A lesson in supply and demand, and a question about a supply-and-demand breakdown


by David Safier

A story in today's Star could be from an intro Econ textbook. West Coast farmers can't find enough workers to pick their crops. The labor supply is down, so demand is up, which drives up the price of labor. Farmers are paying workers more than minimum wage, they're buying meals for workers, paying for transportation, even paying bonuses to people who stay for the season, since other farmers are trying to lure workers away. That's the way supply and demand is supposed to work.

Oh, and the farmers are supporting immigration reform, hoping that will increase the supply of workers.

So my question is, why isn't supply and demand working in skilled labor areas? I'm more than a little out of my depth here, diving into economics, but here's how it looks to me.

Tech firms are saying they can't find enough trained workers to fill all the job openings, and we're hearing the same from prospective employers in other fields that demand specific skills. In other words, they're complaining that supply is low and demand is high. So why aren't wages going up in those areas to meet the demand? Why aren't businesses paying relocation expenses so people who have the right skills in the wrong location are given an added incentive to move where the jobs are? Why aren't businesses offering education and training to people who may not be a perfect fit for a job but have the right educational background and basic skills sets — and paying them during the training period? How about retraining older workers who have been displaced because their skills are no longer appropriate for today's job market, something that happens regularly in the fast changing world of high tech. Train a 45-55 year old worker to perform the tasks needed in today's workforce, and a business will likely have a highly motivated, very loyal worker who will stick around for the next 5-10 years, at least.

What I see instead is business people complaining there aren't enough skilled workers to go around but keeping wages flat and offering few incentives to bring new workers their way. That sounds to me like the businesses are doing OK with whatever labor shortages they're suffering through and playing a waiting game, hoping workers will suck it up and take low wages for skilled jobs which should pay far more in a tight labor market.

Oh, and high tech bigwigs are big supporters of immigration reform, especially the kind that gives more visas to people in other countries who will jump at the chance to get a job in the U.S., no matter how low the wages.

There may indeed be a degree of mismatch between certain skilled jobs and people in the U.S. labor force. But if the supply were really that low and the demand were really that high, we'd be seeing all kinds of financial incentives to entice new workers. That doesn't seem to be happening, which leads me to conclude that employers are exaggerating the problem, because keeping labor costs down is more important to them than filling empty jobs.