc/prodybar.htm https://www.bls.gov/lpc/prodybar.htm Now, productivity growth has slowed down, but it hasn't decreased. 1%/year may or may not be stagnation.
darawk 8y ago
Yep. Every time people say "Americans don't want to do these jobs" or anything else suggesting that there is a labor shortage in some sector I always mentally append the phrase "at the price you want to pay".
- devoply 8y ago
  There are many usually smaller sized businesses that simply won't work because of the nature of their economics and would cease to exist if you raise pay too much. There are though many other businesses of larger size that earn multiples on each employee and could afford to pay them much more and pay the shareholders and execs much less or nothing.
  - CM30 8y ago
    Isn't the answer then that said businesses simply shouldn't be trying to hire too many new employees yet, or should shut down? Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet. If a company's business model doesn't work, then it shouldn't really stay open/continue to exist.
    - devoply 8y ago
      Maybe. From an overall perspective of entrepreneurship and job creation no. The reason being that many companies are bootstrapped on the backs of cheap labor until they reach a point where they can sustain jobs. You are basically saying that bootstrapping should never happen and you should always have investors to create companies... unless maybe if the founder can make a company based around a very small team work somehow who are working for next to nothing for equity.
      - kristianc 8y ago
        You’re welcome to set up a company and pay yourself as little as you want - that doesn’t mean you can compel others to accept mediocre wages too.
mattnewport 8y ago
> Add to that the tax cuts which automatically made the employees even more expensive This may be the dumbest thing I've read on the Internet today.
- dragonwriter 8y ago
  > This may be the dumbest thing I've read on the Internet today. It's literally factually true, even if somewhat unintuitive; it's more frequently pointed out that corporate taxes on retained profits are a subsidy on losses, but that's equally true of expenses even when the corporation is net profitable as it is of losses.
  - TangoTrotFox 8y ago
    I prefer to avoid calling things dumb, but I tend to agree this does sound like it fits the bill. Any clarification would be appreciated. Companies are taxed on net. This sort of itemization makes no sense. So for instance imagine a company that grosses $250 in sales with total before tax costs of $100 in labor and $50 in other costs. With a 30% tax rate, their after-tax net is $70. With a 20% tax rate, it's $80. Suggesting that a company might, for any reason, prefer the 30% scenario does seem quite absurd unless I'm missing something critical here.
    - dragonwriter 8y ago
      That's not the suggestion. The suggestion is that the net added cost (after taxes) of an added unit of labor on its own is greater with a lower tax rate, not that a profitable company's overall position with the same pre-tax choices is worse with the lower tax rate.
      - shoo 8y ago
        that may be true, but is there any part of this argument specific to labor? could it be the case that tax cuts also made non-labor expenses more expensive? could revenues in turn also become more, er, revenue-ive?
stakhanov 8y ago
The article is kind of saying the opposite of what the headline implies. It says that Kashkari had previously been making the argument about paying more, but that, with unemployment falling to its lowest level in 49 years, we might now be getting to a point where there might actually be truth to the notion that there are just not enough bodies out there. I see a solution to the problem: Remote work. Put people who are on site into jobs that actually require people to be on site, and fill jobs that don't have that requirement remotely. That way you can get around the absence of bodies in the U.S. (coupled with the tight immigration regime) and the skills shortage.
jedberg 8y ago
I was listening to a great podcast about this. They said they asked owners of businesses, "If you're having trouble hiring, why don't you offer more money?". Their response was all a variation on, "because then I'd have to pay all my other workers more when they found out, and it's cheaper to just pay the current folks overtime at their lower rate than give everyone a raise".
- danieltillett 8y ago
  This can only go on so long before they have to raise pay.
  - minikites 8y ago
    Wages have stagnated since the 1970s, so "they" definitely don't have to raise pay: https://upload.wikimedia.org/wikipedia/commons/thumb/7/73/US_productivity_and_real_wages.jpg/800px-US_productivity_and_real_wages.jpg https://upload.wikimedia.org/wikipedia/commons/thumb/7/73/US...
    - danieltillett 8y ago
      Not if unemployment is back to 1960s levels. I suspect you are right in that the Fed will kill any general wage rises.
  - faceplanted 8y ago
    And in the meantime everyone is underpaid and the owner is stressed because he can't hire people.
    - danieltillett 8y ago
      Such is life when caught in a vicious circle.
- breitling 8y ago
  Do you remember what podcast this was? Sounds like something planet money would do.
esotericn 8y ago
Is it the case that companies are actually struggling to fill positions, or are statements to that effect just an aspect of the metagame? There's a ton of stuff that goes on outside of the actual mechanics of 'company hires for job and person applies for job'. Unless you've been pretty lucky you've almost certainly dealt with euphemisms at work when it comes to discussions around pay, for example. It's kind of annoying that we can't just speak frankly about these things, but such is life.
Animats 8y ago
I just saw a help-wanted sign at a supermarket which said they were hiring for "long-term jobs". Now that's a good selling point.
mrarjen 8y ago
These things always remind me of two things. Only wanting young employees with many years of experience, and that time the Dutch government tried to get unemployed people to work in the green houses. They got hundreds of people on buses, drove them to the green houses "look how wonderful it is to work here", a few million investment later, two people started working there. Both because this was a good way to meet others, and they didn't mind getting a lot less money if they took the job over government payment.
- dep_b 8y ago
  The greenhouses paid less because unemployed have many benefits that don't apply to working people, so getting a minimum wage job would be 40 hours + travel of your life gone for effectively a few % of more expendable income. The people that actually do the work are people from Eastern Europe that don't get that kind of money from welfare in their own country if it exists at all. If welfare would be less or preferably the actual minimum wage would be taxed less the gap between having a job and not having a job would be really worth the effort. It's utterly strange that within some of the people that are rescued from war there's up to 80% of unemployment while The Netherlands needs to import people to do unskilled labor.
georgeburdell 8y ago
Paying more could work for certain kinds of jobs, but others are simply not productive enough to justify paying more. I recently went to a country without a minimum wage and it was amazing what they were paying people (presumably very little) to do, such as sell napkins and straws in a market. Without a regulatory requirement to do so, it's simply impossible for an employer to extract a U.S. minimum wage's worth of productivity doing that kind of activity. That's not to say that every low paying job is like this. We in the U.S. have gotten used to certain blue collar jobs paying very little because of massive numbers of new immigrants, legal and illegal. Now that the spigot is being turned off, there's a labor shortage at the low end. Maybe, e.g., food and construction ought to cost more to compensate, which will certainly change the type of offerings of each, but we might get more efficient usage as a result.
sbhn 8y ago
What, there is a shortage of workers willing to work for low pay? The Answer. Create competition in the labour sector by relaxing border controls and let in immigrants. Keep there status as illegal, so that you don’t need to pay all the costs that legally protected employees are entitled to
- toxik 8y ago
  That’s very cynical, and implies that the government is even able to pull a stunt on that scale. I think an easier explanation is available here.
  - richardknop 8y ago
    Don't large part of some American industries depend on such immigrant labor? I even hear comedians like Bill Maher joke about this all the time saying things like "without illegal immigrants there would be nobody to pick fruit" so it almost seems like an accepted reality of US, at least agriculture industry in border states. Is that no true? I just assumed jokes and lines like that are based on some sort of universally accepted "unofficial" truth, that's what makes them funny.
    - snarfy 8y ago
      My mother worked at a produce company most of her life. She said the workers always had paperwork. The company didn't try very hard to verify the authenticity of the paperwork. They would work for two weeks, get their check and be gone, off to work at another field for two weeks.
    - rhexs 8y ago
      If an industry requires illegal subsidies to thrive, there is no industry. They should naturally go bankrupt. If a nation decides it is important enough to subsidize (i.e. strategic food stock to feed a populace), then they should do so through funding bills instead of hiding the true cost through the lack of immigration enforcement. But the farming lobby is powerful.
keiferski 8y ago
I’m pretty convinced that as the realization that most work is meaningless, combined with concepts like basic income, employers will need to provide more-and-more incentives to get motivated workers. Maybe they should study how trash men, sewer cleaners and other “undesirable” jobs are staffed?
mk89 8y ago
The alternative is trying to get cheap workers from abroad, which worked quite well in the past and still seems to do well to some extent - if you can accept all the challenges this way of doing business carries along on social/security/national level. Times are changing, though, and absolute poverty is thankfully not everywhere an issue anymore, which leaves it to relative poverty: I can't afford Netflix => I am poor. In such cases, people are much less likely to do that "shitty not-well-paid job" for long. Selling drugs is much more convenient and profitable, for example. Also, more and more countries are restricting their borders, making it harder for cheap workers from abroad to come and do such jobs. So, yes, the other alternative is: raise the salary!
- hvindin 8y ago
  Interesting comment: > Selling drugs is much more convenient and profitable, for example. I know its not related to the original topic, nor the core point of your comment but I'd be fascinated to know why you think this. Based on my knowledge of the market WRT wholesale prices/retail (street) prices/legal risks/product expiry/supply chain reliability as well as just the statistics around anyone towards the bottom few levels of the pyrmaid on this I'm almost certain that this is roughly never the case. I find it interesting that this assumption seems to still exist, and suspect that a suprising number of people would harbor a fallback position of "if shit gets really bad I could just sell drugs" which makes a lot of assumptions about how profitable it could possibly be.
  - mk89 8y ago
    I think it highly depends on 1) the severity of the law of your country, 2) the demand, 3) where you live (how many gangs are out there, how dangerous it is ..etc.). Also, selling drugs doesn't imply selling hard drugs, which in many countries (in Europe at least) is the real "reason" to worry. The money they make in 1-2 days, depending on what they sell, is way above an average salary (again... talking only about Europe). 1 or 2 days of selling marijuana and maybe cocaine in "good" places (of course, not in the middle of nowhere). So, why wouldn't someone do it, instead of wiping people's asses or cleaning toilets?
jeffrallen 8y ago
Yup, that will clearly never work. eye roll
erikb 8y ago
lol, why does anybody need to say so? This is free market 101. Also I really believe that's how the future looks like, thanks to AI and automation: fewer and fewer jobs with higher and higher requirements but also higher and higher pay.
- IshKebab 8y ago
  Because the news never calls this out. Here's an article in The Guardian from just yesterday: https://www.theguardian.com/business/2018/nov/13/workers-eastern-europe-uk-eu-employment-pay-growth https://www.theguardian.com/business/2018/nov/13/workers-eas... > Britain’s employers have warned that severe skills shortages are holding back the economy after the latest official figures showed the biggest fall in the number of workers from eastern Europe since modern records began. > > The British Chambers of Commerce and the Federation of Small Businesses urged the government to deliver a post-Brexit migration system to meet their needs amid signs that the fall in unemployment in recent years was putting upward pressure on wages. Notice how an upward pressure on wages is bad (because this is from business groups). Even the Guardian doesn't point out how stupid this logic is.
dominicr 8y ago
Related to this: customers need to pay more. Many businesses have very small profit margins, so paying staff more or training staff could turn them unprofitable. When you're buying products cheaply it's likely that somebody (or someone's environment) is paying a price for it. Once you bear that in mind there is such a thing as products being uncomfortably cheap. (I live in Norway where nothing is cheap but almost everyone earns a good wage. The result is that people don't buy so much stuff but lead good lives.)
- IshKebab 8y ago
  Yeah the $1T oil fund ($200k per person) has nothing to do with it.
  - Kurtz79 8y ago
    It has nothing to do with the point OP was making.
  - dominicr 8y ago
    The oil fund is a result of that as much as a cause. Only a small percentage of the country's spending is from that fund. The aim of the fund is to save for the future and the government is only allowed to spend some of the profits. What makes more of a difference is the feeling of social and fiscal responsibility that led to the fund's creation. Planning for the future and helping people through hard times sounds like communism to some people but in Europe is generally considered common sense.
- nawitus 8y ago
  If everyone earns 2x but everything costs 2x, what changes?
  - Tade0 8y ago
    Thing is, it doesn't. As an example cars are produced everywhere around the world but the same product costs roughly the same regardless of geography. This way in rich countries people can afford domestically manufactured cars, while in poor countries they can't.
growlist 8y ago
I guess I'm not very clever because I don't understand how encouraging inward immigration in search of cheap labour isn't akin to a ponzi scheme. Another thing I never see discussed is: what is the top limit to the population a country can carry without things becoming miserable? Surely at some point inward migration will have to stop unless we aim to have every single citizen of the world living in a single country, and what then? Also, how is it morally or economically justifiable to let existing citizens languish on unemployment benefit whilst solving the problem of their lack of participation in the labour market by opening doors to cheap migrants? It seems to me like if we care about our fellow citizens we should all get used to paying higher prices in support of them, which might enable them to obtain the necessities of life in a more fulfilling manner.
- digitaltrees 8y ago
  If you pay more, people bid up prices on things they buy like housing and food. There is no silver bullet that solves all things. The reality is it is a combination of policies that promote equality and opportunity, or they promote concentration of wealth and power in a few individuals, corporations and political bodies.
  - growlist 8y ago
    > no silver bullet that doesn't change the fact that a race to the bottom i.e. lower prices is surely a bad thing.
bayesian_horse 8y ago
"Higher Wages" is almost never the answer for finding more candidates. The only way higher wages lead to more candidates is by taking them away from other companies or other industries, and sometimes from other countries. So that is sometimes an option for certain employers, but not for an entire industry. It's a myth that there is a pool of workers who is "underemployed" because of low wages. Also: In a free market, if companies can earn more profits by hiring more people by offering higher wages, they will do so. But increasing wages also reduces profit, and there just may not be enough room in the margins.
- joekrill 8y ago
  > The only way higher wages lead to more candidates is by taking them away from other companies or other industries, and sometimes from other countries. So that is sometimes an option for certain employers, but not for an entire industry. It's a myth that there is a pool of workers who is "underemployed" because of low wages. But that's only true in the short term. > In a free market, if companies can earn more profits by hiring more people by offering higher wages, they will do so. But we're not in a truly free market, are we? And we've already seen huge tech companies band together to keep profits artificially low. And that's just the one's that got caught. > But increasing wages also reduces profit, and there just may not be enough room in the margins. Corporate profits are at an all time high, and have been for quite some time. We're paying C-level executives insane amounts of money. Profit margins are surely not the issue here.
  - bayesian_horse 8y ago
    How does competition for workers decrease over time through higher wages? If you are implying that more high school graduates would choose a particular industry or profession because of a wage hike, it's still a situation of taking them away from other options. The market is free enough. There seems to be some collusion, direct or indirect. That would change my proposition though, because companies cooperate because defecting (by increasing wages) doesn't benefit. If one company increases wages, others have to follow. Good for workers, but that's not magically creating any new workers either. It's not about "corporate profits" but about the marginal profit of an additional worker gained through higher wage offers. On the contrary, at a certain point workers decrease work hours when they get more pay.
zwaps 8y ago
There is so much demand for non-mindless consumption these days, and in some areas certainly also the money for it, that I wonder why American companies don't start to signal. Like, put a huge sign in front of the door: "America needs higher wages, but someone needs to start! Our prices include fair wages to our workers, 25% above industry average". Or something more clever. Building this into the company ethos has the advantage, in the current economy, to not only take higher prices for hopefully little drop in demand, but also to attract better workers. Since there are almost no labor related laws in the US, the only way to afford above average wages is to generate demand by differentiation. And that might be done, after all, Americans are willing to tip ridiculous amounts (like 25%) just so that waiters or delivery drivers get to make a living. Has this ever been attempted? I have no prior on whether it actually works, people might care too much about the price...
- scarejunba 8y ago
  If you take the mean tip and raise your prices by that much and move it to workers, they will make less. Cash tips are usually tax frauded away.
- mdorazio 8y ago
  I haven't seen this ethos specifically with respect to workers, but have definitely seen it with respect to ethically sourced materials, sustainable environmental practices, etc. It seems to work well in wealthy areas where people can afford to care about these things. It does not work at all in lower income areas, which is most of the US. Price tends to trump pretty much everything else for the vast majority of consumers.
- lazerpants 8y ago
  The gas station chain, Buccee's, in Texas posts the average starting wage of their employees in their stores, and the amount that it is above the average in the area. Or at least the did several years ago.
credit_guy 8y ago
Finally a respected economist who calls a spade a spade. There is no such thing as "shortage" of anything. Just pay more, and you'll get it. Now, here's some alternatives for companies that can't/don't want to pay more: - offsource (but they know this already) - automate (everyone is in a continuous process of automating what can be automated) - hire temp workers (most likely they've been doing this for years) - hire illegals (well, that's illegal) - lobby for more immigration (probably what Kashkari was answering to) But here's some novel alternatives: - train people more. You hire them at lower qualifications, and educate them in house - open source your tools, so people can train themselves for free, before applying for your job openings. Tensorflow, PyTorch anyone? - offer training for interested outsiders. See the Udacity WorldQuant course in AI for trading [1]. - invest in STEM education to increase the general pool of qualified hires. I know of the Google initiative [2] [1] https://www.udacity.com/course/ai-for-trading--nd880 https://www.udacity.com/course/ai-for-trading--nd880 [2] https://edu.google.com https://edu.google.com
- huhtenberg 8y ago
  > train people more. You hire them at lower qualifications, and educate them in house... ... they learn and then leave, because if you were able to pay them the market rate you would've not been training them in the first place (considering the context of your comment).
  - richardknop 8y ago
    Increase their salary to market rate once they complete their training. Easy.
    - huhtenberg 8y ago
      The OP lists options for when you do NOT have funds to do exactly that.
      - admax88q 8y ago
        If you don't have the money to pay market rate for the skills you need to run your business then unfortunately your business model is untenable. Just like you can't sell jewellery for less than the cost of the gold you had to purchase to make it.
crispyambulance 8y ago
"Pay more" works fine for companies that are at the top of the pyramid: google, amazon, facebook, etc. For the rest of the employers there's a hard stop at some point well below what the top 5 are paying. The next thing to consider is training. Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker).
- krigath 8y ago
  > Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker). Wow, I'm so glad that I am part of a company culture that values mentorship and teaching younger employees. Since joining in August last year I have spent a large proportion of my time both mentoring and pair programming. Our team of 8 developers is fairly junior with 3 graduating last year and one this year. It's been great to see last year's graduates grow to become very independently productive members of the team, and I like to think that they would not have grown as much without my support and trust.
nova22033 8y ago
Does this really apply equally to programmers and starbucks baristas? I don't know of a single programmer who didn't make more at his/her new gig.
sailfast 8y ago
I agree that increasing wages is definitely a good way to get more folks in the door! That said, a very real problem here is the fact that health care and basic benefits costs have been increasing significantly over the past 10 years but it's much harder to convince an employee of that value vs. dollars in the door on a salary number. Just keeping your health care premiums steady year over year as an employer could be the equivalent of a huge wage increase, but your employees won't see it that way because nobody understands the true costs of care. Nobody says "Thanks for the 10% raise" when they get to keep their benefits. This is only part of the problem with "you should try paying more." as an argument. That said - for jobs without benefits especially, paying more should be the first reaction to this, 100%.
- jcadam 8y ago
  Yea, in my industry most employers give a piddly 2-3% annual COL raise, which is then whittled down to nothing (or less than nothing) after the new "changes to our medical benefits to align us with the rest of the industry and make us more competitive" are announced during open enrollment each fall. Factor in inflation and you effectively take a pay cut every year until you 'hop' to your next job.
Eridrus 8y ago
It's common for people on HN to say "there's no such thing as a shortage, just pay people more", but that assumes that the amount of value people provide is infinite, and can just keep growing. To the extent that companies are offering "good" wages already, the people who need to hear the message about a shortage are those who would consider changing fields for the current wages.
dnautics 8y ago
How about the fed not make it incrementally hard for companies to do that as a matter of policy (in order to.boost employment)? https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/ https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
helen___keller 8y ago
My last job that I quit I had worked for a "growth stage" startup. Our valuation was probably in the 500~M range and we had a real shot at making it to unicorn status. The entire time I worked there, every couple months the CEO would give this inspiring talk at the company all hands about how we're doubling down on recruiting and we're about to grow like you've never seen and change the world, etc. When I left after two years, the number of engineers was about the same as when I joined, but they were almost all different engineers. The company both struggled to hire and retain because the salaries were just ok, the options pitiful, and the management downright awful. We talked about getting the best and brightest from top universities, but at one point I learned our recruitment strategy was to look for "bargain" hires, which we defined as really bright & competitive new grads coming out of top schools, willing to work long hours, but willing to accept low salaries. (Yes, I was one of those bargain hires, minus the long hours. I quit after suspecting that my lack of long hours was holding me back from getting promotions in spite of the significant responsibilities I had as one of the more tenured engineers).
- collyw 8y ago
  Keeping salaries low for proven engineers is the height of short sightedness.
loourr 8y ago
yay wage inflation
logfromblammo 8y ago
They got rid of their training programs so that workers would have to acquire new skills at their own expense. Then they were surprised that a dearth of the workers wanted to acquire skills that are only useful for employees at a tiny subset of companies, who refuse to pay more for them, and instead most went for more portable, more universal skills. But they still don't want to pay more for the niche skills that they require--the skills that no one is acquiring because the marginal benefit of acquiring them do not pay the cost of the training. And they don't want to change their business model to work better with the skilled employees who have the more commonly learned skills. This seems like all that would be required to fix it is an economic understanding at the most basic level--supply and demand. Pay more to employees already suitable, or pay to train those who are not, but have sufficient aptitude to become so. Labor skills are a service product, and the market finds a price for them just the same as every other product. If you can't buy what you need, you got outbid. There seems to be some flaw in business management education if managers are ignorant of this, and some flaw in public policy education if the managers are not ignorant, but just pretending to be, in order to get government concessions. Somewhere along the line is a person that needs to re-take Econ 101. For the question of "What if we train them and they leave for a competitor?" it doesn't take much to work that out with thought experiments. The game-theory analysis says that each individual company is better off ending its in-house training program and poaching its trained employees from another company, with the greatest advantage going to the company that does this first. So the Nash equilibrium is for no companies to have their own training programs, and therefore for no companies to have access to trained employees, while the optimal group benefit occurs when every company has a training program, and trains rather than poaches. The obvious solution is to cartelize the competitors, such that they all agree to contribute to a common training program, and give at least a minimum pay raise to every employee trained by it. There are a variety of ways to make that happen. A union could run the program, and force the businesses who are hiring its members to pay for it, by threat of embargo. A government could tax the businesses, and use the tax to fund a professorship at the public university, required to teach certain classes. The businesses themselves could create certifications, and jointly control the certification body, such that certain certification levels meet some common needs of all participating companies, while those seeking certification pay all the costs of the training program. Or, one businesses could pay more to prospective employees that strategically acquire niche skills, as a means of encouraging them to actually train themselves. If you're running a business, you can't just sit on ass and expect the world to just cater to your needs. The world wants money.
sheepybloke 8y ago
My company wants to hire around 50 new people, but their pay is only decent and their facilities meh... And they wonder why they're having issues filling the different positions.
mynegation 8y ago
That can well be true for one particular company, but what does it mean for employment as a whole? Say you increase the comp and you find a person for the position. It's not like they have been sitting twiddling their thumbs, you hire them away from some other company. Now a different company has this problem. Without some external contribution, like willingness to invest into on-job training, availability of online and brick-and-mortar education, this is a zero-sum game.
hnuser355 8y ago
That’s quite an amazing theory. Is there any fundamental law of economics that describes such a profound relationship?
- mattlondon 8y ago
  Supply and Demand https://en.wikipedia.org/wiki/Supply_and_demand https://en.wikipedia.org/wiki/Supply_and_demand
megaman8 8y ago
I dont have much sympathy for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all. I mean sure, paying more can help alot, but first of all, just fix your Hiring process. The hiring process at these some of the companies I've heard about are absolutely abysmal. I've heard first hand: They get great candidates who pass the phone screen and all the in person interviews: then at the last minute change their mind about hiring. I've seen this at software companies when I was on the hiring side of the equation. HR told us we had an extra slot open. We don't wanna waste the slot so decide to hire somone. we wasted months turning down excellent candidates because engineers don't know how to interview a candidate because there's never time to train someone when teams are changing every year. Then we finally find a perfect one that everyone likes, and the manager above us decides to cancel the position and use the slot to hire a college buddy of his for a completely different role. My theory is, a lot of these so called job openings are for jobs that aren't really needed. And the stake holders don't realize that the jobs aren't needed until the final hiring decision sign off is needed.
- zeroname 8y ago
  > I have no sympathies for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all. An "MBA" doesn't make you "highly qualified". People (especially those with an MBA) should realize that it's about supply and demand: There's too many MBAs and too few jobs where just an MBA makes you a good candidate. Companies are never complaining about finding workers, they are complaining about finding workers at the right price. For obvious reasons, they don't phrase it that way though. > My theory is, a lot of these so called job openings are for jobs that aren't really needed. At least they're not desperately needed. I assume you have a computer. I also assume you'll replace it at some point. As long as the old one is still working or you have a spare, you could you delay that purchase for months, even years. In the meantime, you can just go window shopping.
  - choicenotchance 8y ago
    Sounds like you are a recruiter.
penglish1 8y ago
The companies appear to be complaining that they can't hire skilled people. Paying more is one solution - hire the skilled people away from their current job. But so is training. Training could be considered a benefit, but at one time it was the standard assumption - all jobs include training, particularly jobs that are in any way skilled. And not just training at the beginning, but ongoing. Every year. Like a salary, vacation and sick time. As part of the standard budget. Not the first thing to be cut - because it is just as necessary as salary, vacation and sick time. Unless of course, the job isn't really skilled, and companies doesn't actually need skilled people.
austincheney 8y ago
Ugggghhhhh, there is absolutely no data to back up the proposition that throwing more money at the problem is a magical fix. This is a guess based on vapor out of convenience and desire. As a software developer in the Dallas metro I make over 6 figures, twice the average income. The work isn't that hard and the perks are amazing. At EVERY software development job I have ever held I have worked with a huge number of immigrants. If the pay is so damn good (already) and the benefits are so damn fantastic why aren't more Americans writing software? Why aren't so many of those people who are writing software so incompetent? I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated. So let's propose a hypothetical. Let's say entry level were $150,000 and senior were $500,000. A ridiculous increase. Would more people be interested in programming: absolutely. Would there would be a substantial increase in senior developers? I suspect there would be a minor increase, because it takes effort. Competence isn't a gift and gifting additional income won't work. Now, I could be wrong, but as it stands all the objective evidence is on my side on this.
- abakker 8y ago
  There are other jobs that are not software development. I don't think a fed chairman has "no data". Many companies are not trying to hire software developers at $150k. They're trying to hire truck drivers, warehouse workers, and accountants. At the minimum possible market wage. What he is saying is that if you raise your wage off "bare minimum possible" you may actually fill some open jobs. I agree, talent isn't infinite, but, workforce participation rates are low and part of that is that for a given job there are those qualified to do it that won't do it for the prices on offer. There are also those who would be highly qualified and would switch into different jobs if the salaries were competitive.
- tboyd47 8y ago
  > I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated. That's a good point, and I know exactly the kind of people you mean, but that's not because those people lack the drive to struggle for more money. It's because they really have no interest in programming whatsoever but become convinced that they can overcome that lack of interest long enough to learn how to do it. But they all underestimate how freaking boring programming can be and how it really takes a certain personality type to do it. Honestly, I think if programmers all got $500,000 a year and our own private jets, it wouldn't increase the pool of competent programmers by all that much. This is a phenomenon that's pretty unique to programming, so I don't think that's what Kashkari was talking about. I feel like he's talking more about people who want a better job in their same field but perhaps all the better jobs are a little bit too far away from them, or maybe the better jobs contain more responsibility than they can handle at their pay rate, etc. So if you just bump the salary up a little bit, you expand your circle of applicants just enough to include a few more qualified people.
janeroe 8y ago
Do you have to be a right-winger or a left-winger to believe that private companies owe you something be it education, training, or a special level of compensation. I mean they already pay taxes. If you don't like the conditions and terms offered, just ignore the company. How come people on HN are praising the free market (saying there is no shortage, it's just supply and demand, and stuff like that) and criticising the companies who're exercising their right for free market at the same time?
feefie 8y ago
> There is no such thing as "shortage" of anything. Just pay more, and you'll get it. Businesses are also limited by how much their customers are willing to pay for the item/service their workforce produces. If a company's labour costs are higher than the price their customers are willing to pay for the product they are selling, then that product won't be produced. e.g. if the labour that goes into making raspberries means the customer has to pay $6.99 for a tiny little package of raspberries at the grocery store, and no one in the world is willing to pay that, then raspberries will no longer be sold. I'm not saying that there currently isn't room to pay higher wages, I'm just saying there is a practical limit to "just pay more".
AngeloAnolin 8y ago
One missed point is that companies should also fill jobs with people who are willing to do the work. Most of the time, their economics and hiring processes are blurred by trying to get what they perceive the best and those who usually have a lot of clout based off some social media information they have gathered. It is far easier to train and make an expert of someone who wants to work with you than getting someone who has all the nice credentials that pretends their expertise. People who embrace what you are providing are generally more inclined to stay and contribute.
gwbas1c 8y ago
I think that's an oversimplification. I'd love to move back to Silicon Valley and work for an early stage startup. But, now that I'm a bit more established and have kids, that means that I want something more than a budget 2-bedroom apartment. (And, I also want a reasonable commute.) The cost of living is just too darn high for many businesses to afford to "pay more." So, part of the problem isn't just paying more. Part of the problem is ensuring that areas with job openings are affordable for employees at what the employers can afford to pay.
hinny 8y ago
Two thoughts: 1) I've been saying this for years, but nobody wants to hear it. In particular, an oft-repeated maxim from the immigration debate is “these are jobs Americans will not do!”. This statement is plainly and obviously false. Most Americans will not do these jobs FOR THE WAGE YOU ARE WILLING TO PAY. Picking tomatoes is backbreaking soul-killing work. I won't do it for minimum wage. I will do it for $10,000/hr. Somewhere between these extremes is the optimal wage (from the employer's point of view) which will attract a field full of pickers. Perhaps that wage is $100/hr. Now, I hear the grower growling “$100/hr is not a reasonable wage for a tomato picker”. To which I reply, “define ‘reasonable’ ”. Is it not a tenet of Republican free-market orthodoxy that the fair value of a commodity is that which is determined by market forces? Why is this orthodoxy so quickly extinguished when applied to wages, and especially when its application argues for better wages for low-status people? 2) I've referred to products and labor as commodities with prices set by market forces. However, I caution against viewing the employer-employee relationship as being exactly analogous with the manufacturer-customer relationship. Both business and labor make money by selling something -- the manufacturer sells his goods to a customer; the laborer sells her labor to an employer. But the two are very different in one regard: companies (mostly) have a multitude of customers, while a worker generally has ONE customer: her employer. Most companies strive to avoid overreliance on a single customer. They diversify their offerings and try to establish a large customer base. The IT company selling its software to Walmart, and only Walmart, is surely aware of the inherent peril. Laborers can't do this. An employee is selling his time; he cannot slice his day into 5-minute segments and sell each 5-minute labor period to a different buyer. He may even be contractually constrained from trying this (“no moonlighting”). A laborer selling her time is not really in the same boat as a producer selling a product. [There are exceptions, generally to the benefit of the laborer. For example, self-employed physicians and lawyers really do have many customers who purchase small segments of their time].
JohnnyHero 8y ago
This guy is F'n Brilliant! What an AMAZING idea, I can't believe that NO ONE EVER thought of paying more to attract employees! Econ-101: wages go up when demand for services requires employers to bid for the labor (i.e. pay raises) Of course if you do a quick economic analysis, you realize that it's a zero sum game. While employers are running an infinite loop of stealing from each other via compensation one upmanship - There is still going to be a Million job openings unfilled. Did raising pay to attract employees away from other companies increase the size of the workforce???? Duuuuuuhhhh...NOPE Will higher pay increase the workforce participation? somewhat but the folks on the sidelines are mostly entry level skillsets and the one that have advanced skillsets already had an ability to get a higher paying job (i.e. they are sitting on the sideline by choice not because of low pay). Will immigration solve it? somewhat, but not at the current pace. Plus there is this dilemna... are we going to allow entry level skillsets in or advanced skillsets? since the bulk of the currently available unhired workers are entry level skillsets, immigration of entry level skills will help keep them on the sideline. If we allow higher skilled immigrants, then we hear about companies laying off employees and having them train their replacements. Hard to believe this Economist has any credibility after proposing this monumentally simple minded and STUPID solution.
rebrad 8y ago
Interesting article from MIT Tech Review on the topic: https://bit.ly/2OPFjV7 https://bit.ly/2OPFjV7

545 points by SQL2219 8y ago

the productivity in the US has been stagnating/decreasing for more than a decade already. Tight labor market requires to pay more to employees which in turn requires the businesses to increase productivity and efficiency - i.e. the more expensive the labor the less waste of that labor can the business afford. Add to that the tax cuts which automatically made the employees even more expensive (actual cost of employee = cost paid - tax on profit, i.e. $100 employee salary comes down to just $70 in actual cost with 30% profit tax rate whereis it is $80 with 20% profit tax rate). Even more automation/computerization/robotization/etc. to come.

daveFNbuck 8y ago
How does giving companies more money automatically make employees more expensive? That's extremely counter-intuitive.
- dragonwriter 8y ago
  > How does giving companies more money automatically make employees more expensive? Giving companies more money by itself (e.g., “here, have $100,000 no strings attached”) doesn't. OTOH, taxing retained profits at a lower rate does (it increases the after-tax cost of any reduction in before-tax retained profits; any expense is, considered on its own, a reduction in before-tax retained profits.) In exactly the way deductibility of charitable donations subsidizes such donations at the taxpayers marginal tax rate deductibility of business expenses subsidizes such expenses at the businesses marginal tax rate, and cutting the tax rate cuts the subsidy.
  - daveFNbuck 8y ago
    I think I get what you're saying. The savings from not paying the employee are increased when the profits are taxed less. This makes sense if the employee is a net negative on pre-tax profit. If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper?
    - trhway 8y ago
      >If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper? in a situation of rigid linear connection between expenses and revenues - i.e. when adding additional work units immediately and proportionally increases your revenue. In real life there is usually elasticity between expenses and revenues - while increasing/decreasing expenses has immediate direct effect on the bottom line there is no such effect on the top line. The situation is even worse when you need to hire or do capital investment today (and thus take the hit today) while the related revenue increase would come only some years down the road.
      - daveFNbuck 8y ago
        So this is part of a more general effect where low taxes on profits deter investment? It makes a little more sense to me phrased that way. You don't need to worry about increasing your future profits as much when they're higher now.
- usrusr 8y ago
  It's intuitive iff you believe that paying taxes on profits is worse than not even having any profits to tax. (I don't share that belief)
  - trhway 8y ago
    whatever one's beliefs are, it is very intuitive to everybody what is going to happen to charitable contributions if the tax deduction is removed. In accounting grand scheme of things employee salaries, materials, depreciation of capital assets, etc is just the same thing as charitable contributions - just deductions.
    - usrusr 8y ago
      That would only be a meaningful comparison if we were talking about wether or not money a business doesn't have because it was spent on wages should nonetheless be counted as taxable earnings.
      - trhway 8y ago
        >money a business doesn't have because it was spent on wages should nonetheless be counted as taxable earnings. that is exactly how it works. All business revenue is counted as taxable earnings unless that amount is reduced by deductions. Money spent on wages is just a such a deduction. Charitable contributions is just another such a deduction. No difference.
        usrusr 8y ago
        And that's the point, nobody is challenging that, for good reason. Changing the deductibility of charitable contributions would be just like that, a redefinition of the tax base. The tax base is orthogonal to the tax rate, which is why decreasing the corporate tax rate does not make employees more expensive. (well, occasionally the idea of gross revenue taxation sparks up, but I have not seem that anywhere in this discussion, and it never survives the first mentioning of vertical integration anyways)
rebuilder 8y ago
Don't know why you're getting downvoted. This is a problem all wealthy countries face. As GDP increases, you have to pay workers more or they will find more profitable work, as is being suggested in the article. That, or a lot of workers must not be allowed to reap the benefits of economic growth, and that will be tremendously destablilizing. The problem is, growing wages make domestic production less and less competitive with foreign production. So wealthy countries import goods from places with lower production costs. So, as wealth increases, if you're trying to maintain any semblance of income equality, anything requiring human labour must increasingly get outsourced to cheaper countries. Wealthy countries can only competitively produce high-value goods and services that require e.g. massive capital investments and high levels of technical skill and education. It follows that wealthy countries will eventually face a labour crisis: They have, as a historical leftover, a large class of labourers who no longer have employable skills, and can't even theoretically be re-trained into more current working roles, as there simply aren't enough of those to go around. "Productivity increase" is just another way of saying "more unemployment". I'd like to propose a kind of trilemma here: High median wage, High employment, large population - Pick two. Having all of these can not be sustained IMO, and I think the current political upheavals in the west largely stem from this. You either have tremendous income inequality among workers, you have a large unemployed class, or you have a population consisting largely of highly-skilled specialists.
- nicoburns 8y ago
  This is precisely the problem that a basic income would solve...
  - rebuilder 8y ago
    Yes, it's the problem a basic income proposes to solve. I'm intrigued by the idea, but I do wonder about the long-term economic effects of it. It seems to me that at it's core, basic income would involve a transfer of wealth from companies and wage-earners to the unemployable. Isn't that just looking at the issues I described and going "oh well"? It doesn't seem to solve the competitivity problem. Optimistically, basic income might enable enough workers to re-educate themselves into new roles that the result would be a net positive, but apart from that, I'm not really seeing how it changes the big picture.
mooreds 8y ago
> the productivity in the US has been stagnating/decreasing for more than a decade already. Here's a chart which shows this statement is incorrect: https://www.bls.gov/lpc/prodybar.htm https://www.bls.gov/lpc/prodybar.htm Now, productivity growth has slowed down, but it hasn't decreased. 1%/year may or may not be stagnation.

darawk 8y ago

Yep. Every time people say "Americans don't want to do these jobs" or anything else suggesting that there is a labor shortage in some sector I always mentally append the phrase "at the price you want to pay".

devoply 8y ago
There are many usually smaller sized businesses that simply won't work because of the nature of their economics and would cease to exist if you raise pay too much. There are though many other businesses of larger size that earn multiples on each employee and could afford to pay them much more and pay the shareholders and execs much less or nothing.
- CM30 8y ago
  Isn't the answer then that said businesses simply shouldn't be trying to hire too many new employees yet, or should shut down? Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet. If a company's business model doesn't work, then it shouldn't really stay open/continue to exist.
  - devoply 8y ago
    Maybe. From an overall perspective of entrepreneurship and job creation no. The reason being that many companies are bootstrapped on the backs of cheap labor until they reach a point where they can sustain jobs. You are basically saying that bootstrapping should never happen and you should always have investors to create companies... unless maybe if the founder can make a company based around a very small team work somehow who are working for next to nothing for equity.
    - kristianc 8y ago
      You’re welcome to set up a company and pay yourself as little as you want - that doesn’t mean you can compel others to accept mediocre wages too.

mattnewport 8y ago

> Add to that the tax cuts which automatically made the employees even more expensive This may be the dumbest thing I've read on the Internet today.

dragonwriter 8y ago
> This may be the dumbest thing I've read on the Internet today. It's literally factually true, even if somewhat unintuitive; it's more frequently pointed out that corporate taxes on retained profits are a subsidy on losses, but that's equally true of expenses even when the corporation is net profitable as it is of losses.
- TangoTrotFox 8y ago
  I prefer to avoid calling things dumb, but I tend to agree this does sound like it fits the bill. Any clarification would be appreciated. Companies are taxed on net. This sort of itemization makes no sense. So for instance imagine a company that grosses $250 in sales with total before tax costs of $100 in labor and $50 in other costs. With a 30% tax rate, their after-tax net is $70. With a 20% tax rate, it's $80. Suggesting that a company might, for any reason, prefer the 30% scenario does seem quite absurd unless I'm missing something critical here.
  - dragonwriter 8y ago
    That's not the suggestion. The suggestion is that the net added cost (after taxes) of an added unit of labor on its own is greater with a lower tax rate, not that a profitable company's overall position with the same pre-tax choices is worse with the lower tax rate.
    - shoo 8y ago
      that may be true, but is there any part of this argument specific to labor? could it be the case that tax cuts also made non-labor expenses more expensive? could revenues in turn also become more, er, revenue-ive?

stakhanov 8y ago

The article is kind of saying the opposite of what the headline implies. It says that Kashkari had previously been making the argument about paying more, but that, with unemployment falling to its lowest level in 49 years, we might now be getting to a point where there might actually be truth to the notion that there are just not enough bodies out there. I see a solution to the problem: Remote work. Put people who are on site into jobs that actually require people to be on site, and fill jobs that don't have that requirement remotely. That way you can get around the absence of bodies in the U.S. (coupled with the tight immigration regime) and the skills shortage.

jedberg 8y ago

I was listening to a great podcast about this. They said they asked owners of businesses, "If you're having trouble hiring, why don't you offer more money?". Their response was all a variation on, "because then I'd have to pay all my other workers more when they found out, and it's cheaper to just pay the current folks overtime at their lower rate than give everyone a raise".

danieltillett 8y ago
This can only go on so long before they have to raise pay.
- minikites 8y ago
  Wages have stagnated since the 1970s, so "they" definitely don't have to raise pay: https://upload.wikimedia.org/wikipedia/commons/thumb/7/73/US_productivity_and_real_wages.jpg/800px-US_productivity_and_real_wages.jpg https://upload.wikimedia.org/wikipedia/commons/thumb/7/73/US...
  - danieltillett 8y ago
    Not if unemployment is back to 1960s levels. I suspect you are right in that the Fed will kill any general wage rises.
- faceplanted 8y ago
  And in the meantime everyone is underpaid and the owner is stressed because he can't hire people.
  - danieltillett 8y ago
    Such is life when caught in a vicious circle.
breitling 8y ago
Do you remember what podcast this was? Sounds like something planet money would do.

esotericn 8y ago

Is it the case that companies are actually struggling to fill positions, or are statements to that effect just an aspect of the metagame? There's a ton of stuff that goes on outside of the actual mechanics of 'company hires for job and person applies for job'. Unless you've been pretty lucky you've almost certainly dealt with euphemisms at work when it comes to discussions around pay, for example. It's kind of annoying that we can't just speak frankly about these things, but such is life.

Animats 8y ago

I just saw a help-wanted sign at a supermarket which said they were hiring for "long-term jobs". Now that's a good selling point.

mrarjen 8y ago

These things always remind me of two things. Only wanting young employees with many years of experience, and that time the Dutch government tried to get unemployed people to work in the green houses. They got hundreds of people on buses, drove them to the green houses "look how wonderful it is to work here", a few million investment later, two people started working there. Both because this was a good way to meet others, and they didn't mind getting a lot less money if they took the job over government payment.

dep_b 8y ago
The greenhouses paid less because unemployed have many benefits that don't apply to working people, so getting a minimum wage job would be 40 hours + travel of your life gone for effectively a few % of more expendable income. The people that actually do the work are people from Eastern Europe that don't get that kind of money from welfare in their own country if it exists at all. If welfare would be less or preferably the actual minimum wage would be taxed less the gap between having a job and not having a job would be really worth the effort. It's utterly strange that within some of the people that are rescued from war there's up to 80% of unemployment while The Netherlands needs to import people to do unskilled labor.

georgeburdell 8y ago

Paying more could work for certain kinds of jobs, but others are simply not productive enough to justify paying more. I recently went to a country without a minimum wage and it was amazing what they were paying people (presumably very little) to do, such as sell napkins and straws in a market. Without a regulatory requirement to do so, it's simply impossible for an employer to extract a U.S. minimum wage's worth of productivity doing that kind of activity. That's not to say that every low paying job is like this. We in the U.S. have gotten used to certain blue collar jobs paying very little because of massive numbers of new immigrants, legal and illegal. Now that the spigot is being turned off, there's a labor shortage at the low end. Maybe, e.g., food and construction ought to cost more to compensate, which will certainly change the type of offerings of each, but we might get more efficient usage as a result.

sbhn 8y ago

What, there is a shortage of workers willing to work for low pay? The Answer. Create competition in the labour sector by relaxing border controls and let in immigrants. Keep there status as illegal, so that you don’t need to pay all the costs that legally protected employees are entitled to

toxik 8y ago
That’s very cynical, and implies that the government is even able to pull a stunt on that scale. I think an easier explanation is available here.
- richardknop 8y ago
  Don't large part of some American industries depend on such immigrant labor? I even hear comedians like Bill Maher joke about this all the time saying things like "without illegal immigrants there would be nobody to pick fruit" so it almost seems like an accepted reality of US, at least agriculture industry in border states. Is that no true? I just assumed jokes and lines like that are based on some sort of universally accepted "unofficial" truth, that's what makes them funny.
  - snarfy 8y ago
    My mother worked at a produce company most of her life. She said the workers always had paperwork. The company didn't try very hard to verify the authenticity of the paperwork. They would work for two weeks, get their check and be gone, off to work at another field for two weeks.
  - rhexs 8y ago
    If an industry requires illegal subsidies to thrive, there is no industry. They should naturally go bankrupt. If a nation decides it is important enough to subsidize (i.e. strategic food stock to feed a populace), then they should do so through funding bills instead of hiding the true cost through the lack of immigration enforcement. But the farming lobby is powerful.

keiferski 8y ago

I’m pretty convinced that as the realization that most work is meaningless, combined with concepts like basic income, employers will need to provide more-and-more incentives to get motivated workers. Maybe they should study how trash men, sewer cleaners and other “undesirable” jobs are staffed?

mk89 8y ago

The alternative is trying to get cheap workers from abroad, which worked quite well in the past and still seems to do well to some extent - if you can accept all the challenges this way of doing business carries along on social/security/national level. Times are changing, though, and absolute poverty is thankfully not everywhere an issue anymore, which leaves it to relative poverty: I can't afford Netflix => I am poor. In such cases, people are much less likely to do that "shitty not-well-paid job" for long. Selling drugs is much more convenient and profitable, for example. Also, more and more countries are restricting their borders, making it harder for cheap workers from abroad to come and do such jobs. So, yes, the other alternative is: raise the salary!

hvindin 8y ago
Interesting comment: > Selling drugs is much more convenient and profitable, for example. I know its not related to the original topic, nor the core point of your comment but I'd be fascinated to know why you think this. Based on my knowledge of the market WRT wholesale prices/retail (street) prices/legal risks/product expiry/supply chain reliability as well as just the statistics around anyone towards the bottom few levels of the pyrmaid on this I'm almost certain that this is roughly never the case. I find it interesting that this assumption seems to still exist, and suspect that a suprising number of people would harbor a fallback position of "if shit gets really bad I could just sell drugs" which makes a lot of assumptions about how profitable it could possibly be.
- mk89 8y ago
  I think it highly depends on 1) the severity of the law of your country, 2) the demand, 3) where you live (how many gangs are out there, how dangerous it is ..etc.). Also, selling drugs doesn't imply selling hard drugs, which in many countries (in Europe at least) is the real "reason" to worry. The money they make in 1-2 days, depending on what they sell, is way above an average salary (again... talking only about Europe). 1 or 2 days of selling marijuana and maybe cocaine in "good" places (of course, not in the middle of nowhere). So, why wouldn't someone do it, instead of wiping people's asses or cleaning toilets?

jeffrallen 8y ago

Yup, that will clearly never work. eye roll

erikb 8y ago

lol, why does anybody need to say so? This is free market 101. Also I really believe that's how the future looks like, thanks to AI and automation: fewer and fewer jobs with higher and higher requirements but also higher and higher pay.

IshKebab 8y ago
Because the news never calls this out. Here's an article in The Guardian from just yesterday: https://www.theguardian.com/business/2018/nov/13/workers-eastern-europe-uk-eu-employment-pay-growth https://www.theguardian.com/business/2018/nov/13/workers-eas... > Britain’s employers have warned that severe skills shortages are holding back the economy after the latest official figures showed the biggest fall in the number of workers from eastern Europe since modern records began. > > The British Chambers of Commerce and the Federation of Small Businesses urged the government to deliver a post-Brexit migration system to meet their needs amid signs that the fall in unemployment in recent years was putting upward pressure on wages. Notice how an upward pressure on wages is bad (because this is from business groups). Even the Guardian doesn't point out how stupid this logic is.

dominicr 8y ago

Related to this: customers need to pay more. Many businesses have very small profit margins, so paying staff more or training staff could turn them unprofitable. When you're buying products cheaply it's likely that somebody (or someone's environment) is paying a price for it. Once you bear that in mind there is such a thing as products being uncomfortably cheap. (I live in Norway where nothing is cheap but almost everyone earns a good wage. The result is that people don't buy so much stuff but lead good lives.)

IshKebab 8y ago
Yeah the $1T oil fund ($200k per person) has nothing to do with it.
- Kurtz79 8y ago
  It has nothing to do with the point OP was making.
- dominicr 8y ago
  The oil fund is a result of that as much as a cause. Only a small percentage of the country's spending is from that fund. The aim of the fund is to save for the future and the government is only allowed to spend some of the profits. What makes more of a difference is the feeling of social and fiscal responsibility that led to the fund's creation. Planning for the future and helping people through hard times sounds like communism to some people but in Europe is generally considered common sense.
nawitus 8y ago
If everyone earns 2x but everything costs 2x, what changes?
- Tade0 8y ago
  Thing is, it doesn't. As an example cars are produced everywhere around the world but the same product costs roughly the same regardless of geography. This way in rich countries people can afford domestically manufactured cars, while in poor countries they can't.

growlist 8y ago

I guess I'm not very clever because I don't understand how encouraging inward immigration in search of cheap labour isn't akin to a ponzi scheme. Another thing I never see discussed is: what is the top limit to the population a country can carry without things becoming miserable? Surely at some point inward migration will have to stop unless we aim to have every single citizen of the world living in a single country, and what then? Also, how is it morally or economically justifiable to let existing citizens languish on unemployment benefit whilst solving the problem of their lack of participation in the labour market by opening doors to cheap migrants? It seems to me like if we care about our fellow citizens we should all get used to paying higher prices in support of them, which might enable them to obtain the necessities of life in a more fulfilling manner.

digitaltrees 8y ago
If you pay more, people bid up prices on things they buy like housing and food. There is no silver bullet that solves all things. The reality is it is a combination of policies that promote equality and opportunity, or they promote concentration of wealth and power in a few individuals, corporations and political bodies.
- growlist 8y ago
  > no silver bullet that doesn't change the fact that a race to the bottom i.e. lower prices is surely a bad thing.

bayesian_horse 8y ago

"Higher Wages" is almost never the answer for finding more candidates. The only way higher wages lead to more candidates is by taking them away from other companies or other industries, and sometimes from other countries. So that is sometimes an option for certain employers, but not for an entire industry. It's a myth that there is a pool of workers who is "underemployed" because of low wages. Also: In a free market, if companies can earn more profits by hiring more people by offering higher wages, they will do so. But increasing wages also reduces profit, and there just may not be enough room in the margins.

joekrill 8y ago
> The only way higher wages lead to more candidates is by taking them away from other companies or other industries, and sometimes from other countries. So that is sometimes an option for certain employers, but not for an entire industry. It's a myth that there is a pool of workers who is "underemployed" because of low wages. But that's only true in the short term. > In a free market, if companies can earn more profits by hiring more people by offering higher wages, they will do so. But we're not in a truly free market, are we? And we've already seen huge tech companies band together to keep profits artificially low. And that's just the one's that got caught. > But increasing wages also reduces profit, and there just may not be enough room in the margins. Corporate profits are at an all time high, and have been for quite some time. We're paying C-level executives insane amounts of money. Profit margins are surely not the issue here.
- bayesian_horse 8y ago
  How does competition for workers decrease over time through higher wages? If you are implying that more high school graduates would choose a particular industry or profession because of a wage hike, it's still a situation of taking them away from other options. The market is free enough. There seems to be some collusion, direct or indirect. That would change my proposition though, because companies cooperate because defecting (by increasing wages) doesn't benefit. If one company increases wages, others have to follow. Good for workers, but that's not magically creating any new workers either. It's not about "corporate profits" but about the marginal profit of an additional worker gained through higher wage offers. On the contrary, at a certain point workers decrease work hours when they get more pay.

zwaps 8y ago

There is so much demand for non-mindless consumption these days, and in some areas certainly also the money for it, that I wonder why American companies don't start to signal. Like, put a huge sign in front of the door: "America needs higher wages, but someone needs to start! Our prices include fair wages to our workers, 25% above industry average". Or something more clever. Building this into the company ethos has the advantage, in the current economy, to not only take higher prices for hopefully little drop in demand, but also to attract better workers. Since there are almost no labor related laws in the US, the only way to afford above average wages is to generate demand by differentiation. And that might be done, after all, Americans are willing to tip ridiculous amounts (like 25%) just so that waiters or delivery drivers get to make a living. Has this ever been attempted? I have no prior on whether it actually works, people might care too much about the price...

scarejunba 8y ago
If you take the mean tip and raise your prices by that much and move it to workers, they will make less. Cash tips are usually tax frauded away.
mdorazio 8y ago
I haven't seen this ethos specifically with respect to workers, but have definitely seen it with respect to ethically sourced materials, sustainable environmental practices, etc. It seems to work well in wealthy areas where people can afford to care about these things. It does not work at all in lower income areas, which is most of the US. Price tends to trump pretty much everything else for the vast majority of consumers.
lazerpants 8y ago
The gas station chain, Buccee's, in Texas posts the average starting wage of their employees in their stores, and the amount that it is above the average in the area. Or at least the did several years ago.

credit_guy 8y ago

Finally a respected economist who calls a spade a spade. There is no such thing as "shortage" of anything. Just pay more, and you'll get it. Now, here's some alternatives for companies that can't/don't want to pay more: - offsource (but they know this already) - automate (everyone is in a continuous process of automating what can be automated) - hire temp workers (most likely they've been doing this for years) - hire illegals (well, that's illegal) - lobby for more immigration (probably what Kashkari was answering to) But here's some novel alternatives: - train people more. You hire them at lower qualifications, and educate them in house - open source your tools, so people can train themselves for free, before applying for your job openings. Tensorflow, PyTorch anyone? - offer training for interested outsiders. See the Udacity WorldQuant course in AI for trading [1]. - invest in STEM education to increase the general pool of qualified hires. I know of the Google initiative [2] [1] https://www.udacity.com/course/ai-for-trading--nd880 https://www.udacity.com/course/ai-for-trading--nd880 [2] https://edu.google.com https://edu.google.com

huhtenberg 8y ago
> train people more. You hire them at lower qualifications, and educate them in house... ... they learn and then leave, because if you were able to pay them the market rate you would've not been training them in the first place (considering the context of your comment).
- richardknop 8y ago
  Increase their salary to market rate once they complete their training. Easy.
  - huhtenberg 8y ago
    The OP lists options for when you do NOT have funds to do exactly that.
    - admax88q 8y ago
      If you don't have the money to pay market rate for the skills you need to run your business then unfortunately your business model is untenable. Just like you can't sell jewellery for less than the cost of the gold you had to purchase to make it.

crispyambulance 8y ago

"Pay more" works fine for companies that are at the top of the pyramid: google, amazon, facebook, etc. For the rest of the employers there's a hard stop at some point well below what the top 5 are paying. The next thing to consider is training. Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker).

krigath 8y ago
> Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker). Wow, I'm so glad that I am part of a company culture that values mentorship and teaching younger employees. Since joining in August last year I have spent a large proportion of my time both mentoring and pair programming. Our team of 8 developers is fairly junior with 3 graduating last year and one this year. It's been great to see last year's graduates grow to become very independently productive members of the team, and I like to think that they would not have grown as much without my support and trust.

nova22033 8y ago

Does this really apply equally to programmers and starbucks baristas? I don't know of a single programmer who didn't make more at his/her new gig.

sailfast 8y ago

I agree that increasing wages is definitely a good way to get more folks in the door! That said, a very real problem here is the fact that health care and basic benefits costs have been increasing significantly over the past 10 years but it's much harder to convince an employee of that value vs. dollars in the door on a salary number. Just keeping your health care premiums steady year over year as an employer could be the equivalent of a huge wage increase, but your employees won't see it that way because nobody understands the true costs of care. Nobody says "Thanks for the 10% raise" when they get to keep their benefits. This is only part of the problem with "you should try paying more." as an argument. That said - for jobs without benefits especially, paying more should be the first reaction to this, 100%.

jcadam 8y ago
Yea, in my industry most employers give a piddly 2-3% annual COL raise, which is then whittled down to nothing (or less than nothing) after the new "changes to our medical benefits to align us with the rest of the industry and make us more competitive" are announced during open enrollment each fall. Factor in inflation and you effectively take a pay cut every year until you 'hop' to your next job.

Eridrus 8y ago

It's common for people on HN to say "there's no such thing as a shortage, just pay people more", but that assumes that the amount of value people provide is infinite, and can just keep growing. To the extent that companies are offering "good" wages already, the people who need to hear the message about a shortage are those who would consider changing fields for the current wages.

dnautics 8y ago

How about the fed not make it incrementally hard for companies to do that as a matter of policy (in order to.boost employment)? https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/ https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

helen___keller 8y ago

My last job that I quit I had worked for a "growth stage" startup. Our valuation was probably in the 500~M range and we had a real shot at making it to unicorn status. The entire time I worked there, every couple months the CEO would give this inspiring talk at the company all hands about how we're doubling down on recruiting and we're about to grow like you've never seen and change the world, etc. When I left after two years, the number of engineers was about the same as when I joined, but they were almost all different engineers. The company both struggled to hire and retain because the salaries were just ok, the options pitiful, and the management downright awful. We talked about getting the best and brightest from top universities, but at one point I learned our recruitment strategy was to look for "bargain" hires, which we defined as really bright & competitive new grads coming out of top schools, willing to work long hours, but willing to accept low salaries. (Yes, I was one of those bargain hires, minus the long hours. I quit after suspecting that my lack of long hours was holding me back from getting promotions in spite of the significant responsibilities I had as one of the more tenured engineers).

collyw 8y ago
Keeping salaries low for proven engineers is the height of short sightedness.

loourr 8y ago

yay wage inflation

logfromblammo 8y ago

They got rid of their training programs so that workers would have to acquire new skills at their own expense. Then they were surprised that a dearth of the workers wanted to acquire skills that are only useful for employees at a tiny subset of companies, who refuse to pay more for them, and instead most went for more portable, more universal skills. But they still don't want to pay more for the niche skills that they require--the skills that no one is acquiring because the marginal benefit of acquiring them do not pay the cost of the training. And they don't want to change their business model to work better with the skilled employees who have the more commonly learned skills. This seems like all that would be required to fix it is an economic understanding at the most basic level--supply and demand. Pay more to employees already suitable, or pay to train those who are not, but have sufficient aptitude to become so. Labor skills are a service product, and the market finds a price for them just the same as every other product. If you can't buy what you need, you got outbid. There seems to be some flaw in business management education if managers are ignorant of this, and some flaw in public policy education if the managers are not ignorant, but just pretending to be, in order to get government concessions. Somewhere along the line is a person that needs to re-take Econ 101. For the question of "What if we train them and they leave for a competitor?" it doesn't take much to work that out with thought experiments. The game-theory analysis says that each individual company is better off ending its in-house training program and poaching its trained employees from another company, with the greatest advantage going to the company that does this first. So the Nash equilibrium is for no companies to have their own training programs, and therefore for no companies to have access to trained employees, while the optimal group benefit occurs when every company has a training program, and trains rather than poaches. The obvious solution is to cartelize the competitors, such that they all agree to contribute to a common training program, and give at least a minimum pay raise to every employee trained by it. There are a variety of ways to make that happen. A union could run the program, and force the businesses who are hiring its members to pay for it, by threat of embargo. A government could tax the businesses, and use the tax to fund a professorship at the public university, required to teach certain classes. The businesses themselves could create certifications, and jointly control the certification body, such that certain certification levels meet some common needs of all participating companies, while those seeking certification pay all the costs of the training program. Or, one businesses could pay more to prospective employees that strategically acquire niche skills, as a means of encouraging them to actually train themselves. If you're running a business, you can't just sit on ass and expect the world to just cater to your needs. The world wants money.

sheepybloke 8y ago

My company wants to hire around 50 new people, but their pay is only decent and their facilities meh... And they wonder why they're having issues filling the different positions.

mynegation 8y ago

That can well be true for one particular company, but what does it mean for employment as a whole? Say you increase the comp and you find a person for the position. It's not like they have been sitting twiddling their thumbs, you hire them away from some other company. Now a different company has this problem. Without some external contribution, like willingness to invest into on-job training, availability of online and brick-and-mortar education, this is a zero-sum game.

hnuser355 8y ago

That’s quite an amazing theory. Is there any fundamental law of economics that describes such a profound relationship?

mattlondon 8y ago
Supply and Demand https://en.wikipedia.org/wiki/Supply_and_demand https://en.wikipedia.org/wiki/Supply_and_demand

megaman8 8y ago

I dont have much sympathy for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all. I mean sure, paying more can help alot, but first of all, just fix your Hiring process. The hiring process at these some of the companies I've heard about are absolutely abysmal. I've heard first hand: They get great candidates who pass the phone screen and all the in person interviews: then at the last minute change their mind about hiring. I've seen this at software companies when I was on the hiring side of the equation. HR told us we had an extra slot open. We don't wanna waste the slot so decide to hire somone. we wasted months turning down excellent candidates because engineers don't know how to interview a candidate because there's never time to train someone when teams are changing every year. Then we finally find a perfect one that everyone likes, and the manager above us decides to cancel the position and use the slot to hire a college buddy of his for a completely different role. My theory is, a lot of these so called job openings are for jobs that aren't really needed. And the stake holders don't realize that the jobs aren't needed until the final hiring decision sign off is needed.

zeroname 8y ago
> I have no sympathies for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all. An "MBA" doesn't make you "highly qualified". People (especially those with an MBA) should realize that it's about supply and demand: There's too many MBAs and too few jobs where just an MBA makes you a good candidate. Companies are never complaining about finding workers, they are complaining about finding workers at the right price. For obvious reasons, they don't phrase it that way though. > My theory is, a lot of these so called job openings are for jobs that aren't really needed. At least they're not desperately needed. I assume you have a computer. I also assume you'll replace it at some point. As long as the old one is still working or you have a spare, you could you delay that purchase for months, even years. In the meantime, you can just go window shopping.
- choicenotchance 8y ago
  Sounds like you are a recruiter.

penglish1 8y ago

The companies appear to be complaining that they can't hire skilled people. Paying more is one solution - hire the skilled people away from their current job. But so is training. Training could be considered a benefit, but at one time it was the standard assumption - all jobs include training, particularly jobs that are in any way skilled. And not just training at the beginning, but ongoing. Every year. Like a salary, vacation and sick time. As part of the standard budget. Not the first thing to be cut - because it is just as necessary as salary, vacation and sick time. Unless of course, the job isn't really skilled, and companies doesn't actually need skilled people.

austincheney 8y ago

Ugggghhhhh, there is absolutely no data to back up the proposition that throwing more money at the problem is a magical fix. This is a guess based on vapor out of convenience and desire. As a software developer in the Dallas metro I make over 6 figures, twice the average income. The work isn't that hard and the perks are amazing. At EVERY software development job I have ever held I have worked with a huge number of immigrants. If the pay is so damn good (already) and the benefits are so damn fantastic why aren't more Americans writing software? Why aren't so many of those people who are writing software so incompetent? I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated. So let's propose a hypothetical. Let's say entry level were $150,000 and senior were $500,000. A ridiculous increase. Would more people be interested in programming: absolutely. Would there would be a substantial increase in senior developers? I suspect there would be a minor increase, because it takes effort. Competence isn't a gift and gifting additional income won't work. Now, I could be wrong, but as it stands all the objective evidence is on my side on this.

abakker 8y ago
There are other jobs that are not software development. I don't think a fed chairman has "no data". Many companies are not trying to hire software developers at $150k. They're trying to hire truck drivers, warehouse workers, and accountants. At the minimum possible market wage. What he is saying is that if you raise your wage off "bare minimum possible" you may actually fill some open jobs. I agree, talent isn't infinite, but, workforce participation rates are low and part of that is that for a given job there are those qualified to do it that won't do it for the prices on offer. There are also those who would be highly qualified and would switch into different jobs if the salaries were competitive.
tboyd47 8y ago
> I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated. That's a good point, and I know exactly the kind of people you mean, but that's not because those people lack the drive to struggle for more money. It's because they really have no interest in programming whatsoever but become convinced that they can overcome that lack of interest long enough to learn how to do it. But they all underestimate how freaking boring programming can be and how it really takes a certain personality type to do it. Honestly, I think if programmers all got $500,000 a year and our own private jets, it wouldn't increase the pool of competent programmers by all that much. This is a phenomenon that's pretty unique to programming, so I don't think that's what Kashkari was talking about. I feel like he's talking more about people who want a better job in their same field but perhaps all the better jobs are a little bit too far away from them, or maybe the better jobs contain more responsibility than they can handle at their pay rate, etc. So if you just bump the salary up a little bit, you expand your circle of applicants just enough to include a few more qualified people.

janeroe 8y ago

Do you have to be a right-winger or a left-winger to believe that private companies owe you something be it education, training, or a special level of compensation. I mean they already pay taxes. If you don't like the conditions and terms offered, just ignore the company. How come people on HN are praising the free market (saying there is no shortage, it's just supply and demand, and stuff like that) and criticising the companies who're exercising their right for free market at the same time?

feefie 8y ago

> There is no such thing as "shortage" of anything. Just pay more, and you'll get it. Businesses are also limited by how much their customers are willing to pay for the item/service their workforce produces. If a company's labour costs are higher than the price their customers are willing to pay for the product they are selling, then that product won't be produced. e.g. if the labour that goes into making raspberries means the customer has to pay $6.99 for a tiny little package of raspberries at the grocery store, and no one in the world is willing to pay that, then raspberries will no longer be sold. I'm not saying that there currently isn't room to pay higher wages, I'm just saying there is a practical limit to "just pay more".

AngeloAnolin 8y ago

One missed point is that companies should also fill jobs with people who are willing to do the work. Most of the time, their economics and hiring processes are blurred by trying to get what they perceive the best and those who usually have a lot of clout based off some social media information they have gathered. It is far easier to train and make an expert of someone who wants to work with you than getting someone who has all the nice credentials that pretends their expertise. People who embrace what you are providing are generally more inclined to stay and contribute.

gwbas1c 8y ago

I think that's an oversimplification. I'd love to move back to Silicon Valley and work for an early stage startup. But, now that I'm a bit more established and have kids, that means that I want something more than a budget 2-bedroom apartment. (And, I also want a reasonable commute.) The cost of living is just too darn high for many businesses to afford to "pay more." So, part of the problem isn't just paying more. Part of the problem is ensuring that areas with job openings are affordable for employees at what the employers can afford to pay.

hinny 8y ago

Two thoughts: 1) I've been saying this for years, but nobody wants to hear it. In particular, an oft-repeated maxim from the immigration debate is “these are jobs Americans will not do!”. This statement is plainly and obviously false. Most Americans will not do these jobs FOR THE WAGE YOU ARE WILLING TO PAY. Picking tomatoes is backbreaking soul-killing work. I won't do it for minimum wage. I will do it for $10,000/hr. Somewhere between these extremes is the optimal wage (from the employer's point of view) which will attract a field full of pickers. Perhaps that wage is $100/hr. Now, I hear the grower growling “$100/hr is not a reasonable wage for a tomato picker”. To which I reply, “define ‘reasonable’ ”. Is it not a tenet of Republican free-market orthodoxy that the fair value of a commodity is that which is determined by market forces? Why is this orthodoxy so quickly extinguished when applied to wages, and especially when its application argues for better wages for low-status people? 2) I've referred to products and labor as commodities with prices set by market forces. However, I caution against viewing the employer-employee relationship as being exactly analogous with the manufacturer-customer relationship. Both business and labor make money by selling something -- the manufacturer sells his goods to a customer; the laborer sells her labor to an employer. But the two are very different in one regard: companies (mostly) have a multitude of customers, while a worker generally has ONE customer: her employer. Most companies strive to avoid overreliance on a single customer. They diversify their offerings and try to establish a large customer base. The IT company selling its software to Walmart, and only Walmart, is surely aware of the inherent peril. Laborers can't do this. An employee is selling his time; he cannot slice his day into 5-minute segments and sell each 5-minute labor period to a different buyer. He may even be contractually constrained from trying this (“no moonlighting”). A laborer selling her time is not really in the same boat as a producer selling a product. [There are exceptions, generally to the benefit of the laborer. For example, self-employed physicians and lawyers really do have many customers who purchase small segments of their time].

JohnnyHero 8y ago

This guy is F'n Brilliant! What an AMAZING idea, I can't believe that NO ONE EVER thought of paying more to attract employees! Econ-101: wages go up when demand for services requires employers to bid for the labor (i.e. pay raises) Of course if you do a quick economic analysis, you realize that it's a zero sum game. While employers are running an infinite loop of stealing from each other via compensation one upmanship - There is still going to be a Million job openings unfilled. Did raising pay to attract employees away from other companies increase the size of the workforce???? Duuuuuuhhhh...NOPE Will higher pay increase the workforce participation? somewhat but the folks on the sidelines are mostly entry level skillsets and the one that have advanced skillsets already had an ability to get a higher paying job (i.e. they are sitting on the sideline by choice not because of low pay). Will immigration solve it? somewhat, but not at the current pace. Plus there is this dilemna... are we going to allow entry level skillsets in or advanced skillsets? since the bulk of the currently available unhired workers are entry level skillsets, immigration of entry level skills will help keep them on the sideline. If we allow higher skilled immigrants, then we hear about companies laying off employees and having them train their replacements. Hard to believe this Economist has any credibility after proposing this monumentally simple minded and STUPID solution.

rebrad 8y ago

Interesting article from MIT Tech Review on the topic: https://bit.ly/2OPFjV7 https://bit.ly/2OPFjV7