Companies struggling to fill jobs 'should try paying more,' Fed's Kashkari says | Hacker News Reader

Companies struggling to fill jobs 'should try paying more,' Fed's Kashkari says

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I was listening to a great podcast about this. They said they asked owners of businesses, "If you're having trouble hiring, why don't you offer more money?". Their response was all a variation on, "because then I'd have to pay all my other workers more when they found out, and it's cheaper to just pay the current folks overtime at their lower rate than give everyone a raise".

This can only go on so long before they have to raise pay.

Wages have stagnated since the 1970s, so "they" definitely don't have to raise pay:

https://upload.wikimedia.org/wikipedia/commons/thumb/7/73/US...

Not if unemployment is back to 1960s levels. I suspect you are right in that the Fed will kill any general wage rises.

And in the meantime everyone is underpaid and the owner is stressed because he can't hire people.

Such is life when caught in a vicious circle.

Do you remember what podcast this was? Sounds like something planet money would do.

I believe it was The Indicator (by Planet Money)

This is the crux of the issue. Let's take a staff of 100, at salary level 100. Total wage cost is 10000.

The owner wants a 10% increase in labour. How much will it cost? Let's assume they can only find new labour at 110, but if they pay this they must pay existing labour 110 as well.

110 * 110 = 12100. A 21% salary increase for a 10% labour increase.

Also it probably won't be a straight 10% labour increase, as some % will have to go to admin and the organizational costs associated with size.

So, that's why. It's also potentially zero sum, as if one employer raises wages, then others will follow, and there may not be a 10% gain in employees. Just increased costs all around. (There will be some gain in employees of course, as workers are pulled in from less efficient sectors)

There are people who would work for the companies but not at their current wage levels. Increase the pay and the pool increases as well.

That was explicit in my post. You increase the labour pool by increasing wages. But when supply is constrained, you get a less than linear increase in output per unit of wage increase.

OTOH it means they've been skimping on raises (not keeping pace with the market) and now it's come back to bite them.

Under normal market conditions, they would hemorrhage current employees to any alternative local employers who raise their wages. But if all local business owners are freezing their wages while unemployment is low, then the liquidity of the workforce freezes, and you get into a weird equilibrium. Workers might want to leave, but there's no alternative that improves their compensation. Businesses are engaged in a natural cartel behavior, but where the incentives to cheat are reversed - the first to raise wages hurts themselves the most.

Wouldn't the first to raise wages get the pick of employees?

Anyone remember when Steve Jobs and other tech leaders were caught making secret agreements to prevent employees from moving?

I've seen this in my hometown in Ukraine. It has ~20 outsource companies in different sectors and if you're good at doing what you're doing and kind of swapping jobs, there's still a ceiling they wouldn't want to break for you despite usually being paid by US citizens for their services. It's easy for companies to get new trainees and juniors as city has 2 universities with CS courses and everyone seems to want to work in IT.

Most of folks who want bigger salary either move to a city with product companies (Kyiv, Odessa, Lviv, Kharkiv, etc), so there's natural competition and outsource rise their salaries too, or go remote.

> It's easy for companies to get new trainees and juniors as city has 2 universities with CS courses and everyone seems to want to work in IT.

If its easy for them to hire, then it's not the same situation at all.

I dont have much sympathy for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all.

I mean sure, paying more can help alot, but first of all, just fix your Hiring process. The hiring process at these some of the companies I've heard about are absolutely abysmal. I've heard first hand: They get great candidates who pass the phone screen and all the in person interviews: then at the last minute change their mind about hiring.

I've seen this at software companies when I was on the hiring side of the equation. HR told us we had an extra slot open. We don't wanna waste the slot so decide to hire somone. we wasted months turning down excellent candidates because engineers don't know how to interview a candidate because there's never time to train someone when teams are changing every year. Then we finally find a perfect one that everyone likes, and the manager above us decides to cancel the position and use the slot to hire a college buddy of his for a completely different role.

My theory is, a lot of these so called job openings are for jobs that aren't really needed. And the stake holders don't realize that the jobs aren't needed until the final hiring decision sign off is needed.

> I have no sympathies for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all.

An "MBA" doesn't make you "highly qualified". People (especially those with an MBA) should realize that it's about supply and demand: There's too many MBAs and too few jobs where just an MBA makes you a good candidate.

Companies are never complaining about finding workers, they are complaining about finding workers at the right price. For obvious reasons, they don't phrase it that way though.

> My theory is, a lot of these so called job openings are for jobs that aren't really needed.

At least they're not desperately needed. I assume you have a computer. I also assume you'll replace it at some point. As long as the old one is still working or you have a spare, you could you delay that purchase for months, even years. In the meantime, you can just go window shopping.

> My theory is, a lot of these so-called job openings are for jobs that aren't really needed. And the stakeholders don't realize that the jobs aren't needed until the final hiring decision sign off is needed.

This. It's a free option (pay if you use it, free if you don't - or, more precisely, it's the candidates who pay, with time and hope.

Related to this: customers need to pay more.

Many businesses have very small profit margins, so paying staff more or training staff could turn them unprofitable.

When you're buying products cheaply it's likely that somebody (or someone's environment) is paying a price for it. Once you bear that in mind there is such a thing as products being uncomfortably cheap.

(I live in Norway where nothing is cheap but almost everyone earns a good wage. The result is that people don't buy so much stuff but lead good lives.)

Yeah the $1T oil fund ($200k per person) has nothing to do with it.

It has nothing to do with the point OP was making.

The oil fund is a result of that as much as a cause. Only a small percentage of the country's spending is from that fund. The aim of the fund is to save for the future and the government is only allowed to spend some of the profits.

What makes more of a difference is the feeling of social and fiscal responsibility that led to the fund's creation. Planning for the future and helping people through hard times sounds like communism to some people but in Europe is generally considered common sense.

If everyone earns 2x but everything costs 2x, what changes?

Thing is, it doesn't.

As an example cars are produced everywhere around the world but the same product costs roughly the same regardless of geography.

This way in rich countries people can afford domestically manufactured cars, while in poor countries they can't.

Because that never happens. TVs aren't affected by the price of milk. Your vacation in Germany costs the same whether you live in San Francisco or San Luis Obispo. Your iPhone costs the same. Etc. Etc.

It does happen to a certain extent, compare basic food like rice and bread in a third world country to a developed one, for a lot of products the price is more a case of what the market more than it is cost of creation.

If "everyone" and "everything" mean "the whole word population" and "all costs in the world", then yeah, nothing changes. But if it happens on a smaller region then oh, yeah. Lots of things change.

It's not that simple as the multipler is not even across all things and all jobs. Eating out or getting a take away is 2x or 3x the cost of the UK/US but your server & chef both make a decent wage without the need for tips. Electronics are about 1.2X the cost of the EU.

The starting salary of a supermarket worker is 2x that of the UK. But a software developer's salary is only a fraction more than in the UK.

The effect is that the range of inequality across the population is reduced. It's a social democracy, so in general the population like this arrangement.

Is it the case that companies are actually struggling to fill positions, or are statements to that effect just an aspect of the metagame?

There's a ton of stuff that goes on outside of the actual mechanics of 'company hires for job and person applies for job'.

Unless you've been pretty lucky you've almost certainly dealt with euphemisms at work when it comes to discussions around pay, for example.

It's kind of annoying that we can't just speak frankly about these things, but such is life.

My last job that I quit I had worked for a "growth stage" startup. Our valuation was probably in the 500~M range and we had a real shot at making it to unicorn status. The entire time I worked there, every couple months the CEO would give this inspiring talk at the company all hands about how we're doubling down on recruiting and we're about to grow like you've never seen and change the world, etc.

When I left after two years, the number of engineers was about the same as when I joined, but they were almost all different engineers. The company both struggled to hire and retain because the salaries were just ok, the options pitiful, and the management downright awful.

We talked about getting the best and brightest from top universities, but at one point I learned our recruitment strategy was to look for "bargain" hires, which we defined as really bright & competitive new grads coming out of top schools, willing to work long hours, but willing to accept low salaries.

(Yes, I was one of those bargain hires, minus the long hours. I quit after suspecting that my lack of long hours was holding me back from getting promotions in spite of the significant responsibilities I had as one of the more tenured engineers).

Keeping salaries low for proven engineers is the height of short sightedness.

"Pay more" works fine for companies that are at the top of the pyramid: google, amazon, facebook, etc. For the rest of the employers there's a hard stop at some point well below what the top 5 are paying.

The next thing to consider is training.

Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker).

> Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker).

Wow, I'm so glad that I am part of a company culture that values mentorship and teaching younger employees. Since joining in August last year I have spent a large proportion of my time both mentoring and pair programming.

Our team of 8 developers is fairly junior with 3 graduating last year and one this year. It's been great to see last year's graduates grow to become very independently productive members of the team, and I like to think that they would not have grown as much without my support and trust.

The article is kind of saying the opposite of what the headline implies. It says that Kashkari had previously been making the argument about paying more, but that, with unemployment falling to its lowest level in 49 years, we might now be getting to a point where there might actually be truth to the notion that there are just not enough bodies out there.

I see a solution to the problem: Remote work. Put people who are on site into jobs that actually require people to be on site, and fill jobs that don't have that requirement remotely. That way you can get around the absence of bodies in the U.S. (coupled with the tight immigration regime) and the skills shortage.

There is so much demand for non-mindless consumption these days, and in some areas certainly also the money for it, that I wonder why American companies don't start to signal.

Like, put a huge sign in front of the door: "America needs higher wages, but someone needs to start! Our prices include fair wages to our workers, 25% above industry average". Or something more clever. Building this into the company ethos has the advantage, in the current economy, to not only take higher prices for hopefully little drop in demand, but also to attract better workers.

Since there are almost no labor related laws in the US, the only way to afford above average wages is to generate demand by differentiation. And that might be done, after all, Americans are willing to tip ridiculous amounts (like 25%) just so that waiters or delivery drivers get to make a living.

Has this ever been attempted? I have no prior on whether it actually works, people might care too much about the price...

If you take the mean tip and raise your prices by that much and move it to workers, they will make less.

Cash tips are usually tax frauded away.

I haven't seen this ethos specifically with respect to workers, but have definitely seen it with respect to ethically sourced materials, sustainable environmental practices, etc. It seems to work well in wealthy areas where people can afford to care about these things. It does not work at all in lower income areas, which is most of the US. Price tends to trump pretty much everything else for the vast majority of consumers.

The gas station chain, Buccee's, in Texas posts the average starting wage of their employees in their stores, and the amount that it is above the average in the area. Or at least the did several years ago.

Two thoughts:

1) I've been saying this for years, but nobody wants to hear it. In particular, an oft-repeated maxim from the immigration debate is “these are jobs Americans will not do!”. This statement is plainly and obviously false. Most Americans will not do these jobs FOR THE WAGE YOU ARE WILLING TO PAY.

Picking tomatoes is backbreaking soul-killing work. I won't do it for minimum wage. I will do it for $10,000/hr. Somewhere between these extremes is the optimal wage (from the employer's point of view) which will attract a field full of pickers. Perhaps that wage is $100/hr. Now, I hear the grower growling “$100/hr is not a reasonable wage for a tomato picker”. To which I reply, “define ‘reasonable’ ”. Is it not a tenet of Republican free-market orthodoxy that the fair value of a commodity is that which is determined by market forces? Why is this orthodoxy so quickly extinguished when applied to wages, and especially when its application argues for better wages for low-status people?

2) I've referred to products and labor as commodities with prices set by market forces. However, I caution against viewing the employer-employee relationship as being exactly analogous with the manufacturer-customer relationship. Both business and labor make money by selling something -- the manufacturer sells his goods to a customer; the laborer sells her labor to an employer. But the two are very different in one regard: companies (mostly) have a multitude of customers, while a worker generally has ONE customer: her employer.

Most companies strive to avoid overreliance on a single customer. They diversify their offerings and try to establish a large customer base. The IT company selling its software to Walmart, and only Walmart, is surely aware of the inherent peril.

Laborers can't do this. An employee is selling his time; he cannot slice his day into 5-minute segments and sell each 5-minute labor period to a different buyer. He may even be contractually constrained from trying this (“no moonlighting”).

A laborer selling her time is not really in the same boat as a producer selling a product. [There are exceptions, generally to the benefit of the laborer. For example, self-employed physicians and lawyers really do have many customers who purchase small segments of their time].

What, there is a shortage of workers willing to work for low pay? The Answer. Create competition in the labour sector by relaxing border controls and let in immigrants. Keep there status as illegal, so that you don’t need to pay all the costs that legally protected employees are entitled to

That’s very cynical, and implies that the government is even able to pull a stunt on that scale. I think an easier explanation is available here.

Don't large part of some American industries depend on such immigrant labor? I even hear comedians like Bill Maher joke about this all the time saying things like "without illegal immigrants there would be nobody to pick fruit" so it almost seems like an accepted reality of US, at least agriculture industry in border states. Is that no true? I just assumed jokes and lines like that are based on some sort of universally accepted "unofficial" truth, that's what makes them funny.

My mother worked at a produce company most of her life. She said the workers always had paperwork. The company didn't try very hard to verify the authenticity of the paperwork. They would work for two weeks, get their check and be gone, off to work at another field for two weeks.

If an industry requires illegal subsidies to thrive, there is no industry. They should naturally go bankrupt. If a nation decides it is important enough to subsidize (i.e. strategic food stock to feed a populace), then they should do so through funding bills instead of hiding the true cost through the lack of immigration enforcement.

But the farming lobby is powerful.

> They should naturally go bankrupt.

No, they should disinstitute by themselves.

The situation may have arised naturally, and then the government refused to deal with it effectively (actually penalize companies that hire illegal immigrants) because business interests liked the situation.

Illegal immigrants are a commodity, for businesses that use them, for politicians that claim to protect you from them, for the industry that processes them

The alternative is trying to get cheap workers from abroad, which worked quite well in the past and still seems to do well to some extent - if you can accept all the challenges this way of doing business carries along on social/security/national level.

Times are changing, though, and absolute poverty is thankfully not everywhere an issue anymore, which leaves it to relative poverty: I can't afford Netflix => I am poor. In such cases, people are much less likely to do that "shitty not-well-paid job" for long. Selling drugs is much more convenient and profitable, for example. Also, more and more countries are restricting their borders, making it harder for cheap workers from abroad to come and do such jobs.

So, yes, the other alternative is: raise the salary!

Interesting comment:

> Selling drugs is much more convenient and profitable, for example.

I know its not related to the original topic, nor the core point of your comment but I'd be fascinated to know why you think this.

Based on my knowledge of the market WRT wholesale prices/retail (street) prices/legal risks/product expiry/supply chain reliability as well as just the statistics around anyone towards the bottom few levels of the pyrmaid on this I'm almost certain that this is roughly never the case.

I find it interesting that this assumption seems to still exist, and suspect that a suprising number of people would harbor a fallback position of "if shit gets really bad I could just sell drugs" which makes a lot of assumptions about how profitable it could possibly be.

I think it highly depends on 1) the severity of the law of your country, 2) the demand, 3) where you live (how many gangs are out there, how dangerous it is ..etc.).

Also, selling drugs doesn't imply selling hard drugs, which in many countries (in Europe at least) is the real "reason" to worry.

The money they make in 1-2 days, depending on what they sell, is way above an average salary (again... talking only about Europe). 1 or 2 days of selling marijuana and maybe cocaine in "good" places (of course, not in the middle of nowhere). So, why wouldn't someone do it, instead of wiping people's asses or cleaning toilets?

I’m pretty convinced that as the realization that most work is meaningless, combined with concepts like basic income, employers will need to provide more-and-more incentives to get motivated workers.

Maybe they should study how trash men, sewer cleaners and other “undesirable” jobs are staffed?

Ugggghhhhh, there is absolutely no data to back up the proposition that throwing more money at the problem is a magical fix. This is a guess based on vapor out of convenience and desire.

As a software developer in the Dallas metro I make over 6 figures, twice the average income. The work isn't that hard and the perks are amazing. At EVERY software development job I have ever held I have worked with a huge number of immigrants.

If the pay is so damn good (already) and the benefits are so damn fantastic why aren't more Americans writing software? Why aren't so many of those people who are writing software so incompetent?

I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated.

So let's propose a hypothetical. Let's say entry level were $150,000 and senior were $500,000. A ridiculous increase. Would more people be interested in programming: absolutely. Would there would be a substantial increase in senior developers? I suspect there would be a minor increase, because it takes effort. Competence isn't a gift and gifting additional income won't work.

Now, I could be wrong, but as it stands all the objective evidence is on my side on this.

There are other jobs that are not software development. I don't think a fed chairman has "no data". Many companies are not trying to hire software developers at $150k. They're trying to hire truck drivers, warehouse workers, and accountants. At the minimum possible market wage. What he is saying is that if you raise your wage off "bare minimum possible" you may actually fill some open jobs.

I agree, talent isn't infinite, but, workforce participation rates are low and part of that is that for a given job there are those qualified to do it that won't do it for the prices on offer. There are also those who would be highly qualified and would switch into different jobs if the salaries were competitive.

> I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated.

That's a good point, and I know exactly the kind of people you mean, but that's not because those people lack the drive to struggle for more money. It's because they really have no interest in programming whatsoever but become convinced that they can overcome that lack of interest long enough to learn how to do it. But they all underestimate how freaking boring programming can be and how it really takes a certain personality type to do it. Honestly, I think if programmers all got $500,000 a year and our own private jets, it wouldn't increase the pool of competent programmers by all that much.

This is a phenomenon that's pretty unique to programming, so I don't think that's what Kashkari was talking about. I feel like he's talking more about people who want a better job in their same field but perhaps all the better jobs are a little bit too far away from them, or maybe the better jobs contain more responsibility than they can handle at their pay rate, etc. So if you just bump the salary up a little bit, you expand your circle of applicants just enough to include a few more qualified people.

While I agree that massively raising salaries wouldn't necessarily cause a corresponding increase in the overall labor pool of programmers, it likely would increase a number employers care more about.

Specifically, such a move would likely deepen the pool of programmers who want a W-2 job with a company that is the ultimate target of their work (as opposed to services firms). I would guess a lot of contractors would sign up for steady work at salaries in the range you mentioned. This applies across the experience spectrum, but more especially to more experienced people, who are less valued by current employment structures.

A lot of contractors basically act like employees now, and are only contractors for exogenous labor market reasons. For example, independent contractors can easily make more than the prevailing total W-2 comp for their level of experience. Closer to entry level, large system integrators (think: Accenture, IBM, etc.) pay marginally more with better benefits than most entry level jobs at F500 companies, where programmers usually do not make $150k to start. A $150k entry level salary would draw this talent directly into the F500 and away from the middlemen. (This is all to the extent that there are even entry level programming jobs at those firms anymore, since so many have been shifted to consulting firms).

Overall, it could end up being cheaper in both short and long terms for many of those roles to be filled by W-2 employees than by system integrators. I'd bet good money that these salary levels would make it relatively easy to hire formerly independent consultants and/or out of the big system integrators.

There is also a decent number of mid-career software people who have switched into other fields (law, project management) for potential financial upside. Programming can be a demanding field, and by mid-career for many people the compensation doesn't balance against the relatively low social status, being on call, etc. Many of these people might prefer to be programmers at a F500 making $400k with benefits, but in the main that job doesn't exist.

And that's before we look at people running small businesses that are semi-successful. The bar for continuing to run those goes up substantially if the alternative is make $40k/month at a +/-40 hour/week job.

To answer your question: yes, a senior development comp of $500k would increase the number of senior development employees.

I believe you are very correct, mostly because of the fact that the moment somebody becomes a VERY valuable senior programmer, they are very close to -- or already are -- burned out.

As you pointed out, when you go the middle of your career, you expect recognition and appreciation -- and appropriate payment. And truth is, most senior programmer roles I've interviewed for use the title as a masked coded language for "we need a battle-hardened veteran to fix our mess for sub-market compensation". As simple as that... and of course they will never admit it -- who would? This is made even worse by the fact that most would throw away the senior programmer the moment they feel their code and business are in a better shape, because at this moment the person usually finally comes to their senses and starts demanding a fair wage.

I might be a hopeless cynic but from my interactions with business people I have the impression that they fear and sometimes even despise programmers and they do their very best to keep them under control by any means, including emotional manipulation, guilt-tripping and conditioning that they deserve the lower pay.

But leaving my cynicism aside, you are very correct. Most exit the programming career because we're basically used up and tossed away -- and you get tired by it eventually. Programmers are often kept far away from where the money are made and eventually some of them grow smarter and start going exactly there. Which is very often at odds with continuing to be a wage worker.

It's a natural evolution. And it's very ironic how the most brilliant of programmers are not for hire.

> Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None.

If that's the actual advice you're giving, I wouldn't expect anyone to follow through.

The incentives are already in place and it's never been easier to learn on your own than it is now.

I've read elsewhere that even if people want something and have someone in reach that has it, 2% will ask for advice and 2% of those asking will follow through with it. I've also seen 10% and 10% of that, i.e. 1% total.

Whatever actual number may be, it's very small.

Then what would you suggest?

If I wanted someone to actually heed what I was saying, I'd suggest a textbook or a set of online lessons to work through and offer to answer questions about the subject matter or the profession. "Simple, put fingers on keyboard, struggle, and figure it out through practice" would be equally useless advice for learning musicianship, writing, or anything else involving a keyboard. With computers it's especially strange since there are so many resources today for people starting out.

In fairness, it's a free country, and these people could have found someone to recommend a textbook or some classes easily enough.

I have done this as well. Spent my time gathering a large number of resource and good starting points for beginners only to have the audience run away in utter intimidation (i think).

Now I just lay it out for people. Programming is like playing the piano. You are as good as your practice allows and its clearly evident in your quality of product.

> There is no such thing as "shortage" of anything. Just pay more, and you'll get it.

Businesses are also limited by how much their customers are willing to pay for the item/service their workforce produces.

If a company's labour costs are higher than the price their customers are willing to pay for the product they are selling, then that product won't be produced.

e.g. if the labour that goes into making raspberries means the customer has to pay $6.99 for a tiny little package of raspberries at the grocery store, and no one in the world is willing to pay that, then raspberries will no longer be sold.

I'm not saying that there currently isn't room to pay higher wages, I'm just saying there is a practical limit to "just pay more".

I think that's an oversimplification.

I'd love to move back to Silicon Valley and work for an early stage startup. But, now that I'm a bit more established and have kids, that means that I want something more than a budget 2-bedroom apartment. (And, I also want a reasonable commute.)

The cost of living is just too darn high for many businesses to afford to "pay more."

So, part of the problem isn't just paying more. Part of the problem is ensuring that areas with job openings are affordable for employees at what the employers can afford to pay.

These things always remind me of two things.

Only wanting young employees with many years of experience, and that time the Dutch government tried to get unemployed people to work in the green houses. They got hundreds of people on buses, drove them to the green houses "look how wonderful it is to work here", a few million investment later, two people started working there. Both because this was a good way to meet others, and they didn't mind getting a lot less money if they took the job over government payment.

The greenhouses paid less because unemployed have many benefits that don't apply to working people, so getting a minimum wage job would be 40 hours + travel of your life gone for effectively a few % of more expendable income.

The people that actually do the work are people from Eastern Europe that don't get that kind of money from welfare in their own country if it exists at all.

If welfare would be less or preferably the actual minimum wage would be taxed less the gap between having a job and not having a job would be really worth the effort.

It's utterly strange that within some of the people that are rescued from war there's up to 80% of unemployment while The Netherlands needs to import people to do unskilled labor.

Paying more could work for certain kinds of jobs, but others are simply not productive enough to justify paying more. I recently went to a country without a minimum wage and it was amazing what they were paying people (presumably very little) to do, such as sell napkins and straws in a market. Without a regulatory requirement to do so, it's simply impossible for an employer to extract a U.S. minimum wage's worth of productivity doing that kind of activity.

That's not to say that every low paying job is like this. We in the U.S. have gotten used to certain blue collar jobs paying very little because of massive numbers of new immigrants, legal and illegal. Now that the spigot is being turned off, there's a labor shortage at the low end. Maybe, e.g., food and construction ought to cost more to compensate, which will certainly change the type of offerings of each, but we might get more efficient usage as a result.

I agree that increasing wages is definitely a good way to get more folks in the door!

That said, a very real problem here is the fact that health care and basic benefits costs have been increasing significantly over the past 10 years but it's much harder to convince an employee of that value vs. dollars in the door on a salary number.

Just keeping your health care premiums steady year over year as an employer could be the equivalent of a huge wage increase, but your employees won't see it that way because nobody understands the true costs of care.

Nobody says "Thanks for the 10% raise" when they get to keep their benefits. This is only part of the problem with "you should try paying more." as an argument.

That said - for jobs without benefits especially, paying more should be the first reaction to this, 100%.

Yea, in my industry most employers give a piddly 2-3% annual COL raise, which is then whittled down to nothing (or less than nothing) after the new "changes to our medical benefits to align us with the rest of the industry and make us more competitive" are announced during open enrollment each fall.

Factor in inflation and you effectively take a pay cut every year until you 'hop' to your next job.

The companies appear to be complaining that they can't hire skilled people.

Paying more is one solution - hire the skilled people away from their current job.

But so is training. Training could be considered a benefit, but at one time it was the standard assumption - all jobs include training, particularly jobs that are in any way skilled. And not just training at the beginning, but ongoing. Every year. Like a salary, vacation and sick time. As part of the standard budget. Not the first thing to be cut - because it is just as necessary as salary, vacation and sick time.

Unless of course, the job isn't really skilled, and companies doesn't actually need skilled people.

One missed point is that companies should also fill jobs with people who are willing to do the work. Most of the time, their economics and hiring processes are blurred by trying to get what they perceive the best and those who usually have a lot of clout based off some social media information they have gathered.

It is far easier to train and make an expert of someone who wants to work with you than getting someone who has all the nice credentials that pretends their expertise. People who embrace what you are providing are generally more inclined to stay and contribute.

My company wants to hire around 50 new people, but their pay is only decent and their facilities meh... And they wonder why they're having issues filling the different positions.

That can well be true for one particular company, but what does it mean for employment as a whole? Say you increase the comp and you find a person for the position. It's not like they have been sitting twiddling their thumbs, you hire them away from some other company. Now a different company has this problem.

Without some external contribution, like willingness to invest into on-job training, availability of online and brick-and-mortar education, this is a zero-sum game.

I just saw a help-wanted sign at a supermarket which said they were hiring for "long-term jobs". Now that's a good selling point.

How about the fed not make it incrementally hard for companies to do that as a matter of policy (in order to.boost employment)?

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

Finally a respected economist who calls a spade a spade. There is no such thing as "shortage" of anything. Just pay more, and you'll get it.

Now, here's some alternatives for companies that can't/don't want to pay more:

- offsource (but they know this already)

- automate (everyone is in a continuous process of automating what can be automated)

- hire temp workers (most likely they've been doing this for years)

- hire illegals (well, that's illegal)

- lobby for more immigration (probably what Kashkari was answering to)

But here's some novel alternatives:

- train people more. You hire them at lower qualifications, and educate them in house

- open source your tools, so people can train themselves for free, before applying for your job openings. Tensorflow, PyTorch anyone?

- offer training for interested outsiders. See the Udacity WorldQuant course in AI for trading [1].

- invest in STEM education to increase the general pool of qualified hires. I know of the Google initiative [2]

[1] https://www.udacity.com/course/ai-for-trading--nd880

[2] https://edu.google.com

> train people more. You hire them at lower qualifications, and educate them in house...

... they learn and then leave, because if you were able to pay them the market rate you would've not been training them in the first place (considering the context of your comment).

Increase their salary to market rate once they complete their training. Easy.

The OP lists options for when you do NOT have funds to do exactly that.

If you don't have the money to pay market rate for the skills you need to run your business then unfortunately your business model is untenable.

Just like you can't sell jewellery for less than the cost of the gold you had to purchase to make it.

Certainly.

That's exactly why "hire people at lower qualifications, and educate them in house" is not a viable option in this case either.

Maybe, but if you treated them as more than a disposable cog, as is the trend, they might not. Show them opportunities for promotion, be respectful of their time, show them they won't be fired for petty reasons, and generally treat them like a human being and let them know they have a future with you. Searching for jobs sucks, being the new guy sucks, discovering that a new company's culture isn't a good fit and having to start the process all over again sucks. Give them enough reasons not to go through that and the money won't even matter that much if they have any wisdom in them at all.

Another advantage of training them yourself is that you shape them into precisely what you need. They know your systems, your work culture, your priorities, and are continuously adding to their institutional knowledge.

This. If https://insights.stackoverflow.com/survey/2018/#work-how-do-... is to be believed, compensation and benefits are the most important thing to most programmers. But it's not the only thing, and my guess is that beyond some "good enough" level, other factors become more important.

Imagine you were hired at a company, trained and mentored in a whole new skill set, given work you enjoy and find meaningful, working with people who encourage your further development, and were shown appreciation for your efforts and abilities.

Would you leave at the first opportunity to get a raise? Unless I really needed the money or was severely underpaid, I probably wouldn't.

I would argue that programmers are still a very special group with a bias towards/a culture of short term gigs. Within my circles, those around 40 are either not programming anymore or work at "unsexy" companies with perks and benefits like "9 to 5" and paid 6 week vacation time. The cool ones still maintain a geek-comptible culture under the hood but that is not expressed in free beers and scheduled crunchtimes.

I'm curious if it's actually possible to treat all employees as more than a disposable cog. I worked at Google and have several friends that work at Google. There's a ton of work to do that is not fun and doing it feels like disposable cog work. It's not fulfilling but it needs to be done. This is one reason lots of people leave. There's a few glamorous jobs and lots of not fun jobs. I'm sure others can come up with better examples but basically with such large code bases things take forever to implement, pass all the tests, and need maintenance forever. There's so much to do and the team so large that you personally get to concentrate on one tiny tiny part of years. Maybe another example is working on drivers for the various new ChromeOS devices. Another might be all the solutions engineers for companies using Google Cloud related stuff. I know people doing it. Their job is to take a call from the customer and then try to write code to show them how to fix their issue. Maybe there are people who want to do those things but I don't.

It was once quite common for people to work completely unglamorous assembly line jobs for decades at the same company. Maybe the real issue is that google's hiring practice selected for prima donnas?

Maybe the smart people saw what happened to those that chose to work unglamorous assembly line jobs for decades and realized it's not to their benefit.

Probably because they want actual raises over time instead of the promises of increasing pension pay, which as have many found out is just a lie. Even big companies like GM, promised good pensions years ago, hit a double and got rapid inflation to make the pension payments a fraction of what they were expected to cost, then decided it wasn't enough and went for a triple by successfully lowering pensions for people that have already long retired, bought out other's pension plans for similar pennies on the dollar caused by the fear of lowering pension payouts, and then gave bonuses to all of upper management afterwards because they did so good at destroying other people's retirement and possibly life.

I sometimes do unpleasant work because it needs to be done and I support the long-term goal. My boss talks to me like a human being and makes sure I'm being well compensated in other ways. Unpleasant work != being a cog.

Not necessarily. I’d argue original employer has an inertia/experience advantage, if they don’t underpay too much.

The old joke about this is:

> Two managers are talking about training their employees. The first asks, "Yeah, but what if we train them, and they just leave?" The second responds, "What if we don't train them, and they stay?"

The obvious thing to do is to get some other sucker to do the training and then you hire them away. You can always beat the other guy's wages because you don't spend on training.

Unless the other company manages to get more value out of trainees than they pay them, in which case the additional revenue lets them beat your offer.

Something that doesn’t really exist anymore but easily could is offering fixed contracts (so not at-will employment). This way you can pay to train and keep the employee longer while the employee gets the added security of having a job that they can’t lose. I’ve never heard of contracts like this outside sports and movies and I wonder if any more traditional companies have considered exploring it.

> I’ve never heard of contracts like this outside sports and movies

And the military

It's not that different from relocation contracts. In both cases the company is paying a large upfront cost in order to hire you and doesn't want you to turn around and work for someone else. If you leave early, you're on the hook for a portion of the bill.

>> train people more. You hire them at lower qualifications, and educate them in house..

> ... they learn and then leave, because if you were able to pay them the market rate you would've not been training them in the first place (considering the context of your comment).

As an employer, you're going to have to pay market rate for the skills you need, one way or another.

If you do that and your employees still want to quit after their training, then your organization has more dysfunctions that you need to fix.

> There is no such thing as "shortage" of anything. Just pay more, and you'll get it.

Trivially counter-exampled, right? There's a shortage of manned space launch systems at the moment. If we had a launch system today we'd use it immediately. We can pay infinity dollars and there still wouldn't be one available for use for quite some time.

The person you’re replying to made a generalized statement in the context of companies struggling to fill jobs at a price point that no longer exists. He suggested that companies simply catch up with the price point, which has been moved upwards by market forces.

What you’re describing is correct but different.

That's a theoretical example: an auction without nothing to sell (supply = 0). When supply is > 0, the general rule applies: pay more and you will get it.

"Just pay more, and you'll get it". Thats very general and does not always work if pool of candidates is genuinely smaller than demand. The Education part will obviously correct this long term but does not really help in the short term.

It works. Less sustainable (lucrative) companies will be out of business because they can't afford staff.

Nope they will(actually already have) open offices abroad and US Tax base will get diluted.

Getting that set up though costs way way more than it costs to simply hire an employee here. Large companies can do this, but small to medium sized businesses certainly cannot.

Nope it costs pretty much peanuts to setup especially if they go through local partner in Ukraine or Belarus the overhead for local company handling everything for you is 30% +/-

"Supply and demand" is that simple. The timescale is the part throws people off. The supply should increase even if it's just more people deciding to get degrees and experience in a field that is lucrative.

The google phrase for this article in general is "exogenous force".

As long as the worldwide financial markets will only fund startups in SV staffed by young Stanford grads, Stanford will never be able to produce enough grads to staff the result of a world wide financial bubble. Imagine if the housing bubble last decade would only hire house framing carpenters born in Boise ID.

Eventually the idea of doing a startup in Chicago, Berlin, Paris, Prague, will change from "impossible" to "insanely rebellious and financially reckless" to "thats a great idea" and at that point the candidate pool being too small will disappear.

There are other exogenous forces such as companies that want to hire H1Bs, for whatever reason, must in public declare a labor shortage for legal reasons regardless if one exists or not. I'm not trying to debate H1B program but to state authoritatively that it legally requires corporate statements about the labor market to a pre-defined value of 'shortage' regardless of actual market conditions. As if in a thought experiment federal regulators required CNBC to report false numbers for todays Dow Jones index and people actually debated policy based on the legally required fake numbers. Any corporate statement by any company hiring, or planning to hire H1Bs in the future, is inherently legally required to be a false, fixed statement of 'shortage'.

SV startups don't just hire Stanford grads I think people like to apply that stereotype to make them fill better if they get rejected and it is generally applied to a portion of FANG and not startups. (In reality I know a good number of people working at Google who have degrees from schools which are not even in world's top 100). Working for large company and looking at other large companies the H1B debate is being made irrelevant being tired of convincing people it's an issue they just opened up offices abroad. We for example have developers in US, Germany, Ireland, India.

We've clearly circularized the argument back to there is shortage, because clearly programmers in India as a group are not paid nearly as much as programmers in SV; there seems to be no labor shortage given that ageism is popular across the industry, women are more or less not allowed, etc.

If it would be considered shockingly newsworthy that a company hires old female programmers in India for the same pay as young white guys in SV, that in itself seems evidence there is no shortage at all.

The inability to hire given a "fish in the barrel" hiring target, might indicate a shortage of quality management, especially HR management, but clearly not a shortage of software development professionals. Suggesting companies need to pay more to get better management, given income disparities that already exist... The real story is no matter how much more management is paid, for various workplace or cultural or demographic or educational issues the management product produced even at ridiculous pay rates is shockingly deficient.

>women are more or less not allowed, etc.

Companies are tripping over each other trying to hire women. My wife is blindly offered jobs entirely because she is a woman. Not secretly or anything, they literally say "we are looking for women for our team".

>If it would be considered shockingly newsworthy that a company hires old female programmers in India for the same pay as young white guys in SV, that in itself seems evidence there is no shortage at all

No it isn't. There is no reason to believe old Indian women are as qualified as young white men. There's actually huge reasons to believe they are not. And why are you so fixated on white men? Considering the demographics of the USA, white men are under-represented in US tech jobs, Asian and Indian men are over-represented.

Why everything un PC is downvoted? People put eniugh pressure on companies that many actually do hire exactly as outlined above.

Observation: Many tech professionals are comfortable with active discrimination because it aligns with their political and social beliefs (ie "women have been underrepresented in the past, so we should weigh them more heavily in the future when considering them as candidates, or actively seek women out for roles").

It also might indicate that outside of FANG companies have not cornered huge markets and became monopolies.

It appears the hardening of requirements for H!B's made a new market in OPT, where there is no limit on total number, just years of service. https://www.mercurynews.com/2018/11/13/h-1b-alternative-opt-...

No, education will not obviously correct it because education's effects are not only delayed but relatively weak as many abilities are largely determined before the candidate's birth. We know IQ and conscientiousness, probably most important qualities for modern economy, are largely genetic.

If your statement is true (Big if) the obvious thing to do would be to take better care of underserved populations so that you can take advantage of the natural talent in them (make a bigger middle class with all the trappings including education). You can’t tell me middle class white and Asian men as a population have some secret software development gene, for example. Therefore there must be some inefficiency around race, gender or socioeconomic beginnings.

But it also implies that there’s a natural scarcity to the best talent, in which case you will always run out, no matter what you do to expand the field (barring creepy eugenics or cloning programs).

In which case, paying more money makes sense. In fact a pay scale more on par with pro sports salaries would be the most likely outcome.

That's not true. For any occupation there are qualified people who have dropped out of that particular labor pool to pursue other options such as: teaching, stay-at-home parent, graduate school, etc. If you offer enough cash you can lure them back.

You think there’s an infinite number of people who have dropped out? Otherwise it’s still limited isn’t it?

In general there are plenty of those people to fill the short-term demand while additional workers are trained to fill the long-term demand.

Look at the interview process these days. There are plenty of people capable of doing the jobs out, but who can be bothered to jump through all the nonsense hoops?

"Demand" really means "demand at this price". That's why there's a demand curve - the amount of demand changes as the price changes. So, no, the pool of candidates is not "genuinely smaller than demand". The pool of candidates at this price may be genuinely smaller than the demand at this price.

What I think is happening is that companies are offering less than the market-clearing price for talent, and then complaining that they can't find talent (at that price). Well, yeah, that's usually the way it goes when you offer less-than-market prices for anything.

The usual response to "If you can't pay more, train them!" is that, once trained, they will leave to some competitor who can pay more.

I wonder, couldn't the training be offered as a perk, quantified in some way such that if the worker leaves before X months (or years) some % of that quantity must be given back?

For sure, some European companies offer a relocation package (e.g. they cover the costs of moving all your belongings, furniture, etc. to your destination) but if you leave before 1 or 2 years, you have to give back at least 50% of that cost.

I know at least one community college that will pay for your advanced degree but require a two year contract. If you break it you have to pay them the cost of your education.

Claw backs are fairly common for relocation and major training like paying for degree programs. I don’t know how successful companies are in collecting.

    > [...] once trained, they will leave to some competitor who can pay more.

That comes up a lot, but it's not true. That employer ALSO has the ability to hire someone that was trained elsewhere and pay a premium-- it goes both ways. Moreover, it is not the case that "once trained" the employee can easily find work elsewhere. Employers who are willing to pay a premium for skill want _experience_ and not just a training certificate (especially an in-house one of possibly dubious value). There's a lot more to do for the employee after they're trained and the best way to do it is to stay and practice the newly learned skills.

    > [...] couldn't the training be offered 
    > [...] such as if the worker leaves before
    > X months (or years) some % of that quantity
    > must be given back?

There are places that do that. It's a bit draconian and you usually hear about it Asian countries. Much more practical to just eat the cost of an occasional early quitter-- not like it's going to sink the company.

Well, this is what one of my close friends agreed to with a tech related company in London. He had some other issues which made him come back, and yes he had to pay that money back to the company. So this is actually happening right here in Europe... at least with a sample population of 1.

Oh, I am sure it happens, but these "... must pay us back for training if ..." contract clauses are a serious turn-off to candidates with choices.

When all the big players on the market do the same then you only have an illusion of choice. I've seen this clause everywhere I interviewed in Europe(both Eastern and Western). I don't like it but I got used to it since nobody will hire you without it.

It happened where I did some work - the wiley employees said 'fine, but then you also cannot retrench us in the same period.'

The policy was quietly dropped.

It's not just Asia, I've seen this clasue everywhere I applied in Europe, no employer would hire you if you don't agree to reimburse the training expenses if you left before 2 years. The only way "out" was to get fired.

>The usual response to "If you can't pay more, train them!" is that, once trained, they will leave to some competitor who can pay more.

Then settle with a poorly trained workforce.

A company in this situation either needs new talent or needs to train its current workforce to match the level of their desired new talent. There's no free lunch here.

I'd argue it almost costs more money to NOT train your workforce, since you're settling for a less efficient process for the same amount of money that will only get worse when attrition (naturally) happens and you refuse to hire at a market rate.

In a prior life as a technical trainer we used to offer the following wisdom: either train your employees and accept the risk that they may leave, or don't train your employees and accept the risk that they may stay.

It tech, fantastic employees leave for reasons synonymous with "unsatisfactory training":

- boredom

- lack of challenge

- no opportunity for growth

- repetitive work

- bad technology

And, yes, engineers not concerned about those situations are not innovative and probably not the people you want to hire.

The fact is that "good training" is expected as part of a tech career and therefore is important to tech workers. To the point that they will job hop every three years to make sure it happens.

I don't see how they're synonymous, that's explained better by the idea that they don't want to do the actual work.

If you're working on your internal crud enterprise app, no amount of training's going to magically change what needs to be done, or the almost certain fact that it's better to stick with the existing tech it's built on.

I think may of us go freelance/job hop because ultimately we get bored of a code base and the basic challenges, the fundamental requirements of an app simply don't change much.

Most devs, in my experience, are team players. They'll get the grunt work done. But if you ask them to do grunt work for even five years, you're making a big ask.

You might need to pay more to price in the pay cut they'll need to switch gears or the year off they'll need to retrain themselves on related open source side projects.

That being said, there are lots of engineers who get comfortable and shy. You can fill up all your desk chairs in your office eventually. You just won't have a well trained workforce, which is bad for everyone involved.

This, again, reads like a bunch of people who don't want to do their actual job.

What exactly does 'retraining on related open source projects' even mean?

It either works, or it doesn't. Unless you're working in the schizo world of JavaScript, tech, in reality, doesn't change a massive amount in the space of 5 years.

I know. My tenure at my last few jobs was 2 years, 1 year, and now I just hit my one year anniversary at my current employer and am bored out of my skull (they stuck me on legacy maintenance). So, I'll be moving on soon.

I'm 38, I really do want to settle into someplace and stop hopping around, but I'm also not willing to allow myself to stagnate and become unemployable after you decide to "green" your workforce 5-10 years down the line.

Provide me with growth opportunities, challenging problems, creative freedom, reasonable pay increases, and I'll stick around. But alas, I haven't found a company willing/able to do that yet.

That is a very good point. I daresay that the engineer who is continually seeking excitement via jobhopping is not as common as the steadfast engineer, possibly with family obligations, who just doesn't want to be laid off at 52 with no knowledge of what has happened in the development world in the last 10 years.

I am almost 40, and over my career have had exactly one job that I stayed at for longer than 2 years. I stayed at that job for 5 because they provided yearly evaluations and good raises, paid educational reimbursement and actively promoted from within. All of the other jobs where you started was where you essentially stayed. If you got a raise generally it was essentially C.O.L.

If you pay people well, make them believe that there is a future for you at the company and that hard work is noticed and rewarded, people will stay longer. For the most part, companies don't and that's the reason a large number of technology workers have become mercenaries when in comes to employment. We go in, do a job and are constantly looking for the next step up. I would love to find a long term job, but at my age, it needs to be somewhere that I believe I will be valued and rewarded for sticking around.

On a side note, there have been many times a recruiter has called me, and offered an insulting wage for a position that requires 5+ years of experience. The companies offering these low wages are the ones saying we cant find anyone to hire and complaining about the youth of today's work ethic.

I'm somewhat north of 40. I stayed longest at the company I started, riding it up, and unfortunately, down. I was the proverbial last one out, and yes, I did turn off the lights.

>On a side note, there have been many times a recruiter has called me, and offered an insulting wage for a position that requires 5+ years of experience. The companies offering these low wages are the ones saying we cant find anyone to hire and complaining about the youth of today's work ethic.

This. I have recruiters call me up frequently after doing a basic scan on linkedin, looking for HPC people, or other specific things I've done. They send me emails telling me how wonderful things are on the other side, and how they are seeking people with lots-o-experience (™). Then they talk compensation rates that don't match the other aspects.

Or the ones wanting me to contract to hire. Sure, but if you can't afford the salaried rate, you really can't afford the contract rate, which prices in my risk in accepting this.

True wisdom right here!

Don't train and people will have to leave, because they would stagnate otherwise. Train and they will want to stay, because it is huge perk.

My employer paid for part of my graduate school tuition. They structured it as a deferred loan, and then forgave the principal after I stayed for two years.

>I wonder, couldn't the training be offered as a perk, quantified in some way such that if the worker leaves before X months (or years) some % of that quantity must be given back?

This happens fairly often, especially when it comes to things like the company paying for an outside degree or similar.

I don't think this matters in big software nearly as much as in other fields. Every new hire needs to be trained up - even the most experienced are going to require at least a few months before they are useful to the company.

This is how the many trucking companies work. They'll train you for a CDL but require you drive for them for a period (a year?) or pay for the cost of training.

If the instructor and the institution gain nothing from the process, then you are mostly right.

For myself, things always have gone better when there’s a little bit of turnover. The training gets better. The obtuse decisions get removed. The sharp corners sanded down.

With no turnover, people tend to memorize the system and eventually nothing material ever changes. I find it soul sucking and so I give a slightly negative score to highly stable teams now, whereas I used to count it as a pro (wow people like working here!).

My fiance works for a major ISP in the US. She started in sales while we were living in NY, but I got a really good offer for a gamedev position in CA and we both moved across country. She transferred her position to be a dispatcher for techs, which came with a significant pay cut (no commission, similar hourly rate).

They have a well defined training/progression system where you study IT materials they provide, take a few in-person courses, and pass some tests in order to get a new title, more responsibilities, and a raise.

She's one of the fastest people to progress from 1 to 2 (~4 months), her manager is scheduling the in-person courses for 3 ahead of time.

There's an office closer to where we live that does support for business class customers, they're looking at maybe bending the rules on how long you have to wait between internal transfers since she'd probably be more valuable there and it would be closer to home.

If you take the path of hiring employees that you train, you should work with them and give them raises as they're trained to get them closer to market rate. A lot of them will want to stay. At least for long enough to recoup the cost of training them. Also consider how many of those people don't have the right qualifications on paper but could pick up the necessary skills quickly. They'd be underpaid for a while, offsetting the cost of the people who need more training or are slower to learn.

Tangentially related, my job gave me relocation for both of us. If I leave my job before a full year, I'll owe all of it back. It makes sense for relocation since that's generally money the company gives you up front (that counts as a bonus, and is taxed as such). The only way I can see this applied to training would be if the employer covered the cost of taking courses at a local college or something like that. If you have your own in-house training staff, I'd count it more as a benefit of the job than a conditional bonus.

> I wonder, couldn't the training be offered as a perk, quantified in some way such that if the worker leaves before X months (or years) some % of that quantity must be given back?

That's how a previous employer of mine did it.

They wanted to expand the scope of my work to include some stuff I didn't know, so they spent about $10,000 to send me to a couple training courses and made me sign a contract that said I had to pay some or all of the training/travel costs back if I left the company for any reason within 12 months. They also gave me about a 10% raise at the time as well.

I ended up leaving about 18 months later when someone else offered me nearly 50% more. I'm still friends with a few people that work at the previous company. It's been two years and they still haven't found an adequate replacement for me. Apparently, their offers have been at a salary even lower than what I started at over there, yet still include the larger scope.

Agreed. I can't say that there is a shortage of Teslas because I have offered to buy one at $10k, and no one will sell me one at that price.

Agreed. The training part is key. Train those who show interest but currently lack competency. If by company rather than national program, get rights to the worker for a year or two to offset training costs (not much diff from fed programs designed to get teachers to teach in less desirable districts).

> Finally a respected economist who calls a spade a spade. There is no such thing as "shortage" of anything. Just pay more, and you'll get it.

This is economics 101 - supply and demand. What everyone learns in their first course in economics. But most economists are paid to espouse a political perspective, so most choose to ignore it. Paraphrasing sinclair : When your salary depends on you not knowing something, you magically don't know something.

> - train people more. You hire them at lower qualifications, and educate them in house

When you prevent out sourcing, h1b visas, hiring illegals, etc, it forces local companies to invest in the local population. And it's not just at the company level. The reason we have a public education system, highways, public transportation is because the private sector needed literate workers and the ability to transport workers and goods. So companies put pressure on the government to provide education for the masses, build highways, public transportation, etc. Amazing what can be accomplished when private+public interests are aligned. When they aren't aligned, you get the rust belt, increasing wealth inequality and continued societal breakdown ( opioid crisis, late family creation, distrust between people and distrust of government, etc ).

Isn't it incredible how many "hot button" political issues go right back to this basic economic law? Healthcare, tuition, minimum wage, housing, etc. Econ 101. Supply and demand. But so many people hate the idea of supply and demand. They try and tweak around it and legislate like it doesn't exist, and things get more and more distorted.

The law of supply and demand relies on efficient markets. Heathcare, to name one, really doesn't apply.

No it doesn't. And you've made my point perfectly.

Health care can never be a free market because decisions to buy are always made under duress. Pay for health care or die. That nobody is actively holding a gun to your head doesn't matter a great deal.

Labour can be similar, depending on how the economy is organised. If you need a job in order to eat, then you can't freely reject a job offer. Only for fairly wealthy people is the labour a free market. Unless you get a good social security system (welfare, UBI, etc). Then people may be able to walk away from a bad job offer.

Low unemployment is also making the labour market behave more like a free market; there are other jobs available, and employers can't rely anymore on job seekers being desperate for a job.

This is a great example of someone who wants to pretend that the market doesn’t exist, like the previous poster said. You can draw this argument to its logical conclusion and argue that any good that somebody needs is “not a free market”.

The food market is obviously not free because you need to eat. The car market is not free because a lot of people need to drive to work. The plumbing market is not free because sanitation is essential.

I won’t comment on the relative effectiveness of free vs centrally planned economies, just pointing out the logical fallacy above.

I'm not pretending the market doesn't exist, I just explain some of its limitations. I admit I could have explained this better. The thing that matters is choice. Without it, there's no free market. Healthcare is not a free market for urgent issues because you can't afford to shop around. Especially if an ambulance is involved, you just get taken to the nearest hospital. Depending on where you live, you may not be able to shop around much for non-emergency issues either.

With jobs, people with ample financial reserves can afford to shop around, but people who live paycheck to paycheck can't.

With food, well, it depends on how many different places sell food. Fortunately, there's usually no shortage of shops selling food. The market for expensive food is absolutely free, because I can say no and eat something cheap instead. But the market for cheap food does indeed not behave like a normal free market, as any economist can tell you: when prices for the cheapest foods go up, people will actually buy more, because they won't be able to afford more expensive food. And if one company had a monopoly on all food and set prices for all food high, it would not be a free market anymore, though that's true for any monopoly. Still, if it were a monopoly on something non-essential, people could still say no.

A free market requires competition. When no competition is possible, there's no free market. When there's an army of unemployed people desperately hunting for jobs, companies can afford to be picky and underpay them; there's no meaningful competition to hire those people, who can't afford to say no, because the only alternative for them is to be unemployed. This can lead to a situation where even people with a job have trouble making ends meet.

You are being willfully ignorant and have a poor grasp of what a "free market" is.

Healthcare isn't a "free market" because of massive information asymmetry (detailed prices for services, consumer education needed to evaluate information), high barrier to competition, and of course the literal product being your life.

Whereas cars are much closer to a free market. Sure, you might need to drive to work, or you can take a bus or other public transportation, ride a bike, walk, move closer or to another area somewhere this is easier to do, find a job that lets you work from home, etc.

If you choose to buy a car you can gather tons of information, pick a product to fit your specific budget, and end up with something that works everywhere. You can sell the product in the future. Contrast this with healthcare where you can't generally evaluate the information, have minimal to no pricing choices (especially in certain time sensitive situations), etc.

Even a good you're compelled to buy can be obtained through a free market. Cars are the perfect example because contrary to your understanding, they are actually a basic requirement for a huge number of people. In addition, the vast majority of healthcare expenditures are not emergency, and aren't complicated so there's no reason why people can't obtain a diagnosis from one place and then seek out the best place to actually receive the treatment.

The problem lies in executing that "seek out the best place to actually receive the treatment". Its hard when healthcare givers do not give a quote or outright misleads. Readers who are not familiar with the American way might find that hard to believe.

How does the free market account for the cost of researching options?

I am sure I could find a better deal on many medical purchases, but the cost to find them is significant. Purchasing the default/readily-available option is often the best bet because of the hours or days required to find a better solution. Spending a few hours to save $100 or a few days to save $1000 is a clear loss to me.

> ...then seek out the best place to actually receive the treatment.

How do they seek out the "best place" if they don't have complete information on what it will cost? It would be like buying cars with no price-tags or MRSPs - yes, there will be good/prestigious dealerships with excellent staff who can tell you the technical details about the car that's right for you, but you won't know how much it will cost you until each component manufacturer sends you their separate itemized bills for months after taking possession of the car, and you can't take the car back (5x tires, 2x wipers, 1x engine, dealership charges, factory charges, line-assembly person 30 minutes @union rates, 1x battery, 348x bolts,1x suspension platform, transmission, etc). That is not a free market.

In the real world you can't usually separate diagnosis from treatment. The initial diagnosis may change depending on how the patient responds. And it's not always feasible to communicate the important nuances of a particular diagnosis from one doctor to another. Bungled transitions in care are one of the leading causes of harmful medical errors. Care continuity is important for patient safety.

Most products are extremely complicated. Food and its effects are extraordinarily complicated, but general knowledge about what foods to eat to stay healthy diffuses through an emergent and bottom-up process, through channels like Wikipedia and word-of-mouth.

Cars are another extremely complicated product. Society has self-organized to create reputable sources of information on the quality of different models.

We don't need government restrictions and monopolization of spending to manage the complexity of the economy. Healthcare faces severe problems because of governemnt intervention, not despite of it.

For the last couple weeks I've been trying repeatedly to vote with my wallet. Since nobody will tell me how much any of this is going to cost, I have zero ability to do that. It is extremely frustrating.

Personally I don't view the problem as being about healthcare being a market or not, I view the problem as what a free market optimizes for. Finding the price at which the market clears is very different then optimizing for cost effectively improving the health and wellness of everyone in a society. Sometimes the free market purpose matches with the broader societal goal well, other times it does not.

I think the argument here is that people are too reactionary with their health and aren't capable of planning in advance. I would say if public and private interests were in alignment here it could look something like the lobby against smoking cigarettes. People are giving up smoking in droves because of many public campaigns to educate people. If people were only reactionary they would smoke until they started getting sick, but people are capable of being educated to behave rationally in a free market, I think.

I'm trying to plan in advance. My doctor wants me to get a couple tests done. It's not urgent, but the results will inform the future steps I take in managing my health. So far I have not been able to get a single provider to tell me how much it will cost. The tests are known, there is no secret, no emergencies will come up during the test, but still they can't tell me. They need to talk to my insurance company first to even have some idea, and even then no guarantees they will be able to give me a dollar figure.

There are time, as in emergencies, where the purchaser doesn't have the ability to shop around. But in general free markets work fine for food despite the fact that without food you'll also die. The problem is more that it's hard for the consumer to know the quality of what they're purchasing.

The consumer often doesn't know the cost, either.

It's like a restaurant that doesn't tell you the prices until after you've eaten, except it's the only way to get food.

In countries where the consumer pays for their treatment they generally do get the prices up front, as in a restaurant. That's also how things used to work in the rest of the world before the rise of health insurance and national health services.

Your definition of "duress" is so extreme as to be absurd. Just about all important decisions would be thought of as being made "under duress" which means you can justify unlimited intervention into any segment of the economy because someone will always either need the good or the job.

In the US, only about 5% of healthcare expenditures are for emergency care. That means there is huge opportunity for people to shop around. The problem in the US is that there's no actual healthcare market, so shopping is impossible. No prices are displayed so customers can't make informed decisions, most areas are operating under healthcare monopolies, and most areas enforce a perverse set of laws that make it difficult for competition to enter the market.

There’s a vast amount of healthcare spend that’s not made under duress. Non-US systems have embraced the free market here as a means to control cost. The common example I throw out is that France publishes a list of reasonable and customary costs for common outpatient treatments. Your insurance will reimburse you 80% of that. If you want to go to a doctor that charges 10x that, well, that’s your choice and your money. With cash up front operations, doctors don’t require a huge staff to interface with insurance. They also don’t have to build in extra cost to deal with float and/or possible non-payment.

Emergency care and care for the truly poor is handled with a different process.

I believe there is a trend in EU to change this towards a system where private health care providers are payed based "patient health" instead - sounds like a better economic incentive if it succeeds. (should probably provide a source here, but I forgot the name for it)

Your comment actually presents an idea that many choose to ignore, that healthcare is actually two markets in one.

For routine primary care like regular checkups or an appointment for some symptom bothering you, you absolutely are not under duress. You won't die because you took 5 minutes to choose a doctor on ZocDoc. With more transparency in costs of service, this could definitely become a market, ie "for $XX per month, get unlimited visits to our partner doctors' offices".

For emergency situations, surgeries, and things that require expensive ongoing care like cancer, you're correct in that you're under duress and can't really shop around. This is the market in which the usage of insurance makes sense, as it's a rare occurrence that would be catastrophic to pay for out of pocket for the majority of people.

I think we can do a great deal to lower cost of healthcare to Americans if we think of it in this two market approach, and handle each accordingly.

Even getting routine care, I've had 0% success gaining any transparency at all. Maybe it works for generic GP services, but for imaging or other testing, I've tried and completely failed. "Contact our billing department and they may be able to tell you" is the best answer I get.

I'm ready to vote for forced transparency at all levels. I'm tired of this opaque negotiated pricing with insurance companies that manages to maximize my out-of-pocket costs.

Transparency and high deductibles for everyone would instantly lower costs dramatically. I have to take testosterone, and you have two primary options. One is a gel that you rub on every day that's really hard to dose correctly due to absorbency issues, and the other is a weekly injection. I wasn't even offered the second option until I asked for it. The gel was $400 a month and the injection is around $20 a month. I generally hit my deductible a month or two in to the year for various reasons and the difference in copays isn't enough for me to care, generally. Medical insurance needs to be insurance again.

The way I've usually seen this split is "emergent" vs. "non-emergent" (as in "emergency).

You are correct that non-emergent care is a WAY bigger market than emergent. Most people completely ignore this. Chronic conditions like diabetes and Crohn's, end-of-life care (hospice, assisted living), dialysis, smoking cessation and weight loss, blood transfusions, most flavors of oncology (cancer treatment), knee replacements, etc.

We need way more cost discipline in non-emergent situations. Changing the perception that all care is emergent might be the single biggest thing we could do to lower healthcare costs. It would let people see that there should indeed be a market in everything from X-rays to MRIs and we could finally have a sensible conversation about cost.

A problem with this split is preventive care. You want to incentivize prevention, otherwise non-emergency issues can become way more costly emergencies. And just like that are both tied together, again...

That's why preventive care is almost universally covered in Netherland, despite the fact that many other things are not or partially covered. I can visit my physician any time for the smallest thing.

There is a huge additional set of decisions that are not made under duress, but are made in an information vacuum. Two recent examples from my own health history:

My optometrist wants me to try a new kind of contact lens. She cannot (or will not) tell me what they will cost. She can't tell me what they would cost me personally because she just doesn't know - all they can do is send a bill to my insurance company and find out how much they pass on to me. Which is essentially asking me to write a blank check. Nor can she tell me the sticker price on these contacts so that I can at least know the upper bound, because she simply does not have (easy?) access to that information - the billing department does. Probably I'll stick with the same brand I've been using for years, because at least there I can safely assume they'll cost about the same now as they did last year.

Similar story for my doctor offering me a flu shot while I was getting a checkup. She couldn't tell me the price, she didn't know the price, she couldn't get access to the price, etc. I usually go to the pharmacy, where they bill $30 and insurance covers it all. So I figured, "How bad can it be? And it'll save me some time," and let her give me the flu shot. Big mistake - the doctor's office billed $300, insurance (quite reasonably, TBH) only agreed to cover a portion of it, and I got stuck with a $200 bill.

There's two problems there. One is the lack of price transparency. The other, though, is the prevailing attitude - in both cases, the doctor's opinion, which I think is most everyone else's opinion, too, was, "Who cares what it costs? If the insurance covers it, it's basically free to you." Which just ain't true, especially for routine care stuff like this. The insurance company isn't getting their funds from some magical fountain of money. From a "see the forest not the trees" perspective, they will have to pass every cent of these costs (and more) on to me.

Both of these problems are solvable.

Re: the flu shot story — that’s called balance billing and it is illegal if the provider was in network and the procedure was covered.

https://www.healthinsurance.org/glossary/balance-billing/

At least for dentistry that is changing: I had a filling recently, due to a cavity identified at a prior checkup.

At the end of the checkup, a front-office staffer went on to Delta Dental’s web site, pulled up my record, and requested a treatment estimate. The answer was returned within a minute.

A few days later, I got a copy of the estimate in the mail for my records. I didn’t have any other dental events (which might’ve affected the estimate), so on the day of the filling, I paid the amount as part of the office visit. A few days later, I got the Explanation of Benefits for the procedure, confirming the amount paid was correct.

If I had chosen to, then I would’ve gotten all that over the web instead of on paper.

As far as I’m concerned, the dentist’s office is where I want them to be, in terms of billing processes. My eye doctor is able to do something similar, looking up lens & frame benefits etc. on computer, no I don’t have to be billed after the fact.

The flu shot cost is really terrible, up here in Canada my doctor asked if I wanted a flu shot last time I went in and there was no cost passed onto me directly. There are pharmacies that dispense flu shots for money but it's also pretty easy to qualify for a discounted shot if you need one and people not having the flu makes all of society run better.

Charging 200$ for you to be healthy and able to work the full season while also avoiding being a carrier of a disease is absolutely terrible.

I don't know what order your experiences happened in, but one thought in the first is wrong because of the second: There is no upper bound.

It's something I've seen in other comments here in the past, too.

> My optometrist wants me to try a new kind of contact lens.

My optometrist wanted me to as well. When I wasn't sure, he was nice enough to offer a prescription for both, so I could make the choice later.

That obviously doesn't work in every case of unknown cost, and doesn't really change your point, but I thought it was worth pointing out as a nice tip for anyone in the same situation in the future.

Appeal the flu shot claim. Most insurers cover vaccinations at zero cost to members. Your doctor may have coded the claim incorrectly.

I want to know why the doctor charges $300 for a procedure that a pharmacy offers for only $30. Is there any reason for it besides just wanting to extract more money?

Yeah, that kind of extreme lack of transparency makes a free market utterly impossible. Particularly if you ask explicitly, they should be able to tell you a price, or you should be able to tell them up front that you'll only pay the part that's covered by the insurance.

Springing costs on you that you never agreed to and aren't covered, should be illegal. you're literally being forced into a transaction you never agreed to.

By your argument there can't be a free market in food, you need that even more than you need health care.

Yet somehow in the US there is a market in food. And it is gigantic with way more options than most other places.

One big step toward fixing it would be to require providers to post price lists. Another would be to prevent separate prices for different insurers and uninsured clients.

Yes, there will remain distortions in the healthcare market, but at least there would be a way for people to make informed decisions.

Do you mean that when there's intervention on a market people stop looking into benefiting from it? What do you understand by supply and demand?

That should read "Positive Economics 101", ie. the status quo-legitimising ideology economics students are spoon-fed as if it was some kind of car manual. Postivism is rampant in economics departments where it obscures deeper questions such as the labour theory of value (Marx) and the role of government in creating demand (Keynes). Adam Smith's Invisible Hand is the fiddle that capitalists such as Donald Trump play while Rome burns.

> That should read "Positive Economics 101", ie. the status quo-legitimising ideology economics students are spoon-fed as if it was some kind of car manual.

Do you have any links to books or articles that go into this idea in more depth? It definitely feels true, especially in how oversimplified economic theories are presented to laymen.

Sorta how 1 + 1 = 2 is oversimplified for laymen.

What's your point? That economics is as simple as 1 + 1 = 2? That the typical economics works for laymen present a full understanding of all competing theories that have reasonable claims to some truth, controversies, and assumptions that may not hold in the real world?

I'm pretty sure the labor theory of value was more central to Adam Smith's work than the Invisible Hand.

I guess I am one of those. My main problem with supply and demand is that it is often threated as if it were the "natural order" and not something we created.

The law of supply and demand assumes purely rational actors in every situation, it also assumes commodities are comparable/identical and are largely mobile and transferable.

This doesn't apply to things like healthcare as others have mentioned, but also education (people are told their whole lives that they need to go to a good college, so people often make the poor financial choice to attend the better school), and in many cases housing (not wanting or able to leave the community they have only known, so they are willing to rent burden themselves in order to live somewhere).

Add on the fact that many of these things aren't as standard and transferable and you notice why these are the major markets that experience serious distortions in both a free market and a highly regulated one.

> But most economists are paid to espouse a political perspective

I don't think this is true unless you really contort what the definition of an economist is. Most economists either aren't working on issues that are particularly political at the moment or aren't in a position of influence if they are. Economists have political opinions, sure, but I don't see much evidence that this has a strong effect on their views about how the economy functions.

> This is economics 101 - supply and demand. What everyone learns in their first course in economics. But most economists are paid to espouse a political perspective, so most choose to ignore it.

While I agree that employers should raise wages, I disagree that things are that simple or that economists are generally being paid to lie to people about it.

It's a question of how much the supply of the thing we are talking about will go up when people are willing to pay more for it. If you choose the example of housing in San Francisco, it is clear that it takes more than just people being willing to pay more for something in order for the supply to increase.

If prices go up enough, more people in San Francisco will decide to sell, same as anywhere else. That itself doesn't increase the actual number of houses in San Francisco, but it does increase the number available to buy in the market, exactly as supply and demand would predict.

Barring physical constraints and local laws, that would also likely spur more building to increase actual units. That isn't likely to happen to any large degree because there are physical constraints and laws, and that's probably what you were thinking of.

Companies didn't put pressure on the government. Progressive citizens did. These government programs happened despite massive corporate resistance. In fact these programs emerged right along the same time as the massive monopolies were being broken up by government and laissez-faire economics was being abandoned by the Supreme Court (before ultimately being rejected by the entire government).

You get the rust belt because there has been a massive change of the American economy from manufacturing to high end service (finance, law, management, design). People can and should move to where opportunity is, America is and always should by a dynamic country of immigrants that move to where the economic opportunity is at the moment.

Progressive citizens might favor accepting refugees etc. But they certainly did no call for abusively expanding H1B to suppress wages.

H1B doesn't suppress wages. There is no evidence of that. In fact, the global brain drain to the US has given us a clear competitive advantage and allowed us to create new industries and massive companies. Immigration is a good thing economically and technologically. Refugees will contribute to the long term growth of the economy by being consumers and producers over their life and allow for economic growth. Look at countries that don't allow immigration, and have shrinking populations, how are their economies doing.

You bring in workers who are paid less than the average and can't shop their services around. Free immigration can bring growth as those people can act in the market. H1bs are effectively indentured servitude, which are better for the company, probably better for the person taking the H1b over staying in their home country, but certainly will put a downward force on wages

Where is your evidence that H1B candidates are paid less? That is false based on my experience hiring. Further, H1B sponsorship costs money and commitment to the applicant and government, so hiring an H1B is actually more expensive than domestic candidates. Not only that, but in the H1B process you have to show that there isn’t an equivalent domestic candidate and you, as a company, made an effort to find such a candidate.

You are also ignoring the contributions such immigrants make to the broader economy by inventing, building, and hell, just using their salaries to buy things. We are stronger when we take the labor of or competition and put it to efficient use.

If you’re really concerned about wage increases for employees you need to focus on the imbalance of power we have as employers. I make hiring decisions every month, and I can tell you, as much as this is the best job market in a generation, and employees have the best bargaining position they’ve had in a long time, our company has way more power than any one employee.

>Not only that, but in the H1B process you have to show that there isn’t an equivalent domestic candidate and you, as a company, made an effort to find such a candidate.

And that is trivially easy to game atm as the government isn't enforcing it. We've all seen the job postings where companies are asking for X number of years of experience in a technology that has only existed for X-n years, or a combination of skills that would command high salary but they are only offering market rate or below.

>Further, H1B sponsorship costs money and commitment to the applicant and government, so hiring an H1B is actually more expensive than domestic candidates.

More expensive to the employer != increased wages. Why didn't the company just add that cost to the salary instead and hire locally? Because having captive workers is worth something to them.

The problem with H1bs isn't that they are immigrants, the problem is that they are not free to easily move around employers due to the terms of the visa, and the path to the green card that would give them freedom is also constrained. Personally I think that if a company has successfully argued that the American population can't supply someone to do the job and we need to import someone. That immigrant should be free to work at any company in the US since apparently the whole country could use them, and adding people to the country affects us all. Tieing them to one company is just indentured servitude with extra steps and let's a single company capture the value while putting a ton of the costs on to the nation

Anyway my main point was that you can be talking in a thread about supply and demand and say that increasing supply doesn't put a downward pressure on price, in this case salary. It may not be enough to move the needle if there's enough unmet demand and a price ceiling for whatever reason, but it is a downward pressure

If you want the government to enforce the law fine; but that’s a different argument. If I assume that is true, should we see evidence of reduced wages for the positions that H1B candidates are hired for? Happy to change my mind in the face of such evidence but everything I have seen indicates that wages of skilled employees is increasing.

Companies don’t push the cost of H1B processing to other candidates because those candidates aren’t suitable for the job. My point is that it’s hard to argue that employers are hiring H1B immigrants to depress wages when they cost more than the equivalent domestic employee would; assuming there were such a candidate.

Your argument that more people coming to an area puts downward pressure on wages isn’t consistent with domestic migration. Americans move internally all the time. If you look at the fastest growing cities or states, their wages aren’t dropping as more people move in. In fact the increasing population drives inflation as more people bid for housing and food etc, and that inflation flows through to wages as employees demand higher salaries to cover the cost of living.

I don’t see anyone arguing that people from Ohio or Alabama shouldn’t be allowed to move to NYC because they will lower wages for New Yorkers.

We live in an economy that is based on growth; a growing population (even if through immigration) can in fact drive economic growth.

To be clear I am not saying immigration always promotes growth or is always good. There are challenges. But I thing the gut reaction that it costs locals jobs and lowers wages is nonsense when you look at the evidence, and accurately model the economy.

Increased supply puts a downward pressure on price. That is basic economics. If demand is still growing price can go up, just not as fast as it would have without the increased supply.

No one is arguing that people from Ohio or Alabama shouldn't be allowed to move to NYC because those people are still allowed to move around. The H1b visa ties workers to companies and gets rid of the free part of the free market. I don't care that immigrants come in and work if we don't have the people to do the job here. I care that companies are lying about how hard they looked or the wage they pay, and then getting indentured servants.

The companies are extracting value from society without giving back.

Increased supply reduces prices doesn't it? If I notice BurgerKing and McDonald's are about the same price, I don't conclude that BurgerKing's prices have no impact on McDonald's.

You’re assuming demand is tied to supply. That’s a logical error. If demand is increasing faster than supply there is still scarcity and prices will increase. Is the ratio of supply and demand and the change over time that determines price. Further there is a lot of evidence that wages are unique and resist going down and are slow to rise (because employers are aware of the stickiness of wage levels)

In the case of H1B, we are talking about Highly Skilled individuals that are scarce by global standards. Basically the supply of highly skilled employees is less than the demand, even with current levels of immigration.

A similar thought experiment: if you build more apartments in NYC, the price won’t necessarily go down because the demand is massive and increasing; it would take a lot of apartments to lower prices in NYC.

It's almost like the profession of economics is beholden to a class of rich industrialists that will restrict their careers, exposure, and success if one were to dare repeat obvious, basic facts about increasing pay of workers.

A large proportion of US economists are employed by the Fed and government agencies. Many others in academia do government-sponsored research. Not surprisingly, they won't advance in their careers if they advocate for fewer government interventions in the market.

To take this critique to an even lower order of problems, economics as a field is strictly centered on capitalism and the base assumption that markets are the only efficient distribution of resources. By this nature professionals researching economics will be captured by corporate interests at every level.

Economics makes no axiomatic assumptions favoring market-based economies. The conclusion that free markets work better is empirically supported.

It also counter the interests of powerful special interest groups, which has placed economists outside of the political consensus on numerous issues.

We're not living in some free market paradise. Our economy is highly controlled from the top down, with major government interventions limiting contracting and private property rights. Just to give one especially stark example, if you offer stock in your small business to the public, without going through an arduous registration process and getting approval from the securities regulator, you will be fined and potentially imprisoned.

>The conclusion that free markets work better is empirically supported

Better for whom?

For everyone. Efficient markets raise per capita productivity, which raises quality of life for the vast majority of the population.

The most problematic parts of the economy, like housing, are that way due to govermment intervention. In the case of housing, zoning restrictions create artificial scarcity in the most productive economic regions, leading to rising rent, which limits economic opportunity and contributes to greater income inequality.

>For everyone. Efficient markets raise per capita productivity, which raises quality of life for the vast majority of the population.

The majority of the US can't financially bear an emergency $1000 expense without going into debt, joblessness, or homelessness.

Productivity isn't connected positively individual quality of life, otherwise this wouldn't be the case.

A free market depends on an entire class of people maintained in poverty. That is not efficient except for a minor plurality.

As I said in your parent comment, the base assumptions that markets efficiently distribute resources is a lie.

Well the US has a generous social safety net, which discourages private savings. Healthcare is also vastly over-priced due to govermment intervention.

The number of hospital administrators increased 3,200% between 1975 and 2010, compared to a 150% increase in physicians, and this increasing inefficiency is due to an increasing number of regulations:

https://www.athenahealth.com/insight/expert-forum-rise-and-r...

>>Productivity isn't connected positively individual quality of life, otherwise this wouldn't be the case.

Quality of life is vastly better in high-productivity countries than low-productivity ones. Only someone who has been totally sheltered from the extreme poverty characteristic of many countries of the world could even make a comment as detached from reality as yours.

>>A free market depends on an entire class of people maintained in poverty. That is not efficient except for a minor plurality.

That's demonstrably false. The global poverty rate has been decreasing at the fastest in history over the last 30 years, concurrent with the spread of marker institutions. The rate of extreme poverty has halved in the last 20 years.

Whatever you have to tell yourself to keep believing what you do.

I'm open to seeing what evidence you have that I'm wrong. If you think you can understand economics without challenging and re-challenging your own beliefs, and contending with and considering opposing viewpoints, you're greatly under-estimating its complexity.

>Finally a respected economist

Also the guy who ran the bank/AIG bailout program.

The one that netted US taxpayers $68 billion?

I remember seeing "leaders" in the Vancouver tech industry talk about a labour shortage and thought the same thing [1]. Given the cost of housing and the salaries Vancouver companies are willing to pay, it's not a mystery why there is an exodus from Van. Pay up buttercup.

[1] https://www.theglobeandmail.com/technology/bc-technology-lea...

Salaries in Van are lame, but the housing costs are all out of proportion.

I was in Kitsilano a couple weeks ago and stayed in an AirBnB; liked the neighborhood and decided to check out some of the for Sale Signs. Modest 3-bedrooms were going for $1.7-$2.4MM CAD, while average Dev salary was something like 90k CAD. Even if that doubled they'd be hard pressed to pay for housing that high.

Housing in Vancouver is disproportionately high compared to salaries but I probably wouldn't use Kitsilano as an example. Point Grey and Kits are some of the most expensive neighbourhoods in the city. You can find more reasonable, but still very high, prices in other parts of the city.

There’s nothing reasonable about the cost of housing in Vancouver. Last I checked median price of all housing stock (including condos) was $900k+.

If you’re a two income family with kids home ownership is basically out of reach.

> There is no such thing as "shortage" of anything. Just pay more, and you'll get it.

There is. We didn't create the word to have no meaning. However, it is not defined the way many people seem to think it is or the way you are suggesting. The formal definition of shortage is a situation where an external mechanism prevents price from rising. External mechanisms can include government intervention, which is not completely unheard of. Medical doctors, for example, have a government-mandated price ceiling in the jurisdiction in which I reside. You legally cannot pay more to take the services of a doctor away from someone else. However, such circumstances are indeed rare, especially when it comes to the price of labour-based activities.

To put it another way: A shortage is a situation where you cannot pay more, even if you had all the money in the world to spend on what you seek.

That's an economic definition. A more common understanding of shortage includes conditions where the price rises beyond what I can afford. If I can't afford beef at $10/lb but the supply of beef commands that price, I will perceive that as a "shortage"

> beyond what I can afford

No, it's not usually "CAN afford", it's more like "beyond what I WANT to pay".

Eg Apple has $245 billion in cash. Instead of offshoring the production AND the cash and then gaming the H-1B supply [1], they could be exploring education, infrastructure, and training, per credit_guy's observation above. We also need to discourage offshore tax havens.

1. https://www.networkworld.com/article/3196711/careers/us-law-...

Slightly pedantic point:

A shortage is a market failure where you have willing parties who want to transact (a guy wants to sell at $10 and someone wants to buy at that price) but for whatever reason they can't.

For shortages in particular, there are more buyers than sellers (surplus is the reverse condition). The price might normally rise but it can't.

The failure to transact is the first-order condition. That prices can't rise are sometimes a cause or effect, depending on the situation. But the main thing is that you have people who want to transact who can't.

Shortages often happen due to price controls. Say I want to sell my house. I won't take $100K for it but I will take $200K. You are fine paying $200K. A rule is made that no houses can be sold for more than $150K. We both are fine with $200K but I can't sell my house because I won't accept $150K for it. So we don't transact. The sale doesn't happen, even though we both want it to.

In the long run, producers don't bother producing because their upside is capped. That usually makes things worse: not only can the price not rise, but the market becomes systematically undersupplied. But that's a follow-on effect, not the "shortage" per se.

You are completely correct that this (a shortage) is a highly technical condition that doesn't correspond to the common use of this term, something like "it costs more than I want to pay".

This seems off. Isn't a shortage simply where demand exceeds supply? In that scenario there will always be some companies lacking no matter how much they pay. Salaries can rise indefinitely and it will still be true that the bottom portion won't have supply.

Now, I don't think we are in that situation, but it absolutely can occur. Usually in artificially constructed scenarios these days, e.g. taxi medallions, but in the past you certainly could be limited by the number of people in your village as well.

> Isn't a shortage simply where demand exceeds supply?

I suppose you could put it that way, but it is important to remember that as price rises, demand wanes. As long as price is able to rise, then the demand will keep offering higher and higher prices until the supply presents itself. In the meantime, as offers go higher and higher many will drop out of the market. A shortage occurs when that price is unable to rise, leaving a situation where nobody exits the market. This is the only time that demand exceeds supply.

> In that scenario there will always be some companies lacking no matter how much they pay.

Everyone has a limit. I know of a lot of businesses who cannot afford to pay more than $10,000 per year for a developer. Needless to say they are developer-less. This does not mean that the supply of developers is lacking, it simply means those businesses were never in the market for a developer in the first place.

I don't have the money to pay the hundreds of thousands of dollars for a new Ferrari. That doesn't mean the supply of Ferraris is lacking – they are more than abundant for those who are truly in the market for one – it simply means I don't have enough money, and thus I'm not really in the market for one. We, for obvious reasons, don't count people who simply have dreams of buying something. Every 10 year old kid dreaming about owning a Ferrari is meaningless just every business dreaming about hiring an employee is equally meaningless. Demand is far more nuanced.

> but in the past you certainly could be limited by the number of people in your village as well.

If we take it to the logical extreme and assume there is only one person available for hire, the business which offers the best deal will hire that person, and if nobody can offer a better deal, they're just dreaming. Supply doesn't exceed demand in this scenario. The price rose to the point where all other demand vanished.

A shortage occurs when price cannot rise. Suppose our village with one worker has a law that says the worker cannot be paid more than $30,000 per year. Every business in town is quite willing to pay $30,000 for this worker, and now there's no market solution to determine where the worker should go. This is when demand is able to exceed supply, and when you have a shortage, relying on some other method, like a lottery, to determine where the worker ends up. Such scenarios aren't completely unheard of, but rare. Especially when it comes to labour as most people aren't in favour of placing limits on one's earning potential.

Medical doctors are an interesting exception as we don't feel (where I live, other parts of the world may be different) that the rich should be able to pay a doctor more money to incentivize looking at their stubbed toe while someone of lesser means is having a heart attack without a care provider. Instead, both people are obligated to pay the same amount, and the doctor will judge based on severity who gets the service and who has to wait or be left out.

also hire felons

>There is no such thing as "shortage" of anything. Just pay more, and you'll get it.

... eventually.

Some things take time. If there is a shortage of babies, you need to wait nine months to get more of them, regardless of how much you pay (!).

If there are only 1000 doses of a life-saving drug and there are 2000 patients that need it TODAY or they will die, no amount of money can make new doses quickly enough.

Labor markets mostly work the way you are describing, but sometimes (especially in cases where training can take a long time, like, say, for doctors), simply offering more money isn't enough of a solution to meet short-term needs.

I think timing is quite important here.

Companies are understandably reluctant to quickly increase wages when the supply/demand forces for labor shift out of their favor.

there is in general not shortages of anything, but you can of course envision situations in which shortages would be real.

You're absolutely correct that novel alternatives are out there. I would add innovations in the hiring process to that list. In a typical interview process, candidates have to take vacation time from their current role and jump through tons of hoops to ever receive a salary offer.

I know there are startups hoping to disrupt hiring (and the LinkedIn fueled swamp that is the recruitment industry), but now is the time for companies to rethink how they vet their candidates (and I don't mean lowering standards).

Business managers should try playing Tropico games sometime. Penultimo mentions in a tutorial popup, the first time a critical building--such as a teamster's office--lacks workers, that perhaps you should increase the wage for this type of worker, Presidente (or increase immigration, or pay to import a foreign specialist).

He never suggests that the job should be offshored, because that would be bad for Tropico's economy, and he's a Tropican loyalist.

For some reason, you can't force a Tropican citizen to cycle between multiple part-time, low-paying jobs to take advantage of fractional-employee building capacity. Perhaps they are programmed to not like that. Can't imagine why.~

I respectfully disagree with this notion - just pay more to workers. There are many people who in this very thread talk about sustainability of businesses, especially those cannot survive without lower wage jobs. All the while ignoring the reasons behind why businesses actually do that.

Couple of years ago, I traveled to US for the first time. And the most startling thing for me was - the relative price of stuff in US. Let's take for example - McDonalds. In US, they use the cheapest ingredients and pay workers minimum wage to keep food costs low and accessible. Sure, you might say the food is shit but cheap and accessible nonetheless. In contrast, my native country (a developing one) they use same cheap ingredients and "decent pay" to employees. The end result is that 95% of the population cannot afford their burgers. McDonald's burgers are considered luxury items.

So, I think people should also think along those line. Why are companies actually not willing to pay more? It is easy for everyone to be cynical and say cheap labor benefits few millionaires/billionaires but that is not the full story.

If your business can't afford a higher wage, you don't deserve to be in business. McDonalds isn't going to go out of business paying more, it'll come out of shareholder profits.

@coredog64: I agree that Starbucks would be a better example.

Decreasing shareholder profits is not the only outcome. The incentive will also be to increase burger prices. And I think that will have its own knock on effect.

McDonalds is a poor example here. McD is primarily a franchise model, selling supplies and demand for what the brand sells. Higher wages would primarily impact the franchisee. The only way McD (the corporation) can increase wages is to mandate that franchises pay above minimum wage.

I believe Starbucks is a better example as they don’t use the franchise model.

Unfortunately when minimum wage and mandatory benefit policies are implemented along the lines of this kind of thinking the reality is that sure, high visibility efficient and scaled businesses like McDonalds and Starbucks can afford to pay more, but family restaurants who can't either have to take on unsustainable debt gambling at becoming the next one-of-a-kind Katz's Deli or go out of business. Then people look at their city streets and wonder where all the mom & pop stores and restaurants went.

>There is no such thing as "shortage" of anything.

Sufficient money/effort can create and do a lot of amazing things. But probably not anything

Couldn't they simply charge more for their product/service to enable them to offer the higher salaries needed to attract workers?

I get the feeling that when they say they're struggling to fill jobs, what they really mean is "our current employees are overworked, and it would be nice to hire more and eek out some productivity, but no one wants the salaries we're offering so oh well".

If their struggle to hire was truly affecting their ability to produce, they would quickly offer more money, just as tech companies do to attract engineers.

- apologize and improve your office culture so you stop scaring people off.

There is no such thing as "shortage" of anything

Is it incorrect to describe a crop failure which leads to widespread famine as a "food shortage"? Perhaps there is a more correct term?

Yep. Every time people say "Americans don't want to do these jobs" or anything else suggesting that there is a labor shortage in some sector I always mentally append the phrase "at the price you want to pay".

There are many usually smaller sized businesses that simply won't work because of the nature of their economics and would cease to exist if you raise pay too much. There are though many other businesses of larger size that earn multiples on each employee and could afford to pay them much more and pay the shareholders and execs much less or nothing.

Isn't the answer then that said businesses simply shouldn't be trying to hire too many new employees yet, or should shut down? Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet.

If a company's business model doesn't work, then it shouldn't really stay open/continue to exist.

Maybe. From an overall perspective of entrepreneurship and job creation no. The reason being that many companies are bootstrapped on the backs of cheap labor until they reach a point where they can sustain jobs. You are basically saying that bootstrapping should never happen and you should always have investors to create companies... unless maybe if the founder can make a company based around a very small team work somehow who are working for next to nothing for equity.

You’re welcome to set up a company and pay yourself as little as you want - that doesn’t mean you can compel others to accept mediocre wages too.

Not a native speaker, but doesn't mediocre mean average? Surely most people are working for a mediocre salary or less?

Normally yes, but it is also used as a degenerate term, though in this case other words might have been a better choice.

In modern American usage, mediocre is a pejorative word. To Horace, aurea mediocritas was a good thing, but we translate that as "golden mean" because mediocrity is, by definition, bad. The sense of "middle" has been lost.

It goes deeper than that. Average is viewed as negative in American culture. When people say mediocre they are thinking "eww average" in the back of their mind.

Didn't you get the memo? Our goal is to pay everyone above-average wages! Anything else is a terrible injustice!

Bootstrapped usually means cheap labour of the founders, as part of the risk they took founding the business. Not paying unreasonably low wages to all around.

Job creation comes after the business has become self-sustaining.

Recently got told by some founders doing a farming technology startup that nobody gets paid because "We don't even pay ourselves!", but if I would like to volunteer my time doing automation and robotics R&D, then that would be great.

I always think that you should account a startup as though you are going to be paying everyone properly even when you cannot, and then start to pay out based on a combination of need and who has the oldest outstanding credit, when money starts to appear.

If you do this, then your company accounts are actually useful documents that you can project costs off going forward and actually attract investment, rather than living in some optimistic dreamland where the numbers you have do not represent anything like the actual costs of running the business properly.

> Recently got told by some founders doing a farming technology startup that nobody gets paid because "We don't even pay ourselves!", but if I would like to volunteer my time doing automation and robotics R&D, then that would be great.

So they are saying you should do slave-labor? I hope they expected to give you plenty of equity (which is cheap as the company is worthless as there is no money being made yet), otherwise it would be idiotic to expect people to work without compensation.

Those founders are getting paid by having 100% ownership in the business. If in 5 years the business becomes profitable then the original unpaid employees won't see any of that money.

The only way this payment structure can be morally sound is by treating every unpaid employee as a founder and giving them an equal share of the company.

This is called "working for venture". I have seen it (once) explicitly stated as the terms of employment.

Businesses aren't bootstrapped on the back of cheap labor. They're bootstrapped on the back of high cost variance labor. They're paid in equity that may be worth nothing or may be worth a lot. You convince people based on the merit of your idea. They evaluate whether or not your idea has a sufficiently high probability of success to be worth their time. The labor isn't cheap, it's just not paid for with cash.

I think historically a lot of businesses were bootstrapped on cheap labor.

Not meaning to be facaetious, but this sounds like something an 18th Century sugar plantation owner might say.

Historically, there were slaves.

That's exactly my point. A lot of the big companies today have at some point in their past exploited workers. Basically every manufacturing company started before WW2 or so.

Sorry, do you mean your comment could be a candidate for the `/s` tag?

Early factory workers where not exploited in terms of pay, they made more money than the average worker of their time period. Safty is a different story.

If someone starting a business works many hours themselves for $2/hour, and asks their spouse/children to chip in, and calls in favors from family and friends to get things going - then that's bootstrapping on cheap labor, but nobody in their right mind would call that 'slavery'. When starting a business when you have nothing, you have to be frugal, yet you can't do everything alone - that doesn't mean all ways you can get work done at below-market rates are sleazy or immoral.

Usually you get that cheap labor with lower experienced and younger employees. You do get what you pay for in many ways, but you do find those talented young people who can be really good for the first 1 or 2 years, or do things that many big companies refuse to do, like hire remote or give things like flexible work arrangements in exchange for cheaper pay.

But where is the line? Can I import hundreds of people to manually have them dig coal out of the ground with their bare hands because I can't afford the machinery yet and claim I'm bootstrapping a mining business. We would typically call this exploitation.

Many types of business can't be bootstrapped. That is not unusual. Bootstrapping is primarily a popular approach now due to easy computer automation that makes a small subset of companies viable with the very small staff and no expensive hardware. It certainly isn't a default across all industries.

The labour pool is a market. You are not entitled to cheap labour just because you want it. If you can't find someone willing to do your work at the rate you want to pay it's because someone else is paying more for the same work, so you need to pay more to attract the labour.

Importing people from abroad is something that only exists as a solution because of the imbalance of development levels around the world right now. I expect that this is an anomaly that we are going to see correct itself in time once all countries reach a similer level of development. Where will you import your cheap labour from then?

In the UK we used to employ children to work in the mines and the mills. This was eventually realised to be exploitative and made illegal. I'd bet that all the business owners at the time complained how would they ever be profitable without the cheap child labour. But they either adjust or die, and I'm happy with that tradeoff. If a business is only viable with child labour I would prefer it didn't exist at all.

> Importing people from abroad is something that only exists as a solution because of the imbalance of development levels around the world right now. I expect that this is an anomaly that we are going to see correct itself in time once all countries reach a similer level of development.

This has never been the case in the past; there is no reason to expect it in the future.

Disagree. In the past, “abroad” was physically closer and in what is now the same country. Londoners can pay the Welsh less, but they can’t go on literal slave-gathering raids c. 999 AD.

It’s all a matter of degree. Degree of progress, degree of wage difference, etc.

The definition of "abroad" is of no interest. The world has always been the same size. There has never been a time when all countries / regions / whatever-you-like were at a similar level of development, and there is no reason to expect that such a thing will or could happen.

Less developed countries tend to have higher growth rate, so there is a reason to expect convergence.

But there are large - sometimes huge - steps back, e.g. Venezuela. Any reason to think they'll stop happening?

The world has always been the same size

Not in terms of travel distance or the speed of human movement (remember when "around the world in 80 days" was an actual accomplishment, worthy of fantasizing about?)

There is every reason to expect it. Compare now with 20 years ago, 50 years ago, 100 years ago, 200 years ago. The graph is exponential.

If everywhere develops at the same exponential rate, you can easily see that the gaps in level of development constantly grow over time. Exponential growth is not meaningful for this question.

Having a few poor countries is not enough to balance things. The global economy is currently balanced on having billions of very low wage workers, but low wage workers push an economy forward so it’s not a stable equilibrium. Either workers send money home via remittances, or work in their own country kick starting the economy.

I think that rule of law and development of institutions (cf. Chinas progress vs Africa's progress) are the drivers of economic development.

Without the rule of law, you don't end up with large scale factories. Corruption is kind of a sliding scale, but factory workers take infrastructure in a way that oil does not.

That said some African countries are actually doing rather well. Botswana has seen real economic growth ranking in the top in terms of GDP PPP, just ahead of China, and that's without oil.

PS: Africa's population density is also much lower due to war and corruption. Overall, it's 1.216 billion over 11.73 million mi² vs say 1.339 billion in India in 1.269 million mi² so about 10x the population density. China at 1.386 billion over 3.705 million mi² is again 5x Africa

Well - the sharp and unexpected decline of fertility levels globally reported in the news last week : https://www.bbc.com/news/health-46118103

Also the improvement of economic conditions in some parts of the world will mean competition for labour globally.

Businesses are bootstrapped on the backs of the founders who exchange high personal risk for potential reward. I have had a bootstrapped company and my employees always got paid first and correctly. I don’t hire people unless I can pay them what they fairly cost. Any shortfalls came from my pocket and savings and never on the backs of my team. Maybe I am an outlier. It seems to me that the Amazons and Ubers of the world are built upon “cheap” labor more so than bootstrapped companies. Those types of companies have a competitive advantage from their access to cheap labor that is magnified at scale. Your typical bootstrapped company isn’t at the scale where exploitive labor makes much sense.

Or they could invest in training instead of expecting perfectly-qualified staff to walk in the door.

Every week I see job ads with "${INDUSTRY_CERTIFICATION} essential". Companies are lazy and spendthrift and have some illusion of a vast labour market just itching to retrain themselves in MIG welding or whatever.

The last ad I remember that said "full training will be given " was for a bakery!

Training requires loyalty to work - if companies can't expect trained personnel to stay then the investment is pure overhead.

To be fair, it's corporate America that burned that bridge in the 80s with layoff culture, citing "economic efficiency".

You could build some measure of "loyalty" into a contract:

* We train you for six months and pay you full salary.

* You have to work for us for two years past the end of your training period.

* If you leave before that, you owe us 50% of salary from the training period. (or whatever)

In a competitive market, you might even see other companies willing to buy employees out of their contracts.

This would be illegal in some (most?) places - labor laws ban employers from clawing back pay for almost any reasons.

In California, for example, you can't even dock someone's final paycheck if they fail to return a uniform - if someone worked the time to earn a wage and you don't pay them in full, you're going to find yourself in court.

I'm not familiar with CA labor laws, but money is fungible so it could be just be structured as "This is a three year contract, and if you quit early, you're in breach and owe us $X".

Then it's not "clawing back" pay, it's just a fine for breach of contract.

I do think laws should prevent low-wage employers from screwing over their employees for piddling stuff like uniforms, but I think that's different than something like a professional apprenticeship.

That wouldn't be an enforceable contract. Contacts require some consideration on both sides to be legally valid. However if the training is provided by a third party then the employer may be able to pay for it as a forgivable loan with the balance being written off if the employee stays for a couple years.

That would be deception against the court of law. Very bad if caught.

I'm still not clear why people are claiming this would run afoul of labor laws. IANAL, but sibling comment claims that a contract needs "consideration" on both sides, but surely the value of the training, and the value of a guaranteed term of employment are both considerations?

Depending on the industry, if the training is somewhat universal (like in the mig welding example) it's possible employers could offer 0% interest loans for training, with forgiveness after some payback period as part an offer.

Repayable bonuses are legal in basically every state

There are different ways of doing this, though. E.g. some law firms will pay off student loan debt as long as you're working for them: https://www.usnews.com/education/best-graduate-schools/payin...

It's kind of mental accounting for the employee, though. The law firm is basically giving you an extra $100 or whatever per paycheck. However, this $100 is earmarked to pay off your law school debt, so in effect the company is helping to pay for your training.

The nice part for the company is that they do not take on any risk paying for the training: the employee already shouldered all the risk for paying for law school. The company buys a little bit of loyalty by helping the employee pay off the debt over time. It probably makes the employee think twice before quitting or looking for other employment; it is similar to the health insurance benefit in that respect.

Companies can still reverse that trend. I work for one where many of my coworkers measure their employment there in decades. You can imagine what I thought recently when I interviewed somewhere where the interviewers had a collective 3 years under their belt.

On the job training within work hours is damm large perk. I don't get why you all talk about it as if people would run away from such companies.

Allow me to learn on the job and I will be reluctant to leave for company that don't.

And rely of corporate welfare or working tax credits as its known in the UK - I don't mid my taxes paying for nurse doctor or teacher training subsidising Starbucks baristas not so much

Should punctuation training come from welfare money?

Welfare, no. Education budget, definitely.

> subsidising Starbucks baristas not so much

I'd recommend you read the Power of Habit. The author talks about the training program Starbucks puts its employees through to build willpower.

I think the question you should be asking is why are people taking these "too low" wage jobs?

Companies do close down all the time because expenses are higher than revenues. Restaurants are a very well-known industry where that is super common (and it's not because restaurants tend to pay exhorbitant wages). It's literally a meme to accountants that having a restaurant as a client is a good way to never get paid (they may close down in the 30 days after delivery they are typically given to pay you).

Also, in a way, we already "shut down" companies that pay too little: you just can't even offer to pay someone 2$/hour. The question I'd ask is "who would take that job if it were allowed?"

In essence, having low wage jobs should never be an issue: if you're of the opinion that these companies shouldn't exist in the first place, you're essentially saying that those workers have better options already available. Do we really need to fire them to get them to go for those?

>you're essentially saying that those workers have better options already available

If you're following the fable of capitalism, those people should start their own, more efficient businesses if none are available.

Yes? Or just get hired by one? Or change field? Or move?

It's no fable. Some of us don't have what it takes to start their own company, that's true.

Probably there is no hope for some. I don't know how you'd show that there is a system that doesn't suffer from this problem. I mean, you'd have to show that even with less incentive to produce and more demand for products (since everyone is owed "decent living" or whatever it's called nowadays), there is no possibility for demand to exceed production.

Because capitalism forces them between a job that does not pay enough and no money to buy food and housing and clothing and such.

The solution is of course something like a basic income to liberate people and break the power of companies.

>Because at the end of the day, if your company can't function without underpaying employees, then perhaps it's simply not a sustainable business/not sustainable to hire that many employees yet.

Do you think the employees would prefer being unemployed or being underpaid? The business closing doesn't magically create new, better-paying jobs for them. If better-paying jobs existed that they were capable of doing, they'd already be doing those instead.

> Do you think the employees would prefer being unemployed or being underpaid?

Depends on how underpaid doesn't it? There's a line for everyone where all that work just isn't worth still not being able to afford a decent standard of living.

>There's a line for everyone where all that work just isn't worth still not being able to afford a decent standard of living.

Then shouldn't this be up to the workers in question to decide? Closing their low-paying workplaces just cuts down their options, it doesn't create new jobs for them.

Workers do decide on things such as the minimum wage, through voting. If a business wants to offer more pay to attract more employees, that's their call and their right.

>Workers do decide on things such as the minimum wage, through voting.

That's a much weaker form of decide. A vote only means at least 50% of voters wanted it, so you can only say with certainty that there's a 50%+ chance that any given voter wants it. Whereas if a worker has chosen to work for a particular salary, there's a 100% chance he's chosen that as nobody else can make that decision for him.

You perfectly make the point that the true minimum wage is $0/hour. Raising minimum wage has often reduced the number of jobs, often creating black markets of cash workers who often compete directly against people not allowed to legally work in US, further depressing wages.

The real question is if a worker and an employer agree to a pay rate, why do you get to call it "underpaying"? Are they not adults, ostensibly free to live their lives how they see fit?

This has always been the argument against companies who claim they can't survive without using undocumented immigrant labor.

If your business model relies entirely on not paying your employees reasonable wages, maybe your business model is a failure.

There will always be a need to employee low IQ individuals, developmentally disabled, etc. Would you prefer those types not have a viable option for employment?

There are definitely businesses that wouldn't exist due to their inability to find labor cheap enough to make their unit economics work. We usually say "those businesses shouldn't exist, then".

For instance, you could make a version of AirBnB that was supported by ads alone, if instead of paying homeowners for the use of their homes, you simply compelled them to let you rent them out for nothing.

you mean https://www.couchsurfing.com?

In this case these businesses should invest in tools that make fewer workers more productive.

Businesses that are only profitable because they short-change workers... should not exist. Businesses don't have a "right to labour".

Usually this is because customers have gotten used to paying less than reasonable prices. Paying people more is often hand in hand with customers paying more. But people like the first idea more than the second!

Companies will try to only pay staff more when they can justify that to the shareholders as being a way to make more money for the shareholders. A public company exists solely for the benefit of the shareholders and all actions stem from that.

> A public company exists solely for the benefit of the shareholders and all actions stem from that.

Not sure about this.

First off, there's the principal/agent problem that causes many public companies to be run for the benefit of their upper management.

Second, this idea of the shareholder above all other stakeholders is a new phenomenon (since the 1980s). It's also primarily an Anglo Saxon idea (USA, Britain). Other countries include other stakeholders more explicitly. And the USA could as well, of the political will was there.

I agree with you that this is how American capitalism is structured now, but it didn't spring from the mind of God, it's a human institution that can be changed.

Yeah. I've often said that in any business decisions there are the following stakeholders:

Upper Management, The employees, the board members, the shareholders, the customers.

Business decisions are almost always made looking at the perspective of perhaps 2 or three of these stakeholders. The employees are basically never considered in the US, often only the biggest one or two customer's desires are considered if any consideration is given at all, etc.

And way too much attention is payed to certain Wall Street types who get all upset when earnings exceed the company's own projections, but fall short of wildly optimistic estimates by third parties.

That's one loop of the self-balancing process - if there's a scarcity of labor, wages go up, some businesses can't afford it and close down, that reduces the needed number of workers and solves/balances the scarcity.

And it's a beneficial process, as it moves these people from business where their labor is less valuable (as evidenced by the fact that it's not profitable to employ them at a slightly higher wage) to businesses where their labor is more useful. The least efficient businesses being forced to close is a good thing that allows the labor, facilities, land, materials, capital, etc to stop being used poorly so that they can be used better in the economy.

The other balancing loop is that higher wages in some field is motivation for people to get the skills needed for that field, either through choice of education for younger people or by transferring from another type of job. This balances the supply side in a beneficial way, but as it's much slower than the balancing loop above, the largest immediate impact comes from the demand-side balance.

“And it's a beneficial process” only to an extend. To much volatility result in a net loss for the market and society.

Shall we legalize slavery then? Just imagine how many business models would become viable if labor was free

I wouldn't say slavery is free. You still have to pay someone to beat the slaves.

You still need to pay the slaves in the sense that since you own them, you are responsible for their upkeep, which takes resources.

Then they will have to adapt.

Here in Denmark we don't have greeters, we bag our own stuff and most of the time we have to put a coin in to get the shopping cart out, which will be returned when we return it.

Of course there will be businesses that can't adapt. These will die out and those employees will then, slightly, decrease salaries.

Many of the jobs in that category are paid little because it's not really economical to pay more. Wages are constrained by productivity and what customers are willing to pay.

E.g. if you have to pay people a lot to wash cars then those jobs will simply disappear.

> Many of the jobs in that category are payed little because it's not really economical to pay more. Wages are constrained by productivity and what customers are willing to pay

What do you mean by that?

> E.g. if you have to pay people a lot to wash cars then those will simply disappear.

What will disappear? The cars? Cleanliness? What I think you mean is that people will demand fewer car washes, which is true. But so what?

People will demand fewer car washes or they will start to use fully automated car washes that don’t require people, or they will wash their own car. High labor costs makes automation that may have been thought of as too expensive or complicated before to seem more viable.

Automated car washes scratch the crap out of your car, so I doubt it.

They're more likely to just do it themselves.

I think you're being a little too pedantic, the meaning seemed pretty clear to me...

1) In some sectors and job roles pay is what it is because there are other hard costs involved, the quantity of labor required is prohibitively high, and/or customers are not willing to pay $75 for <insert name of item or service>. Customers are willing to pay $25 for <insert name of item or service>, so you take 25 and subtract all the other costs involved as well as a profit margin to make it worth your while, do some multiplication (or division, as appropriate) to figure out how many of <insert name of item or service> each person can complete in a given hour, and end up being able to pay each person working on <insert name of item or service> $10 per hour. Whether or not someone is willing to toil away 8 hours a day on <insert name of item or service> for $10 per hour... well, that's what we're talking about.

2) What will disappear? The manual carwashes, obviously. Whether they get replaced by automatic ones (which eliminates the prohibitively high labor cost at a marginal increase in hard costs that decreases over time) or simply by people washing their cars themselves (which eliminates all of the above) doesn't really matter, as we're talking about labor issues and in either scenario the guy washing the car is out of his job. So what? So nothing, except the whole topic we're discussing.

Productivity has been increasing. Wages have not.

Isn't that kind of what increased productivity implies?

No. Productivity is essentially profit - not revenue - per employee.

The clear trend since the 90s has been for productivity to increase while compensation has remained more or less static.

Larger corporations absolutely can afford to pay more - much more. They choose not to, because the institutional narcissism of business culture in the US is set up to gouge employees to the maximum possible extent, not to consider employees as contributors/partners who deserve decent compensation for their contribution.

Unions/strikes were the way to counter this trend. But where are they nowadays? People are too busy too, and very well entertained. Also there is a huge compensation diff between well-paid and low-paid workers, larger than it use to be, this ensures that the more "resourceful" well-paid workers (often freelance) are not compelled to strike/unionize.

Productivity is not profit at all, it's the value produced so indeed ~revenue.

Wages are therefore constrained so that a profit is left after the worker has been paid. Ignoring other costs, profit is equal value produced minus wage paid.

Productivity is literally defined is the ratio of the output (revenue) to the input being measured. It has nothing to do with profit.

Higher productivity, but stagnant wages means productivity is increasing, but labor is not capturing the increase of their productivity and is instead being captured by shareholders or management.

Only shareholders. Mgmt is just another expense.

Management is an expense just on the books. They create most of the value of that business for themselves and shareholders, by themselves.

Can you explain? Why/how does mgmt create most value for shareholders?

I understand how they create most value for themselves, they earn more than the other employees and are more likely to own stock options.

How much has the productivity of low wage jobs increased? Are waiters today serving 2% more customers than two years ago?

They are serving people paying more for food.

Really? Data?

Wages haven't increased, but total employee compensation has increased when you factor in employer paid health insurance premiums. In effect our wage gains have been eaten by healthcare costs.

> if you have to pay people a lot to wash cars then those jobs will simply disappear.

Yep. Even back when I was growing (70s), a car wash in Germany was this big machine you drove into and your car came out clean the other end. You didn't leave the car.

When coming to California early 2000s, a car wash was this place that had someone take your keys, then some people did some prep, then the person who took your keys drove it through a similar but much smaller machine. To my great surprise, this machine didn't actually wash the car but really just made it wet. Then a bunch of people cleaned and dried the car by hand and called you when they were done.

I was...astonished.

I also remember American car companies struggling for profitability, and blaming wages. Except that German car companies at the very same time were paying their workers several times the amount (strong unions) and still raking in the cash.

Saw an article yesterday, some expert, something like "2 in X working age adults don't want a job / don't want to work" - also skill sets need updating and who should pay to train employees needs debating, maybe a fed subsidy..

Around the city I live in, the past 6 months wages have started to increase a bit, some chain restaurants now have banners out front "starting at $12/hour". Many places are short staffed and lose business because of it.

Problem is, the living wage here has increased to around $23 / hour.

I'm sure you could live in one of the slums for less, and you could be on the section 8 waiting list for 2 years hoping to live for less if you can couch surf and bridge sleep while waiting...

mit's living wage calc says an adult can living wage here for $11.24 / hour - I've tried to help people find cheap housing options in town several times the past two years and I just don't see how those numbers work out.

The calculator says 1 adult 1 child, $22.77 per hour - that seems more doable, although I think most people living here would be spending much more than $11,508 on housing, so at that rate they would be sacrificing healthcare and probably transportation or whatever to make it work.

People don't want to work full time and not be able to afford basic necessities.

Another problem is so many jobs say they drug test, but there is (at least not that I have found yet) not a job listing site or category for "Smiling faces" aka 'we don't test for weed in your system as long as you toke at home and don't show up with red eyes / moving slow with a bag of chips in hand.'

So yeah, try paying more for sure. Get more realistic with labeling jobs.

In some cases making transportation free would get you some excellent workers who can't afford $20 per day for ubers but want to work further from their apartment where you job is.

I've watched many here struggle to find rides to work and jobs that are $5 or under for uber to get there.

There is more that can be done for sure. As so many places try to not pay well, I see more and more that are closed when they should be open, or running slow and losing business because they are short staffed.

Certainly steak and shake could pay $20 an hour for third shift workers if it meant they could stay open and make many times that.

Things I've been noticing in this growing city are not indicative of the whole country / world - so whatever bias yeah I know.

As someone who grew up in a house of 4 that spent multiple years living off of a single unemployment check, you'd be surprised at how easily you can fall into a very low spending pattern when you have to.

Slums in the US can be fine. If it's just surface level disrepair that's fine. The real issue is cultural, especially if you have kids.

You haven't said which city you're in, but I think the number of cities in the US where it wouldn't be possible to live alone on $25,000 a year is actually quite low.

Health insurance?

Medicaid is an option, especially if you have kids. Google found this, which seems useful: https://www.policygenius.com/blog/a-state-by-state-guide-to-...

I respect your experience growing up. I have had similar situations over the years including some growing up, and been close friends with many and watched how it can "work".

Living for years by skipping oil changes, hair cuts, dental health, bald tires, all those things - not good for the family or the community really, but it can be done.

Not sure how long ago it was for you and where, but I know that things are harder today money wise than they were when I was growing up, in several ways. Aside from gas being under $1 / gallon and food prices and such being different, there was not the need for broadband internet and some other modern day "staples" -

without getting into a debate about the need for $200/mth cable not being a need, and other things, the divide has greater effects socially / in schools etc I believe. You did mention the issue is cultural and these things are part of that I guess.

The city I describe is my experience in Nashville TN - before out last full term mayor, perhaps around the time you were growing up? - apartments near the airport area could be found around $600 /mth - they weren't the best, but they did not have gangs blocking the corners either.

A decade of hastened gentrification and it's hard to find decent apartments for double the old price. Gas, food, and other things have gone up - yet for many going from $8 /hr to $12 an hour is not going to get you far around here these days.

I think it's easier for me to think that guys would have an easier time living on $25k per year, and that many women would find the living conditions with that kind of money with today's prices around here to be tough to live with.

The few cheap places to live around the city, and even the next county or two over, are likely to be less safe than one of the gated communities down the road from Miley's or Taylor's places.

I've been expanding my searches to the middle of the state and looking at other states to find affordable places to suggest people consider looking. There are some trailers about 2 hours from here for about $400/mth - but the utilities will be high, especially this time of the year.

Of course people living two hours away are not likely going to come to the city to fill these jobs at $12 /hr.

So I guess those businesses who want to keep paying less than a living wage around here need to consider that the pool of people willing to work those jobs are people who can't get a better gig, so probably male, willing to live in sketchy places, likely can't pass a drug test or they would get a home depot gig or similar.

With such a small pool to draw from, some kind of perks will need to be advertised, like comped transportation, no drug tests, etc.

There are plenty of places around town that I walk out of or choose not to go to, knowing that the labor making the food, or cleaning, or watching kids, or all kinds of important things, is probably not the best choice for important things like food safety, etc.

I also get that this can be a cultural thing, and different strokes for different folks and all that. I'd really love to see the monthly spending budgets of lots of the people around here that work for under $22, it just doesn't seem possible in most parts around here, and certainly not sustainable long term.

> not a job listing site or category for "Smiling faces" aka 'we don't test for weed in your system

Why's this called 'smiling faces'?

He might be referring to stock photo websites, you know the kind.

Because I've noticed that fast food places and similar use signage saying "now hiring smiling faces" - implying you just have to show up to work.

No experience required, not discriminating on your criminal history or ability to pass a drug test..

at least that's the way I've been seeing it. As opposed so other jobs; home depot advertises drug testing on the front door. Plumbing places have "all employees drug screened / background checked" - some places have "bachelors degree or equiv"..

Some places have no paper application, requiring you to have internet access to apply - and then computer "personality tests" to be considered for interview.

In my (admittedly limited) experience, many of these things are saying they are trying to discriminate in one way or another, but "now hiring smiling faces" is kind of the bat signal for the X in 10 people who don't fair well with drug tests and criminal background tests, etc.

If you are aware of a similar moniker or whatever, I'd like to know. I've been trying to help people get jobs around town for years and have seriously been considering crowd sourcing a green friendly job board - there are lots of decent people out there that want to work but have been repeatedly beaten down by so many time wasters out there.

Sounds like a good idea, but I wouldn't market with this 'smiling faces' name as I have never seen nor heard of the concept and it took you five paragraphs to explain what it means :)

Clearly the solution is just raise the minimum wage to $35/hr ala Elizabeth Warren

I know you say this statement in sarcasm but I'd like to explore this world.

If minimum wage was $35/hr I bet quite a few things would happen.

Entrenched, successful businesses would support the change. Their competition struggle to afford competing. Businesses will close down, further entrenching the competition.

Jobs will disappear. Just like how the wage hike for New York car washers displaced workers though automation, many businesses will have an even higher economic incentive to replace workers with automation solutions.

Some jobs just won't pull in enough to make it worth it. Why pay someone $74,000/yr to take orders at a restaurant when you can pay for a $50,000 and ~$20,000/yr in maintenance.

Young workers will be out competed by older workers. If you're paying $35/hr, you want the best bang for your buck. Why take a risk on some 16 year old when you have retired 56 year olds who would be willing to pay for their medication working fast food. Or heck, why go into engineering when a basic job gets you above average pay? Where will the younger generation get a chance to develop the soft skillset that allows for future success in their careers?

Naturally, I'm failing to consider the long term economic effects. For example; harder earned skillsets will be paid much more than low skillsets. If the supply chain is paying massively for a work force, then the price of goods & services will go up dramatically. It's harder to puzzle this sort of stuff out!

>raise the minimum wage to $35/hr ala Elizabeth Warren

https://www.google.com/search?q=Elizabeth+warren+35+minimum+...

???

Just in case anyone reads this and gets the wrong impression. Elizabeth Warren wasn't arguing for a $35/hr minimum wage, but just making a point that if the minimum wage had increased at the same rate as the earnings for the top 1% it would be at $33/hr. She was actually arguing for a $10/hr minimum wage.

>Another problem is so many jobs say they drug test, but there is (at least not that I have found yet) not a job listing site or category for "Smiling faces" aka 'we don't test for weed in your system as long as you toke at home and don't show up with red eyes / moving slow with a bag of chips in hand.'

I'm kind of shocked this doesn't exist yet, but then again, I can understand why a company might not want to openly advertise that they don't drug test.

In my (very) limited experience, employers will usually say they drug test but never really follow up on it. It usually took me a bit more effort to find out if I was going to get tested or not, and even then it's a bit of an awkward conversation to have because it implies there's a reason you want to dodge the test.

Ive been racking my brain how to make this, perhaps crowd source info.. scrape listing for a while. Then make it premium to advertise premium spots.

Mainly it would be good for society - saving people lots of time, and getting more people working, and more jobs filled.

I've noticed some employers do tests on application, then don't again for years. I've witnessed people losing jobs when they ran afoul of office politics, then suddenly a test was 'randomly' given.

I think some places around here use some kind of percentages thinking to say, 'if we drug test applicants, make them use an internet portal to apply, and give one of those personality quizzes before an interview' - we can be sure that 99% of our applicants will be white.

I can't say for sure that is what is going on at some places around here, I don't have any inside info saying exactly that - but, when you have a place that needs help doing oil changes and they put up all those hoops to jump through, you have wonder what their target worker market is and why. Maybe they just don't want 'white trash' people under cars getting greasy.

Anyhow, a "smile and work" portal would be beneficial to society imho. Maybe more so in busy cities.

Your town doesn't have a bus?

yes we have buses all over. Some cool maps and stuff for them too. But, the timing and such is limited. (also serious lack of sidewalks, bus stop covers and other issues)

recently... girl lives near the airport, has job at X big box store, 12 minute drive from here. Bus routes from here take you down to 'antioch' then back into the city, where you need to junction with another bus to get back a few miles south of city.

Depending on time of day, the scheduling puts it at 2 hours 20 minutes to get to work. When big box store needs you to be there at open, you need to leave for work at 3am... but no buses run at 3, so you have to leave at 11pm to get to work at 6am.

Getting home via bus is easier though.

admittedly the bus service does take care of certain 'economically challenged" areas better - if you live in Antioch you can jump on a bus to get downtown in much less time. If you needed to connect to go south again, it's still silly, but shaves about 30 minutes off (one hour fifty minutes).

I long for the day of smart voltron like buses, guess I should post about it since our city just cant get transport right.

I think once companies have got taste of cheap foreign labor, it becomes difficult to convince them to pay more.

They are always looking to do some complex maneuver to get foreign labor doing work cheaply for them. This is why they are complaining.

Yeah, while you are working, your boss is busy trying to outsource your job.

Everyone has a job

Until they're outsourced.

> They are always looking to do some complex maneuver to get foreign labor doing work cheaply for them.

What kinds of maneuvers? The only way you can get foreign workers to work for you is to convince them to leave whatever it is they're currently doing.

At the price "Americans" would do these jobs, the companies may not be able to earn a profit.

Because, otherwise, they probably would do just that.

If you have no one willing to pay for your service, including actual labor price, your business is irrelevant, and certainly not entitled to any effort from the worker. It's just business management that suck.

>If you have no one willing to pay for your service, including actual labor price, your business is irrelevant, and certainly not entitled to any effort from the worker. It's just business management that suck.

How much people are willing to pay for a service is connected to the value labour generates. If the minimum wage for cleaning was raised to $50/hour, many cleaning companies would close because few people were willing to pay at least $50/hour for a cleaner; the work done by the cleaner does not generate $50/hour of value. For any given individual at any point on time there is a ceiling on how much value they can generate, based on their knowledge and abilities. If somebody is capable of generating $10 of value, and the minimum wage is raised to $20 of value, anybody employing them would be losing $10/hour (paying $20 for $10 worth of labour). In which case it becomes much harder for that individual to find a job, and also to get a foothold for them to gain skills and experience that allow them to generate more value in future.

You might argue that such a worker is better off on welfare or some kind of basic income, but shouldn't that be their choice to make, not yours?

> How much people are willing to pay for a service is connected to the value labour generates.

It's how much the market will bear. Business owners (shareholders) play a game of arbitrage between what people will pay for the service and the cost of producing the service (e.g. labor costs). I think folks are upset not so much at the cleaning services of the world, but the oligopolies, where you soak up the surplus value of the labor. Sometimes it's done illegally like in the wage collusion case in silicon valley, other times it's done legally through M&A. The wealthy have learned how to leverage their position for maximum profit, and many folks see it for what it is.

> I think folks are upset not so much at the cleaning services of the world, but the oligopolies, where you soak up the surplus value of the labor.

These aren't the companies that minimum wage laws hurt. According to https://www.businessnewsdaily.com/5314-entrepreneur-salaries..., the average salary of small business owners in America is $68,000, which is much less than most software developers on this site seem to make. They're not exactly filthly-rich businesses gobbling up profit. Even a small increase in costs can be enough to put them out of business, leaving their employees jobless.

exactly the same applies to workers - if my work generates less money than it is neccessary for living, then it’s not worth doing it, why lose money?

Except that's not the problem going on here, for non growth stock companies today, profits matter more than revenue expansion. So even if they would be able to successfully grow their business in nominal terms by raising wages for more employees, they are often obligated to only try and expand at the same or increasing levels of profitability.

Guess those companies should not exist then. No company should exist if their workers end up in poverty or need help in the form of food stamps or any other kind of help. Any job should pay enough for a decent life.

Many small business owners are probably not quite so eager to close up shop because they lack a few employees.

The industries or professions where "living wages" is an issue are usually not the ones desperate for labor.

>Guess those companies should not exist then. No company should exist if their workers end up in poverty or need help in the form of food stamps or any other kind of help. Any job should pay enough for a decent life.

Killing such such companies doesn't magically create new companies able to pay more, it just converts their low-paid workers to unemployed workers. The minimum wage is always zero (no job).

That's only the case when profit margins are so low that the minimum wage extinguishes the marginal benefit of a worker.

At the bottom of the wage spectrum that's mostly not true. Profits would allow for higher wages, but the negotiating power of the employers is such that they can hold wages down. In these cases minimum wages do make sense and don't result in higher unemployment. And implementing minimum wage laws has shown that it does not affect unemployment in a big manner.

So how much do you think the local pizza shop should pay my 16 year old son? Should they be giving him a “livable wage” or should they keep offering $7.25/ hour for him and his high school friends who are staying at home with thier parents?

Lets open up a vast class of exploited workers who are adults with families because your son wants to work for pocket money in highschool.

How much do you think unskilled work is worth? How much should he and his teenage friends get paid to flip burgers and make pizza?

And honestly, if you are competing with a 16 year old for a job, there are larger issues than the minimum wage.

Maybe the real answer is to make it easier for adults to get training for jobs that can’t be done by a 16 year old.

The problem is that one (keeping wages low) gets pushed, and the other does not.

Something tells me you would be perfectly happy if wages were kept super low, and the other things you said did not happen.

That is not a solution.

There was just an article yesterday about the owners of 7-11 making a net income of $37K a year. Small business owners aren’t getting rich.

If you don’t think that businesses don’t “deserve” to exist if there business model can’t be profitable at “livable wages” that seems hypocritical to me since a lot of techies work for companies that only exist because of VC funding and if their company had to exist based solely on profitability they wouldn’t be working either.

Whether a minimum wage in a certain situation makes sense or not depends on who is out of work and who is employed at below livable wages.

In an economy with high unemployment, a minimum wage should be lower. With low unemployment, it can be higher in order to put a lower limit on the employers' negotiating power.

If unemployment is low, the employer is going to have to offer higher wages anyway.

If the numbers don’t make sense, either the employer is going to automate or capital os going to move up market and to jobs that are out of reach for the unskilled.

If Apple bought iPhone manufacturing to the US for instance where it would be more expensive, they would invest in ways to automate more before they would hire the same number of people as FoxConn does.

In reality, low unemployment did not lead to significant wage increases at the bottom end of the spectrum, probably because of the negotiating power of the employers.

It looks like wage increases are less of a factor in automation than labor shortages. Which is why Foxconn in China is automating like crazy.

Do you want him to save and pay for college himself? If so, a livable wage doesn't seem too crazy with (US) college tuition.

Most teenagers who work part time and live in middle class families aren’t really doing it for the money, by the time you take into account car insurance and another car payment, the parents could just give the kids money.

Most of the time the teenager is either getting a hand me down car from the parents and the parents buy a new car or they buy their kid a cheap car.

My son won’t be going to an expensive college. He will be going to a two year state school close to home, living at home and then transferring. We will be paying cash.

When students acquire student debt to go to an expensive college, or get the same money from their parents, they do so because they expect to come out with a benefit over going to a state school.

And, maybe unfortunately, given some due diligence, that decision is still most likely the correct one. And yes, there are fraudulent schools and diminishing returns etc.

They can expect a lot of things but if you are going into a field that doesn’t pay above average wages, it really is not a great decision to go to a more expensive school.

But the popular refrain on HN - which I don’t agree with - is that the purpose of college is not to get a job.

If only this were a practical view point for those living in developing countries too no? The entire modern economy as we know it is based on workers making what would be poverty level wages in the places the goods get ultimately sold in.

I'm talking about companies with difficulty hiring enough employees. Almost never are these the jobs close to a reasonable poverty standard.

So minimum wage is an entirely different topic. Increasing minimum wage will not solve any hiring problems, it only bolsters negotiation power for those at the bottom. Which is a good thing, but no solution to the stated problem.

So the market has spoken and the business is unsustainable

Nope, those businesses are sustainable, they just don't pay higher wages to hire more people because that would be unsustainable.

If I put sawdust in the bread i make to "make my business sustainable" I'll end up in jail, why is exploiting my workers more acceptable than that?

"well yeah but the workers consented "

People do a lot of things when desperate, that shouldn't inform how we design our society

Killing such companies doesn't create better-paying jobs for the workers, it just leaves them unemployed. What gives you the right to "design" how these workers spend their time; maybe they'd prefer to be exploited than jobless? Ultimately the worker is payed by the company's customers, and if the law asks consumers to pay more than they're willing to pay for the workers' service, they'll simply go without the service.

> What gives you the right to "design" how these workers spend their time; maybe they'd prefer to be exploited than jobless?

Jeeeeeesus christ, how am I designing how they spend their time?

How can you detect lack of freedom in saying "you can't work for unlivable salaries" but not in "I only pay unlivable salaries because if you dont want these crubs there's other more desperate people".

> Ultimately the worker is payed by the company's customers,

No, no, they are paid by the owners who decide what slice of the income to allocate to salaries. The customers pay the product and walk away, they don't know anything about the internal workings of a company

>and if the law asks consumers to pay more than they're willing to pay for the workers' service,

The law asks the boss to pay livable salary, the end price has nothing to do with the law. If the service cannot be offered at competitive prices while offering livable wages, it's not a sustainable business

>Jeeeeeesus christ, how am I designing how they spend their time?

They want to do some job for money and you're telling them "no, it pays too little, you're not allowed to do that job, you should be on welfare or find another job instead!".

>No, no, they are paid by the owners who decide what slice of the income to allocate to salaries. The customers pay the product and walk away, they don't know anything about the internal workings of a company

The income of the company is connected to the value generated by the workers it employs. An owner of a law firm can pays its employees much better than an owner of a fast food restaurant, because people are willing to pay more for lawyers than they are for fast food service. If the law forced restaurant owners to pay their workers as much as a law firm has to pay its workers, most restaurants would go out of business because people simply aren't willing to pay as much for restaurant service as they are for lawyers.

>The law asks the boss to pay livable salary, the end price has nothing to do with the law. If the service cannot be offered at competitive prices while offering livable wages, it's not a sustainable business

The maximum salary someone can expect is proportional to how much value they can generate for people. If the law requires someone to be paid much more than the maximuim amount of value they can generate given their skills/abilities at the time, then people will simply choose to forgo that service. If you had to pay someone $200/hour to clean your windows, would you do that, or would you clean them yourselves / let them remain uncleaned?

Minimum wage laws don't create jobs; the minimum wage is always zero (if nobody thinks someone can produce enough value to justify paying them the minimum wage, nobody will pay/hire them). Feel free to declare low-paying jobs "unsustainable", but note that the alternative to such jobs in many cases isn't livable wages, it's no wages, or welfare.

> They want to do some job for money and you're telling them "no, it pays too little, you're not allowed to do that job, you should be on welfare or find another job instead!".

The idea that they need to be on some form of welfare ANYWAY doesn't bother you ?

> If the law forced restaurant owners to pay their workers as much as a law firm has to pay its workers, most restaurants would go out of business because people simply aren't willing to pay as much for restaurant service as they are for lawyers.

And if the southern states couldn't have slaves the economy would collapse and if people could strike, no business can survive and if you have to pay immigrants the same salary as locals, no business can survive and if they pass anti-sweatshop laws , no business can survive and if you can't fire them for unionizing , no business can survive and if you can't hire children , no business can survive and if you pay them for ONLY 40h per week , no business can survive and if you pay women equally , no business can survive

it has been the same excuse forever, if we give rights the market will crash, and yet every time instead of crushing it just keeps blooming... weird.

>The idea that they need to be on some form of welfare ANYWAY doesn't bother you ?

Unless they want to live on subsistence, they need things produced by other people. They can either do something for other people (employment) in exchange for other people's things (usually in the form of money, which is more efficient than barter), or they can receive some form of charity/welfare from other people. What's wrong with it? Why should it bother me that the universe doesn't have an infinite source of everything such that anybody can fill all their wants without anybody having to work?

>it has been the same excuse forever, if we give rights the market will crash, and yet every time instead of crushing it just keeps blooming... weird.

Just because everything hasn't completely collapsed that doesn't mean things couldn't be better. That's like arguing polluting the environment is fine because the planet's still alive now. You can see this by comparing for instance Eastern Europe to Western Europe; Eastern Europe didn't collapse, but due to bad economic management it grew a lot more slowly and produced much lower living standards for its inhabitants than Western Europe.

There is no objective standard for "exploitation". We design arbitrary ones, and even those have to be enforced (minimum wages, for example).

And you are right, higher prices lead to less consumption.

Basically any employee contract is a cooperation between two parties leading to a shared benefit of that cooperation. How that benefit is partitioned between the two parties is a matter of negotiation and negotiation power.

Again, these businesses are sustainable, proven by the fact that they are surviving, even though they say they can't find enough workers to hire. They just don't see any benefit in increasing pay, maybe because that would make them unsustainable.

Wages below a certain standard of poverty are a different issue, and those aren't the jobs with hiring problems anyway.

That would be true for businesses who’s motivation is to provide a lot of jobs. This would not be true for businesses who intent to make a few people rich. They have another motivation, and definition of higher wage.

I agree with you but I would also say these systems are complicated. Raising wages can also lead to raising prices and at the end of the day what people really want is more buying power. People want manufacturing jobs back in the US at $30/hour rates for people with no experience but then also want to buy these kinds of goods at the dollar store. These things are very incompatible. People always want it both ways. People also want the perfect job 5 minutes from where they already live (understandably) even though it may be cheaper to have people in WV do that same job.

Even thinking about more practical things like food harvesting, these jobs can pay ~$15/hour but they are REALLY hard work as that rate isn't guaranteed but rather performance based. If we had to pay even $25/hour to attract unemployed US workers to do these jobs instead of migrants, this would cause a likely doubling of the cost of all the produce you buy. We all have to ask, "Are we willing to pay double for fruits and vegetables to create decent paying jobs for other citizens?" I think the answer is that we are clearly not. The same question goes for services we use constantly like Amazon and Uber. The people doing the work are vastly underpaid and that is exactly where our savings come from!

For tech, I think the training path is the right thing. Employers do have to be careful to not spend tons training people just to have them leave. I firmly believe the right answer is apprenticeships. People do work as they learn and their wage rises slowly with the experience and ability to create value. The risk of them leaving is minimized as they have already created corporate value.

I think what you're really hitting on there is the global competitive equilibrium. If we couldn't hire migrants to pick fruit, our farm businesses simply couldn't compete on price (also subsidies). But standard economic theory would say "don't compete then! do something else".

They had a piece on NPR a week or two ago where a vegetable farmer said he'd love to hire locals instead of migrants because you have to pay to house the migrants, which actually makes them more expensive. But none of the locals want to do the work.

> But none of the locals want to do the work.

"...at the price he wants to pay".

More so the price the market would bear, but yes.

There is also no denying that people are less willing to do hard labor than they used to be.

> More so the price the market would bear, but yes.

That really depends on the elasticity of demand for that thing. Usually when a thing costs more to produce than you can sell it for, we say that the market shouldn't produce that thing then, so there's nothing to complain about.

> There is also no denying that people are less willing to do hard labor than they used to be.

By which you mean "less willing to do hard labor as cheaply", presumably.

No I mean strictly less willing to do hard labor. The social safety nets in America may not be great, but most people would prefer to deal with that rather than do back breaking labor. And if you are not in that situation, you would rather do a different job that would pay equivalently. It used to be that your options were do what you had to or starve. Not starving is a good motivator.

> No I mean strictly less willing to do hard labor.

That isn't a thing, unless you're saying that there is no price whatsoever at which people would be willing to do hard labor.

There is no point at which people would be doing to both do the labor and others would still buy the resulting product at an increased price.

You are dealing in a hypothetical where there aren't market forces at work.

> There is no point at which people would be doing to both do the labor and others would still buy the resulting product at an increased price.

Exactly! Which means the good or service shouldn't be produced.

> You are dealing in a hypothetical where there aren't market forces at work.

Erm, no. This is what market forces are. Market forces decide what is and what is not produced, via exactly this mechanism. This is the very essence of what a market is.

But if the price you have to pay to get somebody to do the job, it would be true that no american wants that job, as the job wouldn't exist unless it cost less to hire somebody to do the job than it is worth to the one who pays.

lol, why does anybody need to say so? This is free market 101.

Also I really believe that's how the future looks like, thanks to AI and automation: fewer and fewer jobs with higher and higher requirements but also higher and higher pay.

Because the news never calls this out. Here's an article in The Guardian from just yesterday:

https://www.theguardian.com/business/2018/nov/13/workers-eas...

> Britain’s employers have warned that severe skills shortages are holding back the economy after the latest official figures showed the biggest fall in the number of workers from eastern Europe since modern records began. > > The British Chambers of Commerce and the Federation of Small Businesses urged the government to deliver a post-Brexit migration system to meet their needs amid signs that the fall in unemployment in recent years was putting upward pressure on wages.

Notice how an upward pressure on wages is bad (because this is from business groups). Even the Guardian doesn't point out how stupid this logic is.

Does this really apply equally to programmers and starbucks baristas? I don't know of a single programmer who didn't make more at his/her new gig.

That’s quite an amazing theory. Is there any fundamental law of economics that describes such a profound relationship?

Supply and Demand

https://en.wikipedia.org/wiki/Supply_and_demand

It's common for people on HN to say "there's no such thing as a shortage, just pay people more", but that assumes that the amount of value people provide is infinite, and can just keep growing.

To the extent that companies are offering "good" wages already, the people who need to hear the message about a shortage are those who would consider changing fields for the current wages.

Yup, that will clearly never work. eye roll

Do you have to be a right-winger or a left-winger to believe that private companies owe you something be it education, training, or a special level of compensation. I mean they already pay taxes. If you don't like the conditions and terms offered, just ignore the company. How come people on HN are praising the free market (saying there is no shortage, it's just supply and demand, and stuff like that) and criticising the companies who're exercising their right for free market at the same time?

They got rid of their training programs so that workers would have to acquire new skills at their own expense.

Then they were surprised that a dearth of the workers wanted to acquire skills that are only useful for employees at a tiny subset of companies, who refuse to pay more for them, and instead most went for more portable, more universal skills.

But they still don't want to pay more for the niche skills that they require--the skills that no one is acquiring because the marginal benefit of acquiring them do not pay the cost of the training. And they don't want to change their business model to work better with the skilled employees who have the more commonly learned skills.

This seems like all that would be required to fix it is an economic understanding at the most basic level--supply and demand. Pay more to employees already suitable, or pay to train those who are not, but have sufficient aptitude to become so. Labor skills are a service product, and the market finds a price for them just the same as every other product. If you can't buy what you need, you got outbid.

There seems to be some flaw in business management education if managers are ignorant of this, and some flaw in public policy education if the managers are not ignorant, but just pretending to be, in order to get government concessions. Somewhere along the line is a person that needs to re-take Econ 101.

For the question of "What if we train them and they leave for a competitor?" it doesn't take much to work that out with thought experiments. The game-theory analysis says that each individual company is better off ending its in-house training program and poaching its trained employees from another company, with the greatest advantage going to the company that does this first. So the Nash equilibrium is for no companies to have their own training programs, and therefore for no companies to have access to trained employees, while the optimal group benefit occurs when every company has a training program, and trains rather than poaches. The obvious solution is to cartelize the competitors, such that they all agree to contribute to a common training program, and give at least a minimum pay raise to every employee trained by it. There are a variety of ways to make that happen. A union could run the program, and force the businesses who are hiring its members to pay for it, by threat of embargo. A government could tax the businesses, and use the tax to fund a professorship at the public university, required to teach certain classes. The businesses themselves could create certifications, and jointly control the certification body, such that certain certification levels meet some common needs of all participating companies, while those seeking certification pay all the costs of the training program.

Or, one businesses could pay more to prospective employees that strategically acquire niche skills, as a means of encouraging them to actually train themselves. If you're running a business, you can't just sit on ass and expect the world to just cater to your needs. The world wants money.

yay wage inflation

I guess I'm not very clever because I don't understand how encouraging inward immigration in search of cheap labour isn't akin to a ponzi scheme. Another thing I never see discussed is: what is the top limit to the population a country can carry without things becoming miserable? Surely at some point inward migration will have to stop unless we aim to have every single citizen of the world living in a single country, and what then?

Also, how is it morally or economically justifiable to let existing citizens languish on unemployment benefit whilst solving the problem of their lack of participation in the labour market by opening doors to cheap migrants?

It seems to me like if we care about our fellow citizens we should all get used to paying higher prices in support of them, which might enable them to obtain the necessities of life in a more fulfilling manner.

If you pay more, people bid up prices on things they buy like housing and food. There is no silver bullet that solves all things. The reality is it is a combination of policies that promote equality and opportunity, or they promote concentration of wealth and power in a few individuals, corporations and political bodies.

> no silver bullet

that doesn't change the fact that a race to the bottom i.e. lower prices is surely a bad thing.

the productivity in the US has been stagnating/decreasing for more than a decade already. Tight labor market requires to pay more to employees which in turn requires the businesses to increase productivity and efficiency - i.e. the more expensive the labor the less waste of that labor can the business afford. Add to that the tax cuts which automatically made the employees even more expensive (actual cost of employee = cost paid - tax on profit, i.e. $100 employee salary comes down to just $70 in actual cost with 30% profit tax rate whereis it is $80 with 20% profit tax rate). Even more automation/computerization/robotization/etc. to come.

How does giving companies more money automatically make employees more expensive? That's extremely counter-intuitive.

> How does giving companies more money automatically make employees more expensive?

Giving companies more money by itself (e.g., “here, have $100,000 no strings attached”) doesn't.

OTOH, taxing retained profits at a lower rate does (it increases the after-tax cost of any reduction in before-tax retained profits; any expense is, considered on its own, a reduction in before-tax retained profits.)

In exactly the way deductibility of charitable donations subsidizes such donations at the taxpayers marginal tax rate deductibility of business expenses subsidizes such expenses at the businesses marginal tax rate, and cutting the tax rate cuts the subsidy.

I think I get what you're saying. The savings from not paying the employee are increased when the profits are taxed less.

This makes sense if the employee is a net negative on pre-tax profit. If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper?

>If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper?

in a situation of rigid linear connection between expenses and revenues - i.e. when adding additional work units immediately and proportionally increases your revenue. In real life there is usually elasticity between expenses and revenues - while increasing/decreasing expenses has immediate direct effect on the bottom line there is no such effect on the top line. The situation is even worse when you need to hire or do capital investment today (and thus take the hit today) while the related revenue increase would come only some years down the road.

So this is part of a more general effect where low taxes on profits deter investment? It makes a little more sense to me phrased that way. You don't need to worry about increasing your future profits as much when they're higher now.

It's intuitive iff you believe that paying taxes on profits is worse than not even having any profits to tax.

(I don't share that belief)

whatever one's beliefs are, it is very intuitive to everybody what is going to happen to charitable contributions if the tax deduction is removed.

In accounting grand scheme of things employee salaries, materials, depreciation of capital assets, etc is just the same thing as charitable contributions - just deductions.

That would only be a meaningful comparison if we were talking about wether or not money a business doesn't have because it was spent on wages should nonetheless be counted as taxable earnings.

>money a business doesn't have because it was spent on wages should nonetheless be counted as taxable earnings.

that is exactly how it works. All business revenue is counted as taxable earnings unless that amount is reduced by deductions. Money spent on wages is just a such a deduction. Charitable contributions is just another such a deduction. No difference.

And that's the point, nobody is challenging that, for good reason. Changing the deductibility of charitable contributions would be just like that, a redefinition of the tax base. The tax base is orthogonal to the tax rate, which is why decreasing the corporate tax rate does not make employees more expensive.

(well, occasionally the idea of gross revenue taxation sparks up, but I have not seem that anywhere in this discussion, and it never survives the first mentioning of vertical integration anyways)

>Changing the deductibility of charitable contributions would be just like that, a redefinition of the tax base.

ok, i see where we have disconnect. Let me rephrase my example - what happens to deductible charitable contributions if tax rate goes from 30% to 5%?

One possible outcome is that you donate more before getting the same net return.

It really depends on the target metric: Do you want to donate at least x? Do you want to net at least y? Or do you want to pay at most z in taxes? Only z would cause reduced contributions from shrinking tax rate. Unless of course there is some disguised return channel hidden in the charity and those contributions are not as selfless as they are supposed to be to legitimate deductibility.

Don't know why you're getting downvoted. This is a problem all wealthy countries face.

As GDP increases, you have to pay workers more or they will find more profitable work, as is being suggested in the article. That, or a lot of workers must not be allowed to reap the benefits of economic growth, and that will be tremendously destablilizing. The problem is, growing wages make domestic production less and less competitive with foreign production. So wealthy countries import goods from places with lower production costs.

So, as wealth increases, if you're trying to maintain any semblance of income equality, anything requiring human labour must increasingly get outsourced to cheaper countries. Wealthy countries can only competitively produce high-value goods and services that require e.g. massive capital investments and high levels of technical skill and education.

It follows that wealthy countries will eventually face a labour crisis: They have, as a historical leftover, a large class of labourers who no longer have employable skills, and can't even theoretically be re-trained into more current working roles, as there simply aren't enough of those to go around. "Productivity increase" is just another way of saying "more unemployment".

I'd like to propose a kind of trilemma here: High median wage, High employment, large population - Pick two. Having all of these can not be sustained IMO, and I think the current political upheavals in the west largely stem from this. You either have tremendous income inequality among workers, you have a large unemployed class, or you have a population consisting largely of highly-skilled specialists.

This is precisely the problem that a basic income would solve...

Yes, it's the problem a basic income proposes to solve. I'm intrigued by the idea, but I do wonder about the long-term economic effects of it.

It seems to me that at it's core, basic income would involve a transfer of wealth from companies and wage-earners to the unemployable. Isn't that just looking at the issues I described and going "oh well"? It doesn't seem to solve the competitivity problem.

Optimistically, basic income might enable enough workers to re-educate themselves into new roles that the result would be a net positive, but apart from that, I'm not really seeing how it changes the big picture.

Under basic income, you _always_ come out ahead when you work. you can take a dollar, or you can have a 2 dollar tax cut.

I've never personally been in the position, but i've met quite a few folks that refuse to take a job, because it screws up their benefits.

BI is not a panacea. There are folks out there that can copyedit 30 hours one week and none the next. There are employers who would love the extra occasional help. Unfortunately taking that job nullifies disability - even though they can't work a large fraction of the year.

Before widespread access to computers it made sense to just take the loss on those edge cases. There's really no excuse any more. I know a handful of examples may not be convincing, but i'd argue the existence of even one person means the big picture is pretty screwed up.

BI, again, might not be the answer. Sharp cliffs, creating situations where willing people are screwed over when they want to work is stupid. BI is a pretty obvious easy patch for those weird islands we've created in our current byzantine rule systems.

I don't disagree, but fixing edge cases in social securit, while important, wasn't really what was being discussed.

Sure, you could probably eke out some increased efficiency from basic income if it fixes the problems you describe without being too expensive. As far as the wider economic issues though, isn't it just kicking the can down the road a bit?

The big picture is that our society is predicated on continuous economic growth, and that's just not tenable in the long run. Basic Income may be a part of the answer, but we're going to need far bigger changes than that. What changes, I sure don't know.

> The big picture is that our society is predicated on continuous economic growth, and that's just not tenable in the long run.

On the other hand, US real GDP per capita grew 2%, year after year, for more than a century now. It is both the case that exponential growth is unsustainable, and that exponential growth has been sustained. Since exponential growth since industrial revolution is almost entirely responsible for current human welfare, we should try our hardest to continue it.

It's a mechanism to allow society to distribute wealth who aren't contributing through their labour. Which will become increasingly important as we transition into a world where labour is automated and we don't require most people's labour.

(I'd argue that we're already at the point where some people's labour is superfluous to society).

> basic income would involve a transfer of wealth from companies and wage-earners to the unemployable

Unemployed, but not necessarily unemployable. "unemployable" seems to suggest that these people don't have useful skills. But it may simply be that societal demand for labour decreases and thus people can't find employment even if there is nothing useful that needs doing...

> the productivity in the US has been stagnating/decreasing for more than a decade already.

Here's a chart which shows this statement is incorrect:

https://www.bls.gov/lpc/prodybar.htm

Now, productivity growth has slowed down, but it hasn't decreased. 1%/year may or may not be stagnation.

"Higher Wages" is almost never the answer for finding more candidates.

The only way higher wages lead to more candidates is by taking them away from other companies or other industries, and sometimes from other countries. So that is sometimes an option for certain employers, but not for an entire industry. It's a myth that there is a pool of workers who is "underemployed" because of low wages.

Also: In a free market, if companies can earn more profits by hiring more people by offering higher wages, they will do so. But increasing wages also reduces profit, and there just may not be enough room in the margins.

> The only way higher wages lead to more candidates is by taking them away from other companies or other industries, and sometimes from other countries. So that is sometimes an option for certain employers, but not for an entire industry. It's a myth that there is a pool of workers who is "underemployed" because of low wages.

But that's only true in the short term.

> In a free market, if companies can earn more profits by hiring more people by offering higher wages, they will do so.

But we're not in a truly free market, are we? And we've already seen huge tech companies band together to keep profits artificially low. And that's just the one's that got caught.

> But increasing wages also reduces profit, and there just may not be enough room in the margins.

Corporate profits are at an all time high, and have been for quite some time. We're paying C-level executives insane amounts of money. Profit margins are surely not the issue here.

How does competition for workers decrease over time through higher wages? If you are implying that more high school graduates would choose a particular industry or profession because of a wage hike, it's still a situation of taking them away from other options.

The market is free enough. There seems to be some collusion, direct or indirect. That would change my proposition though, because companies cooperate because defecting (by increasing wages) doesn't benefit. If one company increases wages, others have to follow. Good for workers, but that's not magically creating any new workers either.

It's not about "corporate profits" but about the marginal profit of an additional worker gained through higher wage offers. On the contrary, at a certain point workers decrease work hours when they get more pay.

> by taking them away from other companies or other industries

> So that is sometimes an option for certain employers, but not for an entire industry.

It is not so simple. Higher wages drives automation which then reduces the need for labor.

For example in my home country it is still common to have a maid because it’s so cheap - but because of this there is much less household automation.

On the other hand in the US with my robo-vacuum, dishwasher, microwave, and weekly meal delivery it takes me under 1 hour a week to do the cooking and cleaning.

The problem with that argument, as with many others, is that it is focusing on a small part of the entire system, while ignoring the reactions of other parts.

In this case the driving factor for automation is the same as the driving factor for higher wages: The prospect of higher profits through more work getting done. A wage increase is only possible when it increases profits over the alternative, including automation. Automation will only increase if that is more profitable than the alternative, including higher automation.

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