4 ms·

>There has been a driver shortage for 10+ years How does that square with the low net compensation of the drivers? Is there perhaps a secondary mechanism, othe

by dexen 8y ago

>There has been a driver shortage for 10+ years How does that square with the low net compensation of the drivers? Is there perhaps a secondary mechanism, other than the (asserted) labor supply shortage, that depresses the wages?

aaomidi 8y ago
This is actually one of the cases where supply side economics breaks down. People refuse to pay more for this and if you've invested so much for truck, car insurance, etc...
- zazen 8y ago
  To me, the question still stands: if people refuse to pay more for the service, then in what sense is there a shortage of the service? Can you expand on what you mean by "supply side economics breaking down"?
  - aaomidi 8y ago
    A lot of trucks are owner operated. They can't afford to not work - even though they know they will be able to potentially make more money. Owning a truck is a lot of maintenance - insurance, parking costs, etc. A lot of owners also have to pay lease, loans, etc. They can't afford to negotiate for better rates. Just because there isn't a lot of supply doesn't mean that rates go up!
    - zazen 8y ago
      I can see that small businesses aren't in a great position to negotiate with large businesses. But if there were really a substantial shortage, you wouldn't have to engage in high-risk, high-stakes negotiation to get a better rate. People will offer you a higher rate to secure your service, if your service is _really_ in short supply. If the people hiring these independent trucks can afford not to pay more, because they know someone else will take the lower rate, then there isn't a shortage. This could just about be the definition of whether or not there is a "shortage".
- dexen 8y ago
  I am sorry, this doesn't make any sense to me. If "people refuse to pay more for this", it means there's either over-supply of service at the current price-point, or there are easily accessible, low-cost alternative services. There is no third way, barring country-wide air-tight collusion of all transportation buyers, which is an unrealistic scenario.
  - aaomidi 8y ago
    You don't understand this do you? When you've spent a ton of capital, have loans to pay, paying insurance, etc. You are not in a position to negotiate. It doesn't make sense because we keep getting fed a simplistic view of "supply vs demand." That is a general trend, but not a rule. If you know you have to work to keep your means of survival, you don't negotiate. We've seen salaries/bonuses/rates slowly go up, but there's always some other sucker who has to be able to pay their bills. Even if this means stuff getting to their destination later than usual. A lot of truck businesses are owner operated, they simply don't have the means to say "no."
    - dexen 8y ago
      Every concern you mention is true for both sides of the market - seller and buyer. The buyer has spent a ton of capital on infrastructure and marketing, has loans and other bills to pay, and also has to provide service to their customers at good conditions - and timely - lest the customers go to their competitors. The buyer can't simply wait out indefinitely. Unless there's a significant over-supply of the sellers. In which case the buyer can wait out any given seller, and get better deal from the next seller that comes around. >If you know you have to work to keep your means of survival, you don't negotiate. The very same concern goes for the buyers. They are just as well under the pressure of contractual deadlines and bills to pay. I am sorry, but your post strikes me as example of "magical thinking" - "there must be something special about the owner-operated transport businesses". Yet nobody has provided any serious arguments towards that. Just for the sake of contrast - you could imagine brain surgeons in the very same predicament. Suppose there were plenty of brain surgeons on the market - their prices (wages) would be very low, sometimes even below the costs incurred. No matter how pressed a patient would be for a life-saving operation, if there were multiple surgeons fiercely competing for this work, the price would be low. The only reasons the brain surgeons are earning well is that the demand for service is higher than the supply - and there's little to no alternatives to a life-saving surgery. You may balk at the example of highly skilled specialist surgeon, but it's true story of the eastern block [i.e., communist] countries, where supply of doctors was high, and the demand - which was only the state-funded healthcare - was fixed[1]. The surgeons earned rather low wages, and many supported themselves with bribes for access and expedited treatment. Please don't tell us there's been "driver shortage for 10+ years". It's just fantasy. -- [1] from the layman's POV "demand" for surgeries was high and nearly insatiable, but from the economics POV, demand with willingness to pay was fixed by the centralized healthcare planners.

by dexen 8y ago

aaomidi 8y ago

This is actually one of the cases where supply side economics breaks down. People refuse to pay more for this and if you've invested so much for truck, car insurance, etc...

zazen 8y ago
To me, the question still stands: if people refuse to pay more for the service, then in what sense is there a shortage of the service? Can you expand on what you mean by "supply side economics breaking down"?
- aaomidi 8y ago
  A lot of trucks are owner operated. They can't afford to not work - even though they know they will be able to potentially make more money. Owning a truck is a lot of maintenance - insurance, parking costs, etc. A lot of owners also have to pay lease, loans, etc. They can't afford to negotiate for better rates. Just because there isn't a lot of supply doesn't mean that rates go up!
  - zazen 8y ago
    I can see that small businesses aren't in a great position to negotiate with large businesses. But if there were really a substantial shortage, you wouldn't have to engage in high-risk, high-stakes negotiation to get a better rate. People will offer you a higher rate to secure your service, if your service is _really_ in short supply. If the people hiring these independent trucks can afford not to pay more, because they know someone else will take the lower rate, then there isn't a shortage. This could just about be the definition of whether or not there is a "shortage".
dexen 8y ago
I am sorry, this doesn't make any sense to me. If "people refuse to pay more for this", it means there's either over-supply of service at the current price-point, or there are easily accessible, low-cost alternative services. There is no third way, barring country-wide air-tight collusion of all transportation buyers, which is an unrealistic scenario.
- aaomidi 8y ago
  You don't understand this do you? When you've spent a ton of capital, have loans to pay, paying insurance, etc. You are not in a position to negotiate. It doesn't make sense because we keep getting fed a simplistic view of "supply vs demand." That is a general trend, but not a rule. If you know you have to work to keep your means of survival, you don't negotiate. We've seen salaries/bonuses/rates slowly go up, but there's always some other sucker who has to be able to pay their bills. Even if this means stuff getting to their destination later than usual. A lot of truck businesses are owner operated, they simply don't have the means to say "no."
  - dexen 8y ago
    Every concern you mention is true for both sides of the market - seller and buyer. The buyer has spent a ton of capital on infrastructure and marketing, has loans and other bills to pay, and also has to provide service to their customers at good conditions - and timely - lest the customers go to their competitors. The buyer can't simply wait out indefinitely. Unless there's a significant over-supply of the sellers. In which case the buyer can wait out any given seller, and get better deal from the next seller that comes around. >If you know you have to work to keep your means of survival, you don't negotiate. The very same concern goes for the buyers. They are just as well under the pressure of contractual deadlines and bills to pay. I am sorry, but your post strikes me as example of "magical thinking" - "there must be something special about the owner-operated transport businesses". Yet nobody has provided any serious arguments towards that. Just for the sake of contrast - you could imagine brain surgeons in the very same predicament. Suppose there were plenty of brain surgeons on the market - their prices (wages) would be very low, sometimes even below the costs incurred. No matter how pressed a patient would be for a life-saving operation, if there were multiple surgeons fiercely competing for this work, the price would be low. The only reasons the brain surgeons are earning well is that the demand for service is higher than the supply - and there's little to no alternatives to a life-saving surgery. You may balk at the example of highly skilled specialist surgeon, but it's true story of the eastern block [i.e., communist] countries, where supply of doctors was high, and the demand - which was only the state-funded healthcare - was fixed[1]. The surgeons earned rather low wages, and many supported themselves with bribes for access and expedited treatment. Please don't tell us there's been "driver shortage for 10+ years". It's just fantasy. -- [1] from the layman's POV "demand" for surgeries was high and nearly insatiable, but from the economics POV, demand with willingness to pay was fixed by the centralized healthcare planners.