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"you won't get funding if you go around saying there's no such thing as a labor shortage in a market economy, even though this is entry level economic" The Eco

by makomk 4y ago

"you won't get funding if you go around saying there's no such thing as a labor shortage in a market economy, even though this is entry level economic" The Economics 101 answer is clearly wrong or at least incomplete in this case. Think about it this way: if people's wages increase in real terms by definition this means they can buy more with their wages. Producing stuff requires, amongst other things, workers. Suppose we're in a situation like the current one where unemployment is low and businesses across all sectors cannot find enough workers to keep up with consumer demand. What happens if they all try and solve this by increasing wages across the board? Well, their workers have more money to spend so this increases consumer demand even more - and remember, the problem we were trying to solve was that this was already too high compared to supply. What it doesn't do much for is the supply of workers, since there's not some big pool of potential workers who could be working but aren't. It's not going to encourage people to work longer hours either since when would they have time to spend the money? Basically, it makes the whole problem worse, and that's why the Fed and central banks around the world are freaking out right now.

tsimionescu 4y ago
Your analysis is also very simplistic. A labor shortage is potentially an opportunity for the economy to re-rorient itself and for wealth to be redistributed. Companies producing goods that are more in demand will afford higher wages, while companies that produce less in-demand goods will not, and can ramp-down their production or go bankrupt. To take an extreme hypothetical - let's say there was a massive shortage of food workers. As the price of food increases, so would the wages for food workers, until they will start pulling people from other industries, which can no longer offer competitive salaries. This could lead to something like ad-tech eventually start losing low-level workers to agri-business. Essentially, the mistake in your argument is to assume that demand is high and inflexible around the board. In reality, certain industries have higher demand than others, and many workers can change industry, even in the short term, if incentives are high enough. However, companies used to cheap labor and high margins are not willing to give up their profits and reduce their margins, so they are begging the state to find a way to force people to keep working for them for nothing.
- makomk 4y ago
  I'm pretty sure your example just demonstrates the point that I was making originally though. Assume there is a massive shortage of food workers, food prices increase and the food industry starts pulling people from other industries like ad-tech which can no longer offer competitive salaries. This implies an aggregate shift in spending from discretionary consumer purchases (which are specifically what fund ad-tech and the advertising industry) to food. In other words, people have on average become poorer: they have to spend a larger proportion of their money on essentials like food and have less left over for other stuff. Which is, of course, just another way of saying that on average people's wages have shrunk in real inflation-adjusted terms. (It's not like the other stuff can just become cheaper in order to make up for it either - remember, all the other industries are suffering the same underlying cost pressures as the food companies and the whole reason they're losing the competition for workers is because there's no longer enough people willing to pay the increased prices they'd have to charge.) If I remember rightly, the proportion of a country's workers employed in food production is even pretty good approximate measure of how advanced an economy is, with more advanced economies employing a much smaller proportion of their workers that way and having much more doing other things.
Consultant32452 4y ago
The fed chairman recently gave a press conference in which he complained that workers had too much power in the market and were able to demand higher wages. He explicitly stated he was going to create policy to tip the balance of power back towards businesses. He didn't say exactly what he was going to do, but made his intent clear. People express a lot of concern about things like how wages have not kept up with inflation for decades, how families have to have two incomes to survive, etc. Just when workers were maybe gaining some of that ground back, the fed chairman tells you he's going to fuck you with policy. The type of person who supports such policies and pretends that's good for you are the ones who get the positions, the funding, etc.
- killdozer 4y ago
  "The type of person who supports such policies and pretends that's good for you are the ones who get the positions, the funding, etc." Exactly, and it's insane to see other workers support these policies instead of trying to push for alternatives.

by makomk 4y ago

tsimionescu 4y ago

Your analysis is also very simplistic. A labor shortage is potentially an opportunity for the economy to re-rorient itself and for wealth to be redistributed. Companies producing goods that are more in demand will afford higher wages, while companies that produce less in-demand goods will not, and can ramp-down their production or go bankrupt. To take an extreme hypothetical - let's say there was a massive shortage of food workers. As the price of food increases, so would the wages for food workers, until they will start pulling people from other industries, which can no longer offer competitive salaries. This could lead to something like ad-tech eventually start losing low-level workers to agri-business. Essentially, the mistake in your argument is to assume that demand is high and inflexible around the board. In reality, certain industries have higher demand than others, and many workers can change industry, even in the short term, if incentives are high enough. However, companies used to cheap labor and high margins are not willing to give up their profits and reduce their margins, so they are begging the state to find a way to force people to keep working for them for nothing.

makomk 4y ago
I'm pretty sure your example just demonstrates the point that I was making originally though. Assume there is a massive shortage of food workers, food prices increase and the food industry starts pulling people from other industries like ad-tech which can no longer offer competitive salaries. This implies an aggregate shift in spending from discretionary consumer purchases (which are specifically what fund ad-tech and the advertising industry) to food. In other words, people have on average become poorer: they have to spend a larger proportion of their money on essentials like food and have less left over for other stuff. Which is, of course, just another way of saying that on average people's wages have shrunk in real inflation-adjusted terms. (It's not like the other stuff can just become cheaper in order to make up for it either - remember, all the other industries are suffering the same underlying cost pressures as the food companies and the whole reason they're losing the competition for workers is because there's no longer enough people willing to pay the increased prices they'd have to charge.) If I remember rightly, the proportion of a country's workers employed in food production is even pretty good approximate measure of how advanced an economy is, with more advanced economies employing a much smaller proportion of their workers that way and having much more doing other things.

Consultant32452 4y ago

The fed chairman recently gave a press conference in which he complained that workers had too much power in the market and were able to demand higher wages. He explicitly stated he was going to create policy to tip the balance of power back towards businesses. He didn't say exactly what he was going to do, but made his intent clear. People express a lot of concern about things like how wages have not kept up with inflation for decades, how families have to have two incomes to survive, etc. Just when workers were maybe gaining some of that ground back, the fed chairman tells you he's going to fuck you with policy. The type of person who supports such policies and pretends that's good for you are the ones who get the positions, the funding, etc.

killdozer 4y ago
"The type of person who supports such policies and pretends that's good for you are the ones who get the positions, the funding, etc." Exactly, and it's insane to see other workers support these policies instead of trying to push for alternatives.