Which is why the parent says that rising price eliminates any superfluous demand.
Demand is an economic principle that describes a consumer's
desire and willingness to pay a price for a specific good
or service. Holding all other factors constant, an increase
in the price of a good or service will decrease demand, and
vice versa.
A shortage, by definition, is a scenario where price is unable to rise. For instance, where the government enforces a price ceiling. In my local jurisdiction that happens for medical care providers. A shortage of doctors is very much possible. It is less clear what could cause a shortage of developers.
Having said that, there is another way to increase the supply: Attract others (back) into industry. There are plenty of people who find themselves doing other, perhaps more lucrative, things that would be suitable for the kinds of jobs these companies seek. For the right amount you can attract them into these jobs, but without better offers there is no incentive for them to stop doing what they are already doing.
That is correct, and it may be true. The reason I'm very skeptical is that we have been hearing this same spiel for 5 years at least. If companies are unwilling to raise salaries short-term, it will not incentivize long-term migration into this sector.
If you substitute "programmers" with "widgets", it is obvious what is going on here. Companies want "trade" (immigration) barriers lowered so they can get their widgets more easily and at a lower price. They don't care whether their widgets come from endogeneous US production or from abroad, so long as it is at a minimal price. Best of all for them if there are tons of widgets available both domestically and internationally, so that the price will be minimal.
For instance, suppose that land can be used to grow either lemons or avocados. Avocados suddenly become very popular and fetch a high price. Land that was formerly used to grow lemons is now used to grow avocados. So the price of a lemon now reflects the opportunity cost of not growing an avocado.
Because people can no longer get lemons at the price they used to pay, or at a 50% markup, they claim there is a "shortage" of lemons. They create an immigration system where someone is allowed to come into the US and farm land - on the condition that they grow lemons. The immigrant is not allowed to grow avocados, nor is the immigrant allowed to do something other than farming. You're here to grow lemons buddy, because there's a shortage of lemons. Ok, fine, grow lemons for 7 years, and we'll give you freedom, but only after you've made a massive investment in setting up a lemon operation and costs of changing would be high.
What this does is ensure that absolutely nobody with the freedom to decide what to grow will ever grow lemons. It will also ensure that the price of lemons will never reflect the opportunity cost, so the market signals that would bring prices back into equilibrium, encouraging people who can choose to grow avocados instead will now be suppressed.
This is why a lot of people have no problem with immigration, but are opposed to "employer sponsored" (corporate controlled) immigration designed to fill specific shortages. What these programs end up doing is creating market distortions that make long term problems even worse, all while limiting personal freedom.
It's not that hard to solve, just say that immigrants are free to study what they wish and work in what fields they wish. Employers don't get a say in this. If they aren't offering pay and work conditions strong enough to draw immigrants into programming, any more than for people born here, fine. I see absolutely no reason let corporations tell immigrants they have to be programmers rather than real estate agents, lawyers, nurses, drywall installers, or sandwich shop owners, just so employers can get to hire programmers at salaries that aren't good enough to draw people with freedom into the field.
It absolutely does distort the market, but if we are under a political constraint that we can only have X immigrants per year, it does make sense to take the ones that will be working in high-wage sectors, if we are out to maximize GDP.
> It will also ensure that the price of lemons will never reflect the opportunity cost, so the market signals that would bring prices back into equilibrium
Hm, I'm not sure. It seems like restricted immigration would basically move the supply curve for lemons to the right by decreasing cost of wages for lemons (only). Then because avocados are competing for the same land, avocado supply curve will move left.
The result will be more lemons at a lower price and less avocados at a higher price, but they will both still be in "equilibrium". In either case, the rate of return per unit land should be equal for both avocados and lemons, yes?
It seems the main effect of interest to us would be that wages for avocado-growing employees would be higher and lemon-growing employees lower under a restricted immigration policy vs an unlimited one. So, back to reality, I have never thought about the fact that H1Bs are actually good for everyone else's wages (outside the affected sectors) compared to unrestricted immigration.
If we concerned about "fairness", we could note that it might therefore also be more morally sound to restrict immigration to high-wage jobs because it would actually compress wage inequality and the low-wage natives would benefit. The losers in this scenario are high-skill natives and low-skill foreigners.
In theory, we all benefit from more immigration. Yes, some of the immigrants will compete directly with us for jobs and customers, but others will provide us with services and be clients and customers. Again, in theory, the increased economies of scale leave everyone better off.
The thing is, job-specific immigration restrictions don't allow the market to work properly. If immigration forces people to be programmers, then homegrown programmers will be disproportionally affected by immigration. Sorry for no cite, but I did read a study suggesting that programmers are one of the few educated groups in the US whose wages may have diminished because of immigration. I don't think this would have happened had immigration been "free", because immigrants would be able to respond to market signals and spread into the general workforce in the way I described above. So I don't "blame" immigration per se, I blame the highly coercive nature of the program.
As to high vs low skill... yes, this would impact high skill workers more, but I think the distortions would would be manageable as long as we kept the definition of "high skill" very general. I think the H1B visa is too narrowly defined, and too dominated by high tech, to qualify as the more general "high skill" approach that would avoid these kinds of market distortions.
[1] I find some merit to this, but I do believe there are costs associated with very high levels of immigration that are often left out of this kind of analysis.
Oh, my. If you had said "average GDP per capita" or "total real GDP" or even "many people" better off, OK. Free immigration is very much like free trade: it makes the system as a whole more efficient, but there definitely are winners and losers in the process. In the limiting case of 1 immigrant, employees in that immigrant's field lose (slightly), and everyone else wins, including that immigrant's employer.
So, in my view, these things should be controlled in such a way to try to make sure the winners aren't people already winning and vice-versa. But not to the point of cutting off our nose to spite our face; there is this tradeoff between equity and efficiency.
> If immigration forces people to be programmers, then homegrown programmers will be disproportionally affected by immigration...I don't think this would have happened had immigration been "free"
Well, I agree, and this is pretty close to a tautology. As the "high-skill natives" in an H1B field, we're the primary losers from the policy, whereas most people benefit.
I'm coming at this from the assumption that there is some number of immigrants per year, X, that society is willing to tolerate. Would we prefer X Albert Einsteins or X random people? You are arguing that the former would cause a market distortion; maybe true, but still preferable, I'd say.
And I think that it doesn't really matter whether immigrants are enslaved to a particular company, or whether they're simply selected for a particular set of skills. If you allow only programmer immigrants, most of them will program, whether or not they're required to, because their alternative is unskilled labor.
> I think the H1B visa is too narrowly defined
I agree, but that's the power of lobbying for you. Actually I'm not in programming per se, but science (with computing aspects). Tons of H1Bs here for science as well.
It would make more sense if it were defined by salary rather than field, although may be hard to implement.
For starters, yes, I agree that "everyone better off" isn't the right way to put this. Not much to discuss there, I agree for the reasons you've outlined.
Your second part, though, about the filter. While I would prefer a system that allows programmer immigrants to leave the field and enter other fields if they choose to, this freedom has limited value if immigrants are forced to make heavy up front investments in STEM education as a condition of entering the US. Agreed, If you only allow programmer immigrants, it's likely that most of them will continue to program.
This is particularly true if the sunk cost is heavy. For instance, there's a lot of talk of "stapling a green card" to every MS or PhD in a STEM field. While this would leave immigrants free to pursue other fields after getting their degrees, it requires immigrants to make a huge up front investment in a STEM education.
For example, imagine if we said "there's a shortage of lawyers, therefore, we will staple a green card to all law degrees earned by international students. But of course, these students are free to pursue whatever path they wish after they receive their law degree and pass the bar."
That's better than not allowing it, but we'd have forced everyone to go through a $150,000+ law degree as a cost of coming to the US, as well as giving up 3 years of their life. Options are now considerably more limited.
It's a similar thing for STEM degrees. I read a study of the value add of a MS degree, and it turns out that engineering and STEM MS degrees, while valuable compared to arts and humanities MA degrees, really don't pay like JDs or MBAs, or various Medical MS degrees (let alone MD degrees).
In short, it's rational to avoid getting an MS in a STEM field, because pay and working conditions aren't as good as the options highly talented students can find in other fields. If these workers were really as critical and hard to find as businesses claim, they'd be paid as well as MBA, Medical MD/MS, and JD holders.
However there's a big difference in the equation once someone has already been forced to obtain one of these degrees as a condition of living and working in the US. It may be more rational to get a JD or MBA instead of an MS in Engineering, but it may not be rational to get one once you've put the years and effort into getting that MS. At that point, it may be more rational to just work as an engineer.
This is why I oppose efforts to allow corporations to control the conditions under which immigrants are allowed to come to the US. It's not enough to grant a green card once that person is hired, because it still allows corporations to force immigrants into a high up front cost.
As you've said, though, that's the power of lobbying. I enjoy discussing and debating this on HN, but large powerful corporations are likely to get their way. I have no illusions about ever changing this. Probably the real take-away/lesson is that if you have the freedom to choose your job path, you might want to avoid the ones corporations can force immigrants into. Ironically, in other words, if you hear corporations talking about a "shortage" in a field, it may be rational to avoid that field if you're a citizen with freedom to choose your job and educational path.
One area where I may disagree with you a bit is on the Einstein thing. I consider this a bit of a red herring. There aren't 80,000+ Einsteins coming into the country every year, and there isn't much disagreement that we should allow in all the "Einsteins". Even ardent opponents of the H1B visa absolutely agree that there are a few thousand individuals who should be allowed in. This tends to be around he EB-1 visa, which again, really isn't controversial.
Haha, so true. I think it's fun and worthwhile to at least figure out what's going on. At some point I have transitioned my interest in politics from "I want to change the world for the better!" to a more detached, curiosity-based position.
WRT STEM MS, my understanding is that in "hard" engineering (electrical, mechanical, etc), MS is economically worthwhile. In science and probably math, it is useless, you need a Ph.D. Not sure the breakdown for CS. In general, there is always a salary increase for each level of education, but the difference b/t fields is in how many years it will take to "pay back" the investment.
But more generally, I'm not completely sure what you're proposing as the ideal solution here. When you say:
> This is why I oppose efforts to allow corporations to control the conditions under which immigrants are allowed to come to the US
Do you mean you oppose "chaining" to a particular company, selection of particular skillsets, or what? Are you saying you support an immigration quota with no particular selection criteria (minus specific "Einstein" exceptions)?
Much of your argument seems to boil down to the idea that it's unfair to would-be immigrants to make them sink costs in education to have an uncertain shot at coming to the U.S. Maybe, but that has no bearing on what is in the U.S.'s (i.e., median US voter's) best interests.
> Ironically, in other words, if you hear corporations talking about a "shortage" in a field, it may be rational to avoid that field if you're a citizen with freedom to choose your job and educational path.
Yes!!! This was my takeaway as well. "Shortage" talk is a giveaway that a sector is trying to apply some kind of pressure to reduce salaries in that sector. Even in a field like nursing, where there is supposedly a "shortage", but there is no prospect of getting immigration to fill the gap, what is happening is they are trying to sucker young people into this field in which the salary is simply too low after you account for all the headaches like weird hours, stress, etc.
Such an "odd" correlation that the fields with so-called "shortages" are always ones with higher than median salary-to-education ratio.
But perhaps it is not so clear. Because there would be no "shortage" talk in the first place unless the job were already economically attractive. The rational decision probably depends on how successful you expect the sector to be in bringing down the sector's wage towards the national median.
Another thing you've helped me realize in the course of this conversation is that all the talk of "job creation", as if the number of jobs is a static thing independent of wage, is totally ridiculous. "We need policy change X to create jobs in sector Y" is code for "we want to reduce salaries in sector Y". In this regard "job creation" may be regarded as equivalent in goals and deceptiveness to "shortage".
> One area where I may disagree with you a bit is on the Einstein thing. I consider this a bit of a red herring.
I meant "Einstein" to be a stand-in for "person with high potential economic/cultural/scientific value". The implicit question was, should we maximize immigration for highest value-per-immigrant (however that is defined), or should we select random immigrants?