Examining the paradox of shortage of workers versus shortage of jobs

One of the paradoxes in economics is how can the unemployment rate be high yet at the same time businesses say they can't find enough workers?

Some theories have attempted to explain this problem, such as "the skills gap", but I believe most of these theories are, on the whole, inadequate to explain what's actually going on.

Employers say they have a shortage of workers and workers say there is a shortage of jobs.

In one sense, I don't believe the two will ever converge (not completely). To some degree, employers are always going to claim there are not enough workers and workers are going to complain there are not enough jobs. It's a matter of price, as well as worker quality. Employers could attract more workers if they offered a higher price, but they don't want to or are unable to do that.
In many cases a certain type of job may require an investment of training, and potential workers don't feel that investment is worth the pay at the other end of the tunnel, or the risk. (Or the employer doesn't feel the investment is worth the cost or the risk)

In some economic situations there is going to be more convergence between the two. In times off falling business revenue (or perhaps I should be more specific and say falling profit margins) businesses are going to be under pressure to cut labor costs. Their business can still use these workers, they just can't pay as much as they did before. And therein lies the issue.

It's an issue of contracting revenue that causes businesses to start complaining. The real issue is their revenue, but they are complaining they can't find workers to work at those price points. Often times price inflation obscures this, so it may not seem to the business owner that the amount of their revenue has fallen, when indeed it has, or that it may seem the labor force is demanding more money, when that's not really the case taking into account price inflation.

It's not necessarily just an issue about of total revenue, it could be profit margins. That is, the business might have more sales but it is not able to make as much money from each sale. They might even be wanting to expand their number of workers, but just cannot afford to pay them more money. And this is an issue which I believe has been happening in American society. There are more people, so the economy is bigger, but actually per person income is not greater. So businesses have more potential sales opportunities, but only if they could manage to keep costs down, because they're not making as much money per sale. This then results in issues with their business costs, including workers.

This is something we would expect to see more if the economy was contracting than expanding. If the economy was expanding, businesses might want to hire more workers if they could get them for a lower price, but these businesses wouldn't be complaining about it. Usually people don't complain about new opportunities that don't seem to be economically viable, for some reason.
When businesses complain is going to be when their business starts contracting, and they are having fewer workers, or their growth has stalled. This is exactly what happened in the wake of the Recession.

So it's not really a paradox, because one has to qualify what "enough" workers/jobs actually means, or what a "shortage" actually means. The real issue may well be falling onto other business or labor costs, or declining revenue or profit margins. In general terms, I think a business could always hire "more people" if the labor costs came down.

I once had an economics teacher tell the class there's no such thing as "true" unemployment. It's all a matter of how little money the person is willing to work for and what they're willing to do. He gave the example of an undocumented migrant selling bundles of flowers by the side of a freeway offramp. (I'm not implying there are not very reasonable reasons these people may not take these opportunities, but pointing out that it's not quite as simple as just black & white being able to get a job or not being able to get a job, it can be more like a continuum)

Another old related thread: the myth of the "skills gap"

 

I believe when prevailing wages go down below a certain threshold, there's going to be higher unemployment.
When wages are low it might also not justify the cost of relocation for semi-skilled workers. Relocation can be expensive and risky. So to a certain extent there might be regional disparities.
Also, it might be harder to attract more skilled workers in areas where the costs of housing are more expensive. That carries a hidden tax on the cost of labor. When we're talking about lower wage jobs, there can be other costs to the price of labor, like long commuting times, the price of fuel, maintenance on a car, and so on, that may not justify taking that job. Employment isn't just a simple exchange of money for time spent working on the job, there are numerous smaller costs and risks to working, and the impact of those costs can start becoming significant when the pay is rather low. That could account for some part of the discrepancy between available jobs and persons without work. For an older person, the chance of breaking their hip on the job (and all the expensive medical bills that may ensue) may not be worth working a minimum wage job.

 

This is called the law of supply and demand. Do you understand?

 

Read some Keynes! Read any labour economics textbook referring to involuntary unemployment.

The thread isn't very insightful. The reserve army is a discipline device on workers. It helps to maintain compliancy and therefore wage underpayment. Shortages refer to standard market failure (often encouraged by an education system serving a dual purpose: to invest in human capital; to justify hierarchy inconsistent with any standard division of labour criteria.

 

This thread does lend some credence to the notion of demand side economics.

When inadequate demand exists, you start seeing the mismatch between employers and workers.
(But let's not forget, this is demand relative to the size of the labor pool)

Lost of extra money (per person) helps gloss over any issues in the labor market and helps lubricate the economy.

Employers not having the ability or incentive to hire less desirable workers has to do with a poor economy.

 

There's no successful demand side or supply side economics. Supply side economics built on bastardised Keynesianism, deriving counterargument to analysis alien to Keynes' original contribution.

 

It's quite simple; logistically, or geographically, it's impractical to believe we can align every job seeker with an appropriate job. How many tens of millions of Americans live in rural areas of the US that provide little employment? How many major employers are located in areas like Seattle, SF, LA, NY, etc. in which the cost of living is unaffordable, traffic and commutes are horrific, crime and gangs, etc.? People need to be more mobile to locate where the jobs exist, and employers need to locate in areas where employees can comfortably live...until this improves your scenario remains in place...

 

Geographical discrepancies are only one part of the issue.

And like I already mentioned before, geographical discrepancies go hand in hand with low wages. A worker earning mininum wage may not be able to afford to get up and relocate across the country, especially with the risk that entails if the job doesn't pan out, the 6-month lease they have to sign to get an apartment, being disconnected from their support network of family/friends, etc.
If the worker already owns a house, or his wife has a job, that's a big cost right there, to get up and move.

I've heard several stories of people who got up and moved across the country because they were offered a job, and then when they got there the employer had changed their minds and decided not to hire them.

That's true, but the wealthier the economy is, and the more the supply & demand of labor tips in the worker's favor, the more alignment there will be between people and jobs, even including people who may not be the highest quality workers. When profits are high, the employer will take whatever workers he can get.

That's why in countries like Sweden and Japan you have teenagers and elderly people working in jobs where in other countries those jobs would more likely be filled by poorer middle-aged adults or immigrants.

 

imagine how slow you must be to feel I'm looking for a reading list from a standard libcommie statist

 

Supply and demand makes a reserve army impossible. USA has 97% employment and that's with 30 million illegals and and liberal trade deals driving millions of jobs off shore.

 

Nothing you say makes sense. If you want to critique Keynes, that would be a good start!

 

?? Supply side is built on encouraging the supply of goods and services which capitalism does exceptionally well. USSR never supplied one consumer product innovation in its entire lifetime despite an obvious demand .

 

simple. Keynes was a standard libcommie demand side statist. Here's his letter to FDR to end the Great Depression:

"But preference should be given to those which can be made to mature quickly on a large scale, as for example the rehabilitation of the physical condition of the railroads. The object is to start the ball rolling. The United States is ready to roll towards prosperity, if a good hard shove can be given in the next six months."

 

how is that possible given the demand side libcommieism is based in pure 100% ignorance? Show us a good demand side argument??

 

what?? how can you have inadequate demand when every human being is born demanding food, clothing, shelter, cars and vacations etc etc ?????? You make absolutely no sense???

 

You continue to make ridiculous statements. I can't be bothered with it today.

 

Good that you think a quote from your lord and master, Keynes, is a ridiculous statement! Ever see a conservative who has to run from a debate. What does that teach you?

 

It makes no difference to me the myriad reasons why something exists...my comment was if most people wish to reach their employment potential then they MUST be mobile. The ONLY way around this is for people to work from their homes or from office centers with no regard to where they live. Those who refuse mobility are relegated only to those jobs located within a few miles from where they live...

 

I agreed there is some truth to what you are saying, but pointed out that there are several caveats to this.

That when it comes to the lower wage workforce, that view doesn't really hold up as well. There are several things you have to understand when it comes to the lower wage workforce. It may not be so simple for them to just get up and move to wherever the jobs are. (due to very high cost of living in the new location or moving costs and risks, or the wife giving up her job)

Anyway, like I was saying, geographical discrepancy is only one aspect to the paradox. The employer wanting a worker and the unemployed worker who is available may still not be able to agree to terms of employment even if they're living in the exact same location.

Maybe, for example, the employer demands training and the worker is unwilling to get that training, and the employer is unwilling to provide the training.

Or the Catch-22 of employers only wanting to hire workers who have past experience, which is a frequent phenomena.
Then the employer claims he "can't find enough qualified workers".

 

I worked for a "sweat shop" operation this time last year.

All the labour is temp agency except back office and most management. 70% immigrant labour.
The "Amazon model"


Every time a delivery was delayed they let people go to save money and increase profits.
Or if you were the slowest worker on any day, they let you go.
If you complained in any way.. they let you go.

And this works, they made record profits.

The CEO complained in the national financial newspapers that they could not get the staff due to Brexit.
The truth however was not that they couldn't get the staff, it was that they kept sacking them, hospitalising them and even killing them.

When all you offer is day labour in bad conditions for low pay, you should not be surprised when the people you let go find alternative employment.

When you treat people like ****s, they don't wish to be employed by you. Shocker.

 

Yes. And that is how a "shortage" of jobs can exist simultaneously at the same time as a "shortage" of workers.
Although by technical economic definitions, there is no real "shortage" either way.

 

What the CEO must have actually meant is there was a shortage of workers who can work at breakneck speeds and efficiency like robots.
Paying $15 an hour, he probably had access to a more endurant and hard-working labor pool, but there was still a lot of turnover and burnouts.

So this is an example of a gap between employers and workers being about worker quality (a lot of workers aren't physically or mentally capable of doing that work at that pace and level of intensity) and work expectations.

I heard a lot of workers suffered repetitive motion injuries, or other accidental careless injuries, because the work was so fast-pace and strenuous. And when a worker is in the low wage pool, they probably can't afford the hospital bills. Looking at this from a financial perspective, it might make more logical sense for these workers to take a lower paying $9 per hour job somewhere else with lower risk of injury (especially workers who may be older or more clumsy, at greater risk of accident).

If an employer is only looking to higher some types of workers, it's not surprising there'd be a labor shortage.​

 

There is no unemployment under capitalism, only underpayment;

we really just need a fifteen dollar an hour minimum wage, unemployment compensation for being unemployed on an at-will basis in our at-will employment States, and Industrial Automation to help with social costs.

 

under capitalism how can you have a shortage of jobs and workers?? As usual you make no sense.

 

The gig economy is an example of extreme mobility. End result? Hidden unemployment (via underemployment)