In my opinion, this is the key paragraph in the article. I see this all the time when recruiters send me job postings, and they want someone with 5 years of experience for the salary of someone with 2 years of experience.
How about if it costs a 100$ per loaf of bread?
I'd considered that to be a shortage. Even if supply is technically meeting demand.
If bread cost that much, we'd start eating more rice, pasta, and potatoes. We'd change our meal plan.
Likewise, if the employees you need to hire to execute on your business plan are too expensive, you need to adjust your business plan. Maybe hire different kinds of employees, maybe pursue higher margin opportunities, maybe cut your losses and try something else.
Or maybe we'd import bread from other countries where it goes for $5/loaf? Nah, let's just protect our virtuous $100/loaf domestic industry at all costs and blame the greedy consumers for being selfish and cheap ;)
s/consumers/employers
s/loaf/programmer-hour
At some point the analogy breaks down, since importing people isn't the same thing as importing things. The points were that these kinds of pricing shifts can and have happened before, reactions can be varied, and reactions usually affect things on the demand (i.e., employer) side of the equation.
Or people would realize the ingredients for bread cost < $1, bakeries would pop up, and the price of bread would drop back to normal.
Similarly if software developers are all charging $1,000,000 / year, it gets cheaper to find smart people who aren't software developers (yes, there are plenty of smart people in other professions) and train them.
Even if it is just bread, is it a good thing or a bad thing for society if bread costs 100$?
You do realize that tens of thousands of people graduate from med school every year and go on to do 6 years of residency where they make about $15 / hr right? Maybe the reason you don't hear 'popular media' talk about it is that they would look ridiculous.
But supply is meeting demand at that point, right?
An economic shortage refers to a market failure and not a lack of resources and is only possible because of external factors like price controls, zoning laws, etc.
>There are almost always willing buyers at a lower-than-market-clearing price; the narrower technical definition doesn't consider failure to serve this demand as a "shortage", even if it would be described that way in a social or political context (which the simple model of supply and demand does not attempt to encompass).
If bread costs 100$ is it a good thing or a bad thing for society?
If the "market clearing price" for bread results in people starving to death, is this good or bad?
In this hypothetical situation, would it be a good idea or a bad idea for the government, or charities, or society/individuals in society to try and solve the high bread price problem?
Also, if people are literally starving to death, even if markets "clear", does it or does it not fit a normal person's definition of a "food shortage"?
Personally, my definition of shortage is "there isn't enough of X, and it would be a good idea to increase X".
But supply is meeting demand at that point, right?
Sorry if this was a little off topic. I feel uneasy about our growing inequality in our economy but we can't fix it outside of the boardroom. Did you know that board members get paid? I surely didn't until not too long ago. Why do they get paid? I mean I'm not talking compensation for travel. I'm talking six figure compensation. Do we have a shortage of people who are willing to sit on your board?
You can't be CEO of several companies, so a CEO is fully invested in the success of that one company. From the point of view of a CEO, it makes sense for the company to not take risks.
On the other hand, investors can invest in diverse companies and expect some of them to fail and some of them to win big. From the point of view of an investor, it makes sense for the company to take risks.
Therefore investors pay CEOs a lot and give them golden parachutes to prevent CEOs and investors from having opposite incentives.
I give you that being good ceo is hard and all that. But seriously, calling it financial risk is ridiculous.
What you and a bunch of other people confuse as a shortage is just basic market dynamics. Price is high but costs are also high (not a lot of people are willing and capable of being programmers). Cheaper developer prices would be great for businesses but price has to balance with cost and it is useless to call things a shortage for demand that is unsatisfied at a non-market price.
Example: would you say there is a shortage of Tesla model S's since I only am willing to pay $30,000. No, because the costs for a model S is higher than that and then everything would be considered a shortage at a low enough price point.
Personally, my definition of a shortage is "There is not enough of X, and it would be a very good thing to increase X".
Using my bread example, if bread cost 100$ a loaf, and people were literally starving to death because they couldn't buy bread or other food, then there IS a shortage of food.
It does not matter if "supply is equaling demand", because it is a very bad thing for food to cost 100$ a meal.
Exactly my point! Economists don't call situations where costs (wages for developers) exceed what the market will pay (value created) "shortages".
Whether a good is "luxury" or not makes no difference.
I think part of the problem is that you can have a lot of "fun" these days for very cheap (video games, YouTube, etc). Maybe it's time for us to reexamine why people don't even want high-paying jobs.
...but yes, our entertainment costs are fairly inexpensive. Too bad there are so many other things to pay for.
Well technically you still have the roommates, they just make a mess everywhere and you have to cover their rent every month.
Now i'm divorced, but I got to keep the rent controlled apartment in Russian Hill, with the roommates. Ex and kid moved to Sacramento and commutes in to her grad school classes at SF State.
Perhaps the $100/hr isn't as much as you think it is. More so if you are somewhere expensive like San Francisco or New York.
I'm gonna guess there's two sides to that story
> I think part of the problem is that you can have a lot of "fun" these days for very cheap (video games, YouTube, etc).
Not even really sure what that means? Isn't this like talking about pro athletes or rock stars?
Besides, I don't know about others, but I've recently put out multiple job ads for one vacancy. Our app, Noctacam, uses computational photography to take great photos at night. I was looking for someone with computational photography knowledge and/or iOS. And/or Android, since we plan to make an Android app in the future. I found it convenient to post three job ads, so that I can clearly organise the dozens of applicants based on their skills. Two of them went unfulfilled. Which is exactly as was intended. Someone who doesn't understand the background may say, "Oh, no, tons of positions aren't being filled." In other ways, it may a counting problem, not a real problem.
Imagine I cost my company $50 an hour in salary, and earn them $150 an hour (revenue of 3-5x salary is ballpark for most companies, we'll go for the low end for some perspective). As a senior dev, I have to sit in all the interviews of people potentially joining my team. Imagine we have 10 people that make it through the HR round. I have to participate in 10 interviews, and then likely 3 more for the final round.
My cost for round 2 is: 10 people x 2 hours x (150 lost revenue + 50 salary paid) = $4k
My cost for round 3 is: 3 x 8 x (150 + 50) = $4.8k
My company has already dropped $8.8k on my involvement solely in the interview room for your typical entry level position. This doesn't even include my involvement in onboarding, training, pre-interview prep, post-interview review, etc. This is also JUST ME, and a very lowball figure at that. Now factor in the cost of the HR round, recruiters, background checks, the other devs in the interviews with me, etc. It adds up very, very quickly.
The "costs of doing business" can easily be reduced by not interviewing for shits and giggles.
No need to spend much effort on the interview process, just make sure they can solve a couple standardized problems, and then "hire" them as contractors for a 90-day trial.
Put them onto teams and throw them in the deep end, then get rid of all the ones who can't swim, which will probably be like 75%. But you'll also find quite a few unexpected gems that way.
I mean, that's exactly what we did in Call Center management and it worked great. Hired people at $10 / hour for the first 90 days, then a $2 raise up to $12. We did have super high attrition for brand new employees (since we didn't technically do a contracting period,) but who really cares.
We just kept on filtering and eventually had dozens of shockingly intelligent and competent call center employees for like, $13 / hour. (This was in the Midwest.)
So, you still need a cost benefit analysis.
Yes, not all jobs will be filled quickly. But, unreasonable salary expectations cause needless waste.
it also adds noise to the information provided by the market, confusing job seekers who may adopt sub-optimal strategies
e.g. in reaction to a real job posting, the potential applicant may erroneously think "this listing is bullshit. i won't waste my time applying."
As in, their business doesn't even generate enough revenue to afford hiring the kind of people who can keep it running?
Should workers be doing charity work now?
It's also a marketplace where one side has much more information and negotiating power than the other.
That said, a lot of 'jobs' are simply H1B fodder or resume bait etc.
Even businesses which generate enough revenue to be able to afford higher salaries don't want to pay more for labor. They want to pay less for more.
I think this is more simple: units of production are less obviously attributable to FTE count or difference in skill in software than in other fields. Therefore, management is less sure how much developer they actually need to purchase.
None of this is all-or-nothing. Companies use their power over the individual applicants as a response to the vagaries of the market. However, the basic logic divide and conquer ing means that they always have more power than individuals selling their services to them.
They just get inordinately rewarded for their work, because most of their work involves maintaining the status quo, with them on top. It's their families that don't work.
Moreover, so far the only thing revolution has been good for is shuffling the parasites. I strongly suspect there are biological reasons behind our feudal support of strongmen.
I always wondered why 50% of job listings were totally fake. "Selfish hiring practices" being the reason makes a lot more sense than "appearance of growth" that usually gets stated.
In that case, something's got to give. Either the wage has to go up, or they'll have to accept the fact that they won't find anybody who's willing to work for that wage and the job will remain unfilled.
That would means the company is dysfunctional and only desperate people are going to join this wagon.
Either the value you're bringing to the company is somewhere less than $50k, or the company is irrationally tied to not paying more than $100k.
For most people looking at a $100k a year job, that's not the case.
My rebuttal was pretty simple: major tech companies have profits per employee north of $100k. That's $100k in compensation left on the table, by companies reputed to be among the highest paying out there. In contrast, IBM has profits of $30k per person and is constantly in layoff mode. That's what happens when the value is less than $50k.
25k is very badly paid for any area in the US (outside of a few territories) as a software developer. If you're not in the US, then obviously that changes things.
Businesses complain they can't find the skills they need, but what they mean is they can't the skills they need for a derisory price. Particularly in the UK there seems little appteciation that software is a valuable thing, created by professionals. Too often the MBA types consider it just another form of generic office work, and seek to pay in line with that. Then they wonder why the technical departments they put together are so incompetent...
But in terms of money on offer for a generic development job, yup, the pay is peanuts and they do indeed end up hiring monkeys.
Companies that would prefer to pay less (that would be most of them) always say that there are not enough qualified people, they never complain that they have to pay too much.
If there are not enough qualified people the answer is obvious: allow more emigration or educate more people in the field faster.
The real goal is to reduce wages and improve profits.
If there was not enough qualified people wages would keep growing. So, yes, there are not enough qualified people for the wages that we would like, but this is always going to be the case.
In the same vein, employees never say they are overpaid.
It's just unfashionable to say that there is an inherent conflict between labour and capital.
This has been the norm. There has NEVER been a shortage of qualified American labor. The problem is, just like farm workers in California, everyone refuses to pay what Americans demand. So you get "let's just go hire some Indians at 20 cents on the dollar and have them beholden to us because we control their visa, and make them do all those jobs for one person's salary! Screw Americans! BRILLIANT!"
So there is no shortage of qualified American labor, corporate america just refuses to pay market rate for americans.
companies have been spoiled with degreed employees who do routine coding and testing. in a lot of cases the degree is unnecessary.
but hiring processes can't break out of this pattern, this groupthink.
I've always personally favored self taught over degrees.
"we still don't see lots of employers being willing to take people in right out of school and train them for jobs"
As a person that's only one year out of school with debts, I couldn't afford to be doing side projects when I was using all my free time to make sure I didn't miss a bill.