Public service announcement: There is no such thing as a labor shortage. Having trouble hiring developers? Offer a salary of $1 million per year. Your new problem will be job applicant crowd-control. Whenever an employer reports a labor shortage they mean they can't find enough people to take jobs AT THE WAGE THEY ARE WILLING TO PAY. Lest you brand me a red shirt-wearing Das Kapital-waving pinko commie, let me lay another one on you: there is no such thing as a job shortage. Whenever anyone reports a shortage of jobs they mean they can't find anyone willing to employ their skill set AT THE WAGE THEY ARE WILLING TO ACCEPT. Any discussion of the labor market that focuses on quantity supplied, or quantity demanded, without addressing the necessarily-related price issues is ignorant at best, and very likely intentionally deceptive.
Labor shortage does not mean what you think it does. If we use the logic you presented, then we can say "There is no such thing as a shortage of Cabs, try offering $100 for a cab ride and there will be people pulling their personal cars next to you to take you where you want to go". Well Duh.
A shortage of a good means that there if there can be pending buy and sell orders in a market book, then there are a lot of pending buy orders, but just not for the price at which sellers are willing to sell.
What SV is saying that there are a lot of people who would buy a lot of goods, if they can be produced cheaply (and it isn't because they're poor, it's just because the consumers don't value that good that much). If Netflix raised their fees to $90 per month then it means that a lot of people would cancel their subscription (and not all would do because at $90 they will be unable to meet their rent).
What SV magnates are saying by "labor shortage" or "skills shortage" is that they want higher profits. What SV workers are saying by "no skills shortage" is that they want the same or higher wages.
If Netflix magically halved their wage bill they would likely keep their price the same since how much a Netflix devops engineer gets paid doesn't change how much a family in Peoria is prepared to pay for a Netflix subscription.
This seems like an argument that can be used to argue that shortages cannot exist for anything you can buy. The same rough argument could be used to argue that food shortages cannot exist.
I'm pretty sure the word shortage already implies that there is a shortage at the market price, not at an arbitrary price.
I see your point, and thinking about it helped clarify my thinking, so first, thank you for that. I think another way of phrasing my opinion is that the US labor market is a large, reasonably efficient market; that it's reasonably well modeled by a simple supply and demand model; and that discussing it in other terms obscures the important issues. The notion of a shortage is fundamentally incompatible with a simple supply and demand model of a market. The market price in such a model is, by definition, the price at which supply and demand are balanced. So if you're talking about a shortage in the US labor market, you're either claiming that supply and demand is a poor model of the labor market, or you're talking nonsense. I think either is misleading or at best confusing. So to an extent I really am saying that shortages can't exist for anything you can buy on a large efficient market.
Of course not every market is a large efficient market. If you're talking about a price-regulated market, by all means, discuss shortages. Another good situation where discussing a shortage would be appropriate is markets that have very or perfectly inelastic supply over a relevant time period. Say, a vaccine that costs $1 but that takes 6 months to produce due to the biology involved, combined with a major epidemic in the relevant disease. It's fair to call that a shortage.
I think labour markets are some of the least efficient markets that exist. Without immigration it takes at least 4+ years for extra supply to become available based on increasing prices. And when you hire someone you really don't know what you're getting, particularly in software.
Constraining supply increases salaries precisely because it takes supply so long to incorporate information.
On top of that, supply and demand is a pretty leaky abstraction, I don't expect it to be very accurate in such a nonideal market.
Right, GP is leaving out A. necessary skills, and B. the size of the labor pool (multiplied by the labor force participation rate).
For any given skill there is a labor pool with some participation rate, of people who currently have that skill, such that it is accurate to say that the market has a shortage.
Answers to the shortage must solve for either the size of the labor pool, the rate of participation, or the amount of people who have that skill.
Those answers vacillate between importing labor to solve the problem now, or forcing the market to educate people by blocking imported labor.
The problem with importing labor is that it reduces market incentives to educate people. The problem with not importing people is that it means you'll have a labor shortage until the market adjusts and people re-educate.
> I'm pretty sure the word shortage already implies that there is a shortage at the market price
"Shortage at the market price" seems to be a somewhat incoherent concept. The market price is the price point at which the supply and demand curves intersect. Other than a discontinuity in either supply or demand such that the curves pass without intersecting (which makes the market price ill-defined), demand equals supply at the market price.
I agree that it's poorly defined, but I would argue that a shortage at the market price implies that buyers would buy more at the market price if more of it was available.
We're pretty comfortable talking about shortages in consumer markets when we would buy things at the stated price, but can't because it is sold out (eg Pixel phone shortages), so I'm not sure why we can't say a similar thing about labour.
> I would argue that a shortage at the market price implies that buyers would buy more at the market price if more of it was available.
That can just be a current price below the equilibrium market price; I'd argue that a shortage is a specialized instance of that resulting from a transitory decrease from long-term supply (or increase from long-term demand) that is expected to revert to normal.
But if you need annual supplements of labor for the same field over a period of decades, that's not a labor shortage, its price being artificially suppressed (and inhibiting market signals that would develop domestic supply faster.)
> But if you need annual supplements of labor for the same field over a period of decades, that's not a labor shortage, its price being artificially suppressed
Theoretically, couldn't it also be that demand is consistently growing faster than anticipated (even after whatever corrections are made upon discovery that it previously grew faster than anticipated)?
This assumes that labour is perfectly re-locatable and everyone has perfect pricing information.
Google literally does offer $1 million salaries for the right positions, the problem is that most of the people who could make that work have already been recruited.
Which is why they pay interns six figures to show up for what amounts to a long job interview, to make sure they get all the new talent the moment it's minted.
If you make it more difficult to recruit people from untapped populations abroad, they won't pay lower tier people more, they'll open offices aboard to capture their acceptable talent.
So yes, there is a shortage of talent that meets the bar. While everyone trained as a book keeper can almost certainly fill any book keeper role, not everyone trained as an engineer can actually fill any role. Not just because some people are shitty engineers, it's because engineering involves spending long periods of time learning domain knowledge that isn't transferrable, even setting aside the fact there are literally thousands of types of engineer.
FWIW, my rant was not intended as a rant against immigrants, just a rant against people that spin their personal or corporate financial interests as a national crisis.
There's a surprisingly large cross section of people paid extremely well in Google.
The company is heavily automated and very profitable, which means they can attribute those profits to the humans largely responsible for them with accuracy that isn't often seen outside finance. The bonus structure is extremely kind to the highly productive.
I'd really like to hear some specifics on this. What kind of job descriptions do they have? Roughly how many are there? Are they executives, managers, or individual contributors? Does this only happen in bonus form for extraordinary performance, or can new hires start with the expectation of comp at this level? I regularly hear stories about non-executives getting 7 figure paydays in trading and investment banking. I hear stories about non-executive tech people getting 7 figure pay days due to startup liquidity events. This is the first I've ever heard of something like this at an established tech company.
Higher wage won't necessarily increase number of qualified candidates. To illustrate the point: you could offer piles of gold for a decent C++ programmer in the ancient Roman Empire and get no one simply because they didn't exist.
Higher wages definitely influence graduating STEM students who are choosing between SV and finance. They also cause bootcamps to pop up all over the country and bring people from other industries into tech. In general the market will follow the money.
It is a good point that the market can't achieve the impossible. C++ bootcamps probably wouldn't spring up in your hypothetical ancient Rome and offering millions of dollars today for employees with skillsets that modern humans can't achieve wouldn't work either.
The question is whether you or not the current bar of a "qualified candidate" is impossible. I would say no. Given the right financial incentives, the candidates will exist.
EDIT: (from the article)
"Currently, U.S. colleges graduate far more scientists and engineers than find employment in those fields every year — about 200,000 more — while the IT industry fills about two-thirds of its entry-level positions with guest workers."
One of the reasons that SV tech firms hated Trump was because he wanted to stop the abuse of H1-B Visas.
Even Republican and head of HP Meg Whitman said she was voting against Trump. His promise to fix the H1-B Visa abuse would mean that HP would have to pay market wages for programmers and engineers.
Not two weeks ago I was "hired" by a firm to do some consulting for them, during which time they extracted data on "how" to solve a problem (NLP related) and then flew in some dude form India to code the solution.
I made a decent wage. For two days.
He undoubtedly was a faste progrmmer than me, but fuck if we both didn't get used. I live in a state that thinks the word union means that General Sherman is fixing to burn down the capital, so there's little to no recourse. And I am hesitant about even writing this given how shadily I was treated.
Needless to say, there are many reasons why DT was elected, but one of the primary ones is because he promised a thousand times if he promised once that he would slow the tide of incoming labor to shore up the lessening of wage depreciation.
I also love how ten years ago the Department of Labor "projected" that STEM career growth would continue unabated for many years, and yet now I can't find a job writing code for literally anyone beyond the example I mentioned earlier.
If this is the future, we are completely and totally fucked. Save your pennies folks, you're going to need the copper. Oh, and don't forget to make sure to keep taxes off the rich and the jobs outsourced so the poor Americasn can take it in the ass until the next "public servant" gets elected and doesn't do what they said they would.
Meanwhile, I'll be teaching 7 year olds to code hello world (if I am ever lucky enough to actually get a GD job that isn't flipping burgers or pouring sweet fucking tea) while pining for the research position I spent more than three decades in school to be smart enough to do.
God Bless America, and all of the nations "she" serves.
If the guy that replaced him was that much better than him, that that person should be treated like a first class citizen. Right now H-1B workers are treated like indentured servants and labor abuse is rampant.
That's great, since everyone knows all STEM degrees are equivalent. We'll just shift those biology students into tech jobs and presto, done.
On the list of reasons to hate trump the H-1B is pretty far down. Especially since the proposals so far wouldn't hurt the companies who aren't abusing the system.
What I don't get is why they don't just raise the minimum pay for H1-B visas. It might not fix all issues for this type of visa in the long run. But the fact that the minimum pay was set in 1989 seems like an obvious issue to me. This would seem to be corroborated by the numbers.
The lottery system is arguably the worst part of it, it punishes companies who carefully and rigorously select candidates and rewards companies who "spam" applications. Again, while not perfect, compensation is probably an okay proxy for how selective the interview process is.
Apart from the people abusing the system, who is against a market rate/inflation adjustment? I have no stake in this, but I really don't understand.
>"What I don't get is why they don't just raise the minimum pay for H1-B visas."
That was a key part of Trump's proposed bill. IRRC, the proposal is to increase the minimum from $60k to $130k. Interestingly $60k in 1989 was worth what $117k is in 2017. In other words, given current inflation rates, it's very likely that the new minimum will be the 2020 or 2021 equivalent of the original minimum.
That would suck for low-end outsourcing body shops, be good for the giant SV tech companies and probably remain about equally sucky for young start-ups as it is now.
This ignores the wild disparity in wages across the US.
Not every company is in a place where they can find enough local customers to support a 2x increase in their salary costs. While that has been made somewhat better by the reach of the Internet it's still going to be a powerful force to move companies from lower density areas where it's almost impossible to recruit, and into high density areas that already have the bulk of the talent and customers.
You're effectively fucking middle America into relocating both their people and businesses.
>"You're effectively fucking middle America into relocating both their people and businesses."
I haven't taken anyone's job, I'm sensitive to wage disparities, I support companies letting people work remotely and I'm not doing anything at all to middle America.
Most of the problem with middle America not having jobs is brain drain.
There's no jobs because it's very hard to find people to fill key roles.
But there's no people to fill key roles because there's no longer any jobs, and they're in more populous centers.
If you're pushing policy that prices the few businesses there out of the remaining pools they can hire from, you might as well just close up the middle of the country and admit defeat.
> You're effectively fucking middle America into relocating both their people and businesses.
Some Australian visas have a condition that you must spend 2 years in a regional area, maybe the US and its states can have the condition that you must work in some certain regions for X years.
Startups have never really benefited from the H-1B system anyways -- they rarely have the resources to discover and interview candidates from outside the country, nor are they willing to wait 6+ months for a visa application to be reviewed, especially when there's a good chance that it may be randomly rejected.
Crazy that an increase of supply depresses the price in a market. I have not been this outraged since I discovered water was wet. Competition makes our world prosperous. We should welcome it
Not in this case and this is not very hard to understand. The H1bs who come to US are exploited by companies and are paid less than market salary. The reason most companies give is because they have to bring the person from overseas they have made significant investment in time & money and therefore pay them less.
There's the baby, which is highly talented people educated at elite universities overseas. Then there is the dirty bathwater, which is seat warmers hired at the lowest possible wages by "body shops" that bill them out to government and corporate customers. The first does create prosperity. The second, not so much.
There are several possible fixes: Auction visas with a high minimum. Disallow contracting-out workers on visas. Etc. It's a system that would be easy to fix at zero cost, and maybe even could be made into a source of revenue.
Or would could enforce the law. The H1-B Visa program was intended to fill jobs for which there were no Americans with those skills desired.
There should be some sort of approval process from an institution or firm that does not have a conflict of interest with the firms applying for H1-B Visas.
The problem is that the law as written, while it sounds like it should not allow body shops to hire phalanxes of seat warmers, has been lawyered-around (and by that I mean there are lawyers specializing in fitting your favored candidate to an H1-B visa): Post a job description that's impossible to fill, and then arbitrarily accept that the H1-B applicant meets the job criteria. Short of litigating every case, how do you stop that?
Competition only increases efficiency if the price of a good is currently inflated.
Labor is likely under-priced as a good relative to other expenditures, like property and the means to production, so an increase in competition for jobs does not necessarily equate to a more highly functioning society.
You're ignoring the creation of new goods via reinvestment of profits.
In any case, for a given good if there is any profit at all being made (which...well, there should be otherwise the producers wouldn't exist) then the price of the good is (I will borrow your language) "inflated" and has room for competition to be brought down.
There's a lot of stuff wrong with your claims, I don't know where to begin...
Profits aren't automatically inflated margins. There are healthy margins, and there are inflated margins. There are even margins that are so thin that it's unhealthy, as in the airline industry.
Now, to loop back around to your point about investment; either party having additional capital will allow that party to further invest.
That is true in the case of formalized businesses, like the ones your thinking about, who can further invest in capital goods.
However, it's also true of more informal businesses that you're ignoring, specifically, the employed individuals themselves.
Employees are in the business of services -- they perform some labor, be it mental or physical, and are paid for that labor. Formalized businesses are their customer.
Profits that those employees obtain are also capital which can be invested -- whether that investment is in their health, their happiness, their residences, their educations, buying tools, the stock market, creating new businesses, affording time to raise and educate their children, and so on.
Theories of economics which ignore that the employed are also themselves informal businesses are disjointed, and fail to explain the totality of economic growth and investment.
I feel that there are some core issues that can fix the problem:
1) Solve the Green-Card backlog issue that forces people in the backlog to stick with their current jobs. This is a major thing, that is not talked about more often.
2) Simple merit/salary based priority queue to grant VISAs.
I have never quite understood why there is this urge to entirely get rid of it instead of fixing it to do what it was originally supposed to do.
Edit: On an H1B right now, and I do think there needs to be major fixes.
You still have caps. The difference is you don't have H-1B workers who are trapped in jobs and have little power to move around and increase their wages.
You can see this today. Look at the number of GC sponsorships by companies that treat H-1B employees well (Google, Microsoft, etc...) vs the consulting companies like Infosys and Tata. They have no interest in getting their employees green cards because then they have no power over them.
@richardlong: I'm not even talking about expedited GCs. Even the normal GC process is horribly broken for people who are born in India.
Look up "Green Card backlog India" related searches. Currently it would anywhere from 15 to 35 years for a H1-B from India to get a Green Card after their Perm is filed.
Adding skilled labour can allow more opportunities to add more skilled labour jobs.
Without the extra slack, there's no opportunity. Part of what makes Silicon Valley work is that there's a lot of talent that is somewhat slack to allow for new companies to get started.
How preposterous that a question like this requires a study to answer it. It doesn't take a PhD in high math to know that corporations hire foreign workers because they cost less. IOW, Duh!
I don't understand why we don't just make the minimum H-1B visa salary 130k-150k. If it true that there are no other candidates that have the skills you need in the entire country then surely that skill set is worth a solid six figures.
