There’s No “Skills Shortage”


This is brilliant use of basic micro-economics to demolish the idea of a “skills shortage”.

“So what’s a “job market”. A simple definition would identify the nexus of potential workers and potential employers in a specific geographic region in a particular occupation. For example, “welders in metro Chicago” or “CNC machine operators in SE Michigan” or “software developers in Houston” would be examples. Now if there’s a “shortage” in one of these job markets, it means there are fewer sellers (smaller quantity offered, to be technical) and more buyers demanding a larger quantity at the going market price. Now what happens in both theory and practice when a market has a persistent shortage? Anybody? Yes, the price rises. Price goes up to attract more sellers and discourage buyers. And the price keeps going up until equilibrium between quantity offered for sale and quantity demanded become equal and eliminate the shortage. If there were shortages in job markets we should see wages going up! We should see companies tripping over themselves to offer more and better benefits. But we don’t see that do we? Wages are stagnant across the board. That’s because there really isn’t any widespread “skills shortage”.

What we have is business owners and managers reporting a shortage of highly skilled workers who would be willing to work for below-equilibrium and falling wages.”

There’s No “Skills Shortage”

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