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

At the heart of your question is that you perceive there to be an oversupply of labor, when there really isn’t one. Your perception of oversupply comes from anecdotal evidence “I know a lot of people who want these jobs, and people apply for years.” Of course you know a lot people trying to get into that industry, you’re in an industry town.  

 But if the potential labor pool is national population, ages 18-35 without a college degree, how many of those people are willing to move to your town to join this industry? Very few. Of those, how many are going to be good at the work? Even fewer. Of those who move to the area, and end up being good workers, how many are going to stay in the industry for 3 or more years? Even fewer.  So from the perspective of the company, on a national scale, it is really hard to find people willing and able to do this work. At a local scale, it’s not, but the local talent pool isn’t big enough.  

 To attract people and keep people they can either make the work environment more comfortable (not gonna happen), make it more fulfilling (people work for nonprofits for lower pay because they believe in the mission), or to they can raise the pay.  

 To;dr: supply and demand is working, the supply of labor is low.

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