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

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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

30 Answers

Anonymous 0 Comments

There’s one other external factor driving high salaries/wages. Oil and gas can be dirty, noisy, and smelly industries to have near your town. If they pay above market wages, the locals will be more willing to tolerate them (or at least less likely to fight them).

If they paid lower rates more in line with market forces, there’s a higher likelihood of the locals not being supportive of their industry.

It’s sometimes called the “social license” to operate. It’s important to have all your permits, leases, etc. in place to run a mine or an oil operation. It’s also better for you if the local people want you around. Put simply, the locals can either be calling their representatives to ask for smoother regulatory processes or for more strict requirements.

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