If the law of Supply and Demand dictates that high demand + low supply = higher prices/rates, why aren’t companies/industries suffering from large scale labor shortages offering suitably higher wages to mitigate the shortage? Contrarily, some of them seem to be figthing this obvious solution tooth and nail. Shouldn’t any businessperson worth their salt realise the labor market has changed beyond their control?
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Because the demand for labor isn’t effecting the people who control the supplies of goods. They are rich and protected from shortages. They see a demand for labor as an opportunity, not a cost.
The only way higher wages can solve a labor shortage is if it attracts more labor into the work force. Otherwise it’s going to be companies bidding against one another for the same workers, and those workers hopping to the employer that gives them the best package. The shortage would remain until the businesses that can’t afford to compete for workers close.
Where can we find new labor? People who exited the workforce, for retirement for example, can return. Kids can reach working age, or, very unpopular, the working age can be lowered. Immigration.
There is no such thing as a unified “labor market”. The market consists of many employers spread across a variety of industries, with each industry requiring workers of different skill sets.
Skilled workers have almost always been in demand and their salaries are rising accordingly. It would take a fair bit of time for wage pressures to rise for the lower skilled workers since the supply there is typically fairly robust.
In times of consolidation, employers are more likely to compete for the highly skilled and experienced. A few will naturally decide to upskill some workers and there are going to be opportunities there.
It is rather unlikely that workers who are no longer capable or willing to train themselves will see large wage increases. As with many things, those that are willing and able will reap the most benefits.
It is also likely that many businesses will pursue efficiency and better productivity tools and methods. This will spur more employment for the skilled and reduce demand for the unskilled.
They have been… have you not seen all the stories of fast food spots offering $18 and $20/hr? That’s well above usual for such jobs.
because people with no work can’t afford to continue living in their homes and paying for their food. When those kinds of pressures exist you do not have a purely free market where the law of supply and demand will be the controlling factor. The law of not starving to death in the cold is going to be a big influence on what people are willing to accept as far as payment goes.
Businesses are not obligated to operate. If they start having to spend more to make their product than they can sell it for, they simply scale back or shut down, either temporarily or permanently. In this way, businesses will never pay wages that are so high as to make it unprofitable for them to operate.
When you hire someone for an extra-high wage, you’re locked into paying that price for a long time. I mean, you *can* cut people’s wages, but it really pisses them off and they often quit. So if you think this labor-shortage nonsense will blow over sooner or later, you might prefer to just tough it out and [make your current employees] cope with not having the role filled for a while.
Speaking of your current employees, they’re going to notice if you hire a new coworker for them, and that person is making extra money. Suddenly, everybody will know more about how much you’re willing to pay for labor, and they’re all going to want a piece of that action.
Imagine you’re in a sandbox, playing with all the other kids. There is only so much sand in the box you can all play with and all of you may have different things you want to build with it. You may want a bigger sandcastle, but that would mean you have to take a little sand from the next kids pile, and he may want to use that for his sculpture.
A company has a lot of moving parts, with a lot of different groups, all of whom have different interests. You could increase your labor costs, but that means hurting your margins. Is that something your shareholders are willing to accept? You could offset the cost by raising prices, but is that something your customer is willing to accept? You could use your profit towards labor, but would you be willing to accept less investment into R&D? Is falling behind and losing market share something you’re willing to accept?
There is only so much sand in the box with different people who are all playing in it, all of who want to build different things. Companies have to figure out how to balance that, and the results are going to look different for everyone.
Businesses ARE offering higher wages. The problem is that their competitors are also offering higher wages, so it does them little good.
The difficulty is that businesses can’t just infinitely raise wages, raising wages means raising their prices. If they raise their prices substantially (or in some cases, even slightly) above their competitors, they will lose sales and no longer be a profitable business.
During situations such as the current one, businesses raise their wages and then raise their prices, as they have to to try to keep employees. Then they find they still can’t attract new employees, so they raise them more, but this can only go so far, so they keep trying to raise wages slowly so as not to have to raise their prices too much. Their competitors are all doing the same thing.
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