About Those Millions of Unfilled Jobs

I heard it again during the Governor's "State of the State" address: Indiana has a million unfilled jobs and those poor employers just can't find the right employee with the necessary skills to fill the position.

What a crock.

I have long believed that if you can't find something at the price you're willing to pay, the logical response is to either adjust what you're willing to pay or adjust what you're looking for.

Indulge an example: 

My law firm presently has an opening for a senior-partner level attorney who has a book of business that all but guarantees $2,000,000 in billable collections per year; who has litigated no fewer than 100 cases from start to end;  who has argued at least a dozen times before the U.S. Supreme Court; and who has a winning record before the Supreme Court. My law firm will pay this person $4,000/year. We have an unfilled job opening, right?

I can't help but feel that this is what so many employers are doing. It is the equivalent of me saying that I would like to buy a Ferrari for $50 and when I can't find a willing seller, I then lament that "we just don't have enough luxury cars."

Well, I read this in Slate today and would like to share some excerpts.

Articles in which executives moan about their inability to find qualified workers for job openings are business pressperennials, typically focusing on “middle skill” industries like manufacturing and constructionthat don’t require a bachelor’s degree. In the years immediately following the Great Recession, there seemed to be an entire cottage industry devoted to blaming America’s stubbornly high unemployment rate on the notion that workers just lacked the specific talents employers needed, rather than, say, the hangover from a housing bust and financial crisis that had crippled the economy.

It is so tiring to listen to MBA types talk about how the "real problem" with American workers is that they get paid too much. 

If good workers were really in short supply, you’d expect pay to rise quickly as companies tried to outbid each other for talent. Instead, employers spent years carping about a lack of good job applicants while letting pay stagnate.

Another thing that is tiring is listening to beneficiaries of current injustices dissemble and create reasons why the current injustices are indeed just.

 In the years following the Great Recession, the U.S. labor market was incredibly concentrated, with a relatively small number of businesses posting help-wanted ads across different industries and cities. That appeared to put downward pressure on wages; the more concentrated the local market, the lower pay tended to be, the study’s authors found. This, the study’s author’s argued, was a sign that U.S. employers had an enormous amount of monopsony power—meaning they were essentially free to set low wages, because few other businesses were around or hiring. 

An example of how this works:

Let’s say you manage a small construction company, and you’ve been getting away with paying your crew relatively little because there aren’t that many other contractors posting help-wanted ads in your town. You need a new carpenter. But you don’t want to tick off the rest of your men by offering this new potential employee a more generous wage. So you post the job with the same mediocre hourly rate you’ve offered for the past three years. Nobody good responds, and to you, this looks like there aren’t enough talented carpenters out there. But in reality, there’s only a shortage of people willing to work at the artificially low wage you’ve set your heart on paying. The real problem isn’t a skills shortage, it’s that you aren’t offering market wages, because the market isn’t functioning.

 I've written previously about monopsony power. The idea is that when there is only one buyer, that buyer maintains considerable bargaining leverage with any and all sellers. Anyway, I would encourage anyone who wants to know more about this dynamic to go read the Slate article. It's really good.