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I really hate the framing of the "Labor Shortage" narrative in general. Does supply and demand only work one way? The Citations Needed podcast did an interesti

I really hate the framing of the "Labor Shortage" narrative in general. Does supply and demand only work one way? The Citations Needed podcast did an interesting episode on this kind of framing.[0] Although they skew heavily toward the left so take it with a grain of salt. I'm curious to see if the heightened unemployment benefits act as a new de facto minimum wage law, but I have a feeling everything will be cut to try and force people back into the labor force before anything super interesting happens. [0] https://citationsneeded.medium.com/episode-135-the-labor-shortage-ruse-how-capital-invents-staffing-crises-to-bust-unions-and-fb42448a7e23 https://citationsneeded.medium.com/episode-135-the-labor-sho...

willcipriano 5y ago
Wages are pretty sticky, I'd bet the unemployment benefits have already permanently increased the wage floor nationally.
- Balgair 5y ago
  One thing that I have not seen said is about the stability of unemployment. I remember last year that there were a lot of people waiting a long time to get on unemployment due to the pandemic. Months went by before those checks came in. Now, if you have the resources to work a job, you'll have to go off unemployment. But if that job fires you, you're stuck back in the possibly months long process to get unemployment. Sure, you could try to get another job, but that also has a time lag and other risks, and diapers don't buy themselves. It's not about the cash as much as it is about the cash-flow. You can plan around a small amount. But variable amounts are much harder to plan for, even if the net cash may be higher in the end.
- LanceH 5y ago
  > have already permanently increased the wage floor nationally At the expense of full employment.
  - ZoomerCretin 5y ago
    https://rooseveltinstitute.org/2017/12/18/how-widespread-is-labor-monopsony-some-new-results-suggest-its-pervasive/ https://rooseveltinstitute.org/2017/12/18/how-widespread-is-... The labor market is not adequately explained with only Econ 101 concepts. Employers pay below the true market rate that they are capable of paying because of their market power to set prices.
    - LanceH 5y ago
      Raising the cost of labor means less employment. This is really unassailable and as much as people desire it to not be true, it is. It may not show up as a straight line like an Econ 101 graph, but it's 100% there. It gets confirmed over and over again. No, I'm not going to provide sources on this. They are everywhere. Sure there are some places paying less because they have jobs and a choice of workers. Artificially raising the pay will yield the same number of jobs. This isn't true across the entirety of the US labor market.
      - imtringued 5y ago
        >This isn't true across the entirety of the US labor market. There is also a labor market outside the US that puts a ceiling to US wages.
      - andrewjl 5y ago
        Not so simple. Raising the cost of labor also means increased aggregate demand as workers make use of a higher disposable income. On the business side, capex increases as routine work is automated. As we've in prior periods, automation creates more jobs than it eliminates, whether the through higher-end tasks or through increases in demand due to fall-off in breakeven price.
dtwest 5y ago
No it works both ways. When someone says there is a labor shortage it doesn't mean it's labor's fault, it just means that labor has the power to set prices. If companies want to hire they need to raise wages. If a company can't afford to raise wages, they will need to operate with less workers or shut down operations. There are winners and losers from this dynamic so I'm sure different sides will have a narrative. But the labor shortage isn't a spin on reality, it's an observation that it is difficult to hire in current conditions.
- rsj_hn 5y ago
  It's a bit different with labor. When the demand for oil outpaces supply, there are commodities markets to mediate that, and I can still buy as much oil as I can afford at the higher price. Labor is subject to search costs that create a wedge between supply and demand. It may take me a year to fill a position. In addition to search costs, there are also onboarding costs. It may cost me 300K to train a dev and then after a year they leave. So I may not be able to fill a spot even if I am willing to pay a price that someone is willing to accept, as the costs of finding that person and the risk of not being able to keep them may be far too high. And that is true even if there is a large pool of people willing to work for me at the price I am willing to pay. So the labor market is a lot more complex than the market for oil, and there are these extra costs that may balloon from time to time and cause the market to freeze up and not clear for many positions. For this reason, both employers and workers need some stability in wages and expectations sufficient to make long term plans and commitments, and when volatility destroys that stability, you get into scenarios where workers and employers can no longer find each other. It is the flipside of a recession, where people say "there aren't enough jobs". Both the worker saying "there aren't enough jobs" in a downturn and the employer saying "there aren't enough workers" are right because the economist drawing simple supply and demand curves is omitting the complications that exist in labor markets which do not exist in commodities markets.

willcipriano 5y ago

Wages are pretty sticky, I'd bet the unemployment benefits have already permanently increased the wage floor nationally.

Balgair 5y ago
One thing that I have not seen said is about the stability of unemployment. I remember last year that there were a lot of people waiting a long time to get on unemployment due to the pandemic. Months went by before those checks came in. Now, if you have the resources to work a job, you'll have to go off unemployment. But if that job fires you, you're stuck back in the possibly months long process to get unemployment. Sure, you could try to get another job, but that also has a time lag and other risks, and diapers don't buy themselves. It's not about the cash as much as it is about the cash-flow. You can plan around a small amount. But variable amounts are much harder to plan for, even if the net cash may be higher in the end.
LanceH 5y ago
> have already permanently increased the wage floor nationally At the expense of full employment.
- ZoomerCretin 5y ago
  https://rooseveltinstitute.org/2017/12/18/how-widespread-is-labor-monopsony-some-new-results-suggest-its-pervasive/ https://rooseveltinstitute.org/2017/12/18/how-widespread-is-... The labor market is not adequately explained with only Econ 101 concepts. Employers pay below the true market rate that they are capable of paying because of their market power to set prices.
  - LanceH 5y ago
    Raising the cost of labor means less employment. This is really unassailable and as much as people desire it to not be true, it is. It may not show up as a straight line like an Econ 101 graph, but it's 100% there. It gets confirmed over and over again. No, I'm not going to provide sources on this. They are everywhere. Sure there are some places paying less because they have jobs and a choice of workers. Artificially raising the pay will yield the same number of jobs. This isn't true across the entirety of the US labor market.
    - imtringued 5y ago
      >This isn't true across the entirety of the US labor market. There is also a labor market outside the US that puts a ceiling to US wages.
    - andrewjl 5y ago
      Not so simple. Raising the cost of labor also means increased aggregate demand as workers make use of a higher disposable income. On the business side, capex increases as routine work is automated. As we've in prior periods, automation creates more jobs than it eliminates, whether the through higher-end tasks or through increases in demand due to fall-off in breakeven price.

dtwest 5y ago

No it works both ways. When someone says there is a labor shortage it doesn't mean it's labor's fault, it just means that labor has the power to set prices. If companies want to hire they need to raise wages. If a company can't afford to raise wages, they will need to operate with less workers or shut down operations. There are winners and losers from this dynamic so I'm sure different sides will have a narrative. But the labor shortage isn't a spin on reality, it's an observation that it is difficult to hire in current conditions.

rsj_hn 5y ago
It's a bit different with labor. When the demand for oil outpaces supply, there are commodities markets to mediate that, and I can still buy as much oil as I can afford at the higher price. Labor is subject to search costs that create a wedge between supply and demand. It may take me a year to fill a position. In addition to search costs, there are also onboarding costs. It may cost me 300K to train a dev and then after a year they leave. So I may not be able to fill a spot even if I am willing to pay a price that someone is willing to accept, as the costs of finding that person and the risk of not being able to keep them may be far too high. And that is true even if there is a large pool of people willing to work for me at the price I am willing to pay. So the labor market is a lot more complex than the market for oil, and there are these extra costs that may balloon from time to time and cause the market to freeze up and not clear for many positions. For this reason, both employers and workers need some stability in wages and expectations sufficient to make long term plans and commitments, and when volatility destroys that stability, you get into scenarios where workers and employers can no longer find each other. It is the flipside of a recession, where people say "there aren't enough jobs". Both the worker saying "there aren't enough jobs" in a downturn and the employer saying "there aren't enough workers" are right because the economist drawing simple supply and demand curves is omitting the complications that exist in labor markets which do not exist in commodities markets.