Comment by PragmaticPulp | Hacker News Reader

Comment by PragmaticPulp | Hacker News Reader

When a few companies or industries can’t find enough labor, the solution is simple: Raise wages to attract a larger percentage of the labor pool.

When every company and industry is struggling to hire, raising wages is still necessary but it no longer fixes the bigger problem. Those higher wages aren’t producing more labor, they’re just convincing employees with jobs to switch to other jobs. Switching jobs creates a vacancy in the old position. One job opening filled, one job opening created. Net zero.

The pandemic shook a lot of people out of the labor market. Everything from people who were on the verge of retirement anyway to people who were forced to stay home with the kids because schools and daycares were closed. Until labor market participation returns to pre-pandemic levels, the labor shortages will continue.

Employees win in the short term as companies have no choice but to raise wages to fill positions. The flip side is that inflation will certainly follow as rising wages give people more money to spend (demand up) while labor shortages drive supply down. Demand up, supply down means prices go up.

Which ironically could be the impetus that gives people who left the labor market no choice but to return to work: When everything is getting more expensive, people may have no choice but to return to the labor market to earn enough to support their families. It’s going to be interesting to see this settle.

It isn't net zero people can join and leave the labor participation pool, which has been decreasing for awhile now[0]. Higher wages could convince people to join the labor market.

https://www.bls.gov/charts/employment-situation/civilian-lab...

Many companies don't have sufficient margins to raise wages. Hopefully this isn't confused as me endorsing subpar wages, simply that those business can't be sustained or will just endlessly be looking for someone willing to work for cheap because hiring someone for more will actually cost them money. They may be better of turning away some customers vs. hiring someone for a higher wage to support more demand.

Many of the businesses pleading poverty have execs making millions a year - funny how there is never any issue awarding huge bonuses for the top brass, but the cupboard is always bare for employees.

Seriously if we stopped letting a dew parasites at the top leech all the money out of businesses we wouldn't have this problem. We have entire C Suites getting overpaid while the people who do the actual work can't even afford to live where they work.

Something's gotta give.

One effect of inflation is to reshuffle the economy toward bigger, higher-margin firms. The companies without sufficient margins to raise wages will simply go bankrupt. This reduces competition in their industry, which gives surviving firms more power to raise prices and pay those higher wages.

> Many companies don't have sufficient margins to raise wages.

Not too sure how you came to that conclusion. Profit margins for many companies in the UK seem to have actually gone up [1]. You probably assume that companies are subject to perfect competition. That might be true for small businesses but is not really the case for large firms [2]. Some large firms practically are the market and can get away with employing few people for low wages. It's similar to a monopoly that is incentivised to sell few goods at high prices.

[1] https://www.reuters.com/article/us-britain-antitrust-idUSKBN...

[2] https://en.wikipedia.org/wiki/Monopsony

Higher wages also serves the purpose of allocating scarce labor to the most valuable businesses. Low value businesses will go out of business leaving the workers for the higher value businesses.

When a employee moves jobs, hopefully there moving to a higher productivity job though.

And the low productivity jobs go unfulfilled.

Labor shortages don’t necessarily drive supply down — this is going to lead to a boom in automation. Those automated jobs aren’t coming back. We need to phase in a UBI even if it $1 a month for now.

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