Why do some occupational salaries appear to contradict the theory of supply and demand?

Question

I live near an area where there is a large prevalence oil and gas refineries and O&G-adjacent industries. The men and women who keep these plants running work a grueling schedule and are often involved in fairly risky activities due to the nature of the stuff they are dealing with (flammable or toxic materials). Despite this, tons of locals flock to these jobs and there there is a huge surplus of available people who are seeking these jobs. By huge, I mean people testify to applying to these jobs for literal years before they ever get an opportunity (many don’t without connection). Entry level typically requires experience or an Associates degree. I should note that experience is helpful but not critical, the job is not easy but is not rocket science either. These jobs can generally get you to 6 figures in the first year, and most top out around 150K in a MCOL area. The benefits are generally excellent, some even have pensions. Yes, these companies are extremely profitable and I’ve already mentioned that the work is hazardous and has odd hours, but with the massive surplus of willing and able labor, why do these companies still pay so highly?

In: Economics

Answer 1

It’s a delicate balance. If they didn’t pay so well, there wouldn’t be such an abundance of people lining up to work in these jobs. They’re good jobs, but they are dangerous, and if you mess something up, you will get fired, unless what you mess up kills you in which case you are dead.

The answer is mostly that these companies find they are better off in the long-run having it be seen as a good and desirable job so that they always have a steady supply of high-quality labor. The refineries make a lot of money compared to the payroll, and accidents lead to lost productivity. Basically they’ve found that paying 20% more for labor assures a really strong workforce, and guarantees that the refineries hit their productivity goals, which results in more profit for the company that if they saved the 20% of the labor cost but occassionally had stoppages due to accidents or strikes.