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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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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