The same is true of almost any shortage. You can almost always get what you want, for a price. Whether that price makes economic sense for a business to pay is a different question.
The two question that needs to be answered are
- With two more billions in wages, how much more/better would have employees worked ? Would that have had a meaningful impact on the stock price ?
- Can these two billions be considered reliable income ? If next year is less good, how easy would it be to reduce wages, if those we increased last year ?
The main issue when discussing wages increase is that once they are agreed, they become a de facto mandatory cost, forever. If you have had a good year and have some extra cash, but aren't sure how much of that you can replicate consistently in the next decade, increasing wages is a very bad idea as that one time good news becomes a recurring cost that can put your company in danger down the road. If you want to do that, you can only send a small fraction of said money every year.
Let's take an example: HCBS announced a 2 billion stock buyback in Oct 2021. Let's assume they use that amount on wage increase. All of it. They need to sustain that wage increase for 10 years until salaries are back to "normal", so they can "give away" $200 millions per year. They have 226,000 employees. So that amounts to employee cost by $884/year/employee. After tax, costs etc, that will amount to something around $50 / month of "in hand" money. It's cool, but not really the life changing event you might have expected. And I don't think that $50 per month of additional salary will translate in any significant productivity gains that will impact the stock in any meaningful manner.
Or just give me the $50 and _I_ will decide whether that is significant or not.
Additionally, if your financial outlook is so poor, maybe you shouldn't initiate a stock buyback. It's okay to sit on cash to even out bad years. Using stock buybacks to artificially boost stock price so performance targets can be hit to trigger bonus payouts likely don't help with productivity either.
We can argue that such businesses had unsustainable models, but that wasn't true 2.5 years ago, even if inflation has made it true today. So perfectly reasonable business models that were paying reasonable wages are, suddenly, no longer viable and maybe they collapse.
I don't have a good answer for this. If they were business models that don't work if you pay a living wage I've seen some people say "well those were always bad businesses and deserve to be trimmed off the economy." For jobs a tier or two up that in this position because of recent economic trends it's not so simple. "Let them fail" seems like a neat free market solution but it also wreaks havoc on the economy with lots of people hurt and contagion spreading to other businesses as more people lose jobs, and a death spiral begins.
But what's the alternative to "let them fail"? UBI? I'm in favor of experimenting in that area but I'm not convinced it's a silver bullet.
Mostly?
Source needed.
I ask because a lot of businesses are going under, which is inconsistent with "record profits."
There isn't really an alternative that doesn't cost the tax payer. "let" is a misnomer, because no one is "letting", it's a natural consequence of the inability to profit.
A business could increase their productivity or try to make do with a lower profit margin, but if none of these work, they fail.
There isn't an alternative to failure that is consistent with your premise of free market economics.
I would just do socialism for workers rather than for bosses.
In that way, it's less about what is or isn't owed to a business and more about whether external actions could be taken that keep the entire system from weakening. Take baby formula: Abbot isn't owed a functional formula plant, or government assistance to bring one back online, but not having it online impacts hundreds of thousand of babies, specifically those with special nutritional needs. Abbot screwed up an doesn't deserve tax payer money or special considerations or stop gap measures, not in the narrow sense of getting it's business in order. Bt the alternative hurts people in a very immediate & real sense. External intervention is less about helping the business and more about saving the health of many thousands of babies.
That, however, is a much different circumstance than the labor shortage. I just offer it as an example where what's "owed" is not the only and maybe not even the primary issue. In the labor shortage though I just don't see a clear external action that could save collateral damage. There are no good solutions.
Half-nit/half-tip: if demand changes when price changes, that means that demand is elastic with respect to price. Demand that does not change when prices increase is inelastic (with respect to price).
No longer reasonable. Reasonable isn't a title or award you get to keep forever.
> "Let them fail" seems like a neat free market solution but it also wreaks havoc on the economy with lots of people hurt and contagion spreading to other businesses as more people lose jobs, and a death spiral begins.
You have to have a civil government that plans for this, rather than just making decisions to maximize business outcomes. Take care of people directly instead of propping up businesses to take care of people, which is just an avenue for corruption. UBI is an idea that gets traction due to its complete lack of detail, but a social safety net is what's called for. A federal employment agency to fix HR and guide the unemployed into retraining or extending their education and skills, pipelines into trade apprenticeships?
We don't need a silver bullet, we just need a functioning government, and a reduction of the options for implementing corruption, especially with public funds.
Just govern, instead of panicking when billionaires aren't governing for us, and don't have our best interests at heart.
This is symptomatic of neoliberal reductionism. We shouldn't treat labor as any other commodity. Apples do not care what their market price is, but workers (humans) do, in fact, high wages are an important component of human well-being. The economy should ultimately serve needs of humans, not the other way around.
Because of its centrality and importance, we should be more rigorous about how we approach the economics of the labor market, not less. That's not "neoliberal reductionism". It's the universal laws of economics: the readily-foreseeable consequences of our political decisions and regulations that define the allocation of society's limited resources. When instead we are too-precious about how we treat labor (disrespecting fundamental economics in the name of justice and equity, living in ignorance of the consequences), then we will find stagnation instead of growth, higher rates of unemployment, more inequality, and more poverty.
The cost of apples depend on the labor cost of apple pickers and farmers, etc.
As a consumer it's easy to think of apples as something that "just appears" in the store. If you feel argumentative, that view is a way of dehumanizing the people working in the apple supply chain.
And this is why allocating resources to improving the efficiency of human labor is so important. If a person can be get twice the amount of work done then the fruit of that labor is going to eventually be cheaper for everyone else.
>The cost of apples depend on the labor cost of apple pickers and farmers, etc.
This isn't true. You had to pay somebody for the land those apple trees are grown on and when you do you're not paying them for their labor, you're paying for their status as a land owner.
In the scale of nations, adding more money without increasing supply is called “inflation”: if there was a shortage before, it’s still there even if everyone has an extra thousand currency units per month, per day, or per hour.
Edit: And from the downvote to disagree reaction, looks like people not only get their terms from economics without looking their meaning, but seem to be also incredibly confident on it.
The argument of "if you add more money without increasing [demand|supply], the equilibrium price will change" has a different meaning depending on which of those words you choose, even though at both the old and new equilibrium, the curves will intersect.
The argument does not change if you trade supply into demand. In fact, demand and supply are not good quantities to put on it at all, because both are defined for a set price, so if you add more money and keep them unchanged, the equilibrium price doesn't change. The entire inflation event happens because they change. Both sides of the disagreement up there are logical consequences of looking at half of that issue and trying to get a full picture from it.
It also refers to the reactions of market participants to other factors (substitute goods, supply and prices of key inputs, money supply, taxes/tariffs, etc.)
The demand curve shifts when conditions change. (When you airdrop money to people, they will be willing to pay more in nominal dollars for normal goods at any given quantity.)
Anyway, those curves are mathematical things people create for analysis, that mean absolutely nothing by themselves, and only give you back the conclusions of whatever assumptions you put on them. The phrases you have between parenthesis mean something, the ones you have outside of the parenthesis do not say anything.
If people kept their discussion at the real stuff from the beginning, they wouldn't ever miss their meaning and try to form mathematically invalid arguments by trying to change half one equation while assuming the other half constant.
Or product price increase reduces demand. E.g. pay restaurant workers more -> less people come to more expensive restaurants -> less workers needed.
If there's a sustained screw shortage that drives investment in new factories. If there's a sustained oil shortage and everyone is willing to pay double for oil that drives investment in extraction methods that previously weren't economically viable. Germany had a sustained labor shortage in the 50s and 60s due to a booming economy with a war-decimated population, which drove immigration of Turkish workers (including bilateral agreements to smooth the legal process).
There's a kind of thinking I see a lot in these threads where there's no labour shortage, businesses just need to pay better and if they don't then they don't deserve to continue existing as a business, framing this as evil businesses jsut complaining about not being able to keep their non-viable business models going anymore. The thing is, this misses the other side: a lot of those businesses produce stuff that consumers want, and if they're no longer viable any more then that consumer demand cannot be filled at the price people were willing to pay, again decreasing the value of people's income in real what-they-can-buy terms.
But in almost all markets, higher prices reduce demand. I don't own a Rolex because they cost too much, I settle for a Casio instead. Does that mean there's a Rolex shortage?
The type of shortages where buyers have to wait in line, are picked by lottery etc, only appear when prices are fixed.
It doesn't work perfectly and in fact can't. But it's there and it functions.
Edit to add the other half of this: someone looking to buy a peach wants to eat a piece of fresh fruit or make a dessert, a season of high prices might mean they make more apple crumble and less peach cobbler. It's not the end of the world. There were many years when I was in the black cherry buying market for roughly six weeks a year, because I couldn't afford to eat them over four bucks a pound.
Futures are probably the right choice. But they're fundamentally derivatives that paper over underlying supply and demand; their chief function is to shift who gets to raise prices and when, not to conjure more peaches.
Naive models don't engage with the information aspect of scarcity but the field of economics certainly does. Peaches never hit infinite price, there's too much production, but "I know a guy" certainly becomes part of the market-clearing mechanism, that boils down to reputational capital. Even in normal market conditions there are people making their living on that sort of capital, picture someone who can reliably get sashimi-grade fish at a less insane price.
In reality we're steadily getting richer each year.
We've been automating away work for 250 years, and people have been worrying about how automation will make them poorer for 249 years :)
- Is there a housing shortage if you pay enough? or
- is there a health-care shortage if you pay enough?
: : on & on.
We as a civilisation obviously CAN build houses, utilities, hairdressers, space rockets, grow food, etc. - the question is simply "why" (in the literal, low-level sense: why would I do that for you? even if the economy at large would benefit from it, I just don't feel like working today, and besides, I don't know you well enough). And money (and capitalism in general) is a flawed, crude, but so far the only way the "why" gets answered for the majority of people.
Another way of making someone do something for you, obviously, is to be very, very persuasive.
From the same interview, he shares some thoughts on reasons for a debtor country to strongly favor inflation: https://www.youtube.com/watch?v=Et7IVFOhtIE&t=408s
No. Although on average it's more evenly spread in the West than in some other countries. There are a lot of personal services that are fairly common in some countries (drivers, personal chefs, etc.) that aren't really affordable except as a time-bounded or occasional thing to anyone who isn't very wealthy in the US, say.
There is real housing shortage when people on minimum income cannot afford a house.
There is real health care shortage when people on minimum income cannot afford health care.
There NO labor shortage when many big companies belong to billionaires that get wealthier every day (even during Covid). Small companies might survive or die but large companies are the ones driving salary expectations the most.
Those big companies obviously CAN pay more. The owners are not going to sleep under a bridge anytime soon.
Now for some things that might be ok. If there's a shortage of Superyachts and not every oligarch can get one or afford one, I'm not going to loose sleep over that. But if it's housing or health care as you say yes, shortages and inflation absolutely mean some go without.
The exact same argument applies to employers hiring workers, the question is are workers like Superyachts where a shortage or inflating prices are not a problem in the grand scheme of things, or are they like houses and health care where a shortage is a serious problem.
I think it very much varies depending on the sector of the economy affected. On your fourth point, not every business is run by a billionaire getting ever wealthier. Half of employees work for small businesses, and 60% of new businesses fail in the first 3 years. The world isn't composed only of oligarchs and minimum wage workers.
Is a shortage of butlers and chauffeurs a problem? No. Their employers can pay them more or go without. Does a shortage of nurses matter? Absolutely, but most jobs are somewhere in between in importance and value to society.
Some goods and services that the poorest in society depend on are labour intensive and wages compose a high proportion of the costs. Shortages of workers in those sectors and inflating wage costs translate into higher prices that can disproportionately hurt those least able to pay more.
As you said, "some", and you are further restricting the fraction with "the poorest in society depend on".
But the article is about "US labor shortage", in general. And the market, in general, is very heavily influenced by big players.
> Shortages of workers in those sectors and inflating wage costs translate into higher prices that can disproportionately hurt those least able to pay more.
So, what's your point?
>There NO labor shortage when many big companies belong to billionaires that get wealthier every day (even during Covid). ...
The caveat after that about small companies was added in an edit after I pointed that factor out.
I shed no tears for the guy, he's legit super rich, but he cannot just spend 100 $Bn. In order to bid for Twitter he had to sell a big chunk of Tesla and take loas out against a lot of his shares. Like I said, super rich, but within some real constraints.
Having said that of course he could cash out. Bezos is doing exactly that, Bill Gates still owns a chunk of Microsoft but he's sold a big part of his shares to fund his philanthropy. You absolutely can turn those valuations into real money, but only by either taking big loans against them which eventually need to be settled, or selling up.
Should people with zero income be able to afford housing?
Should people without a job be able to afford housing?
Yes, people should have shelter. Starting here leads to more concrete proposals than conflated arguments about the meaning of “minimum income”. MI presumes you have a job. Is having a job the criteria we want to set for having shelter?
By definition, "zero income" (without infinite savings obviously) means you cannot afford anything! People without income obviously cannot be included in any conversation about affordability.
Should people without income be provided housing directly or through things like UBI? Yes, of course, but that's a different conversation.
…no it doesn’t. No income AND no assets means you cannot afford anything.
It's this manichaean view - business bad, me good - that's the crux of the issue. You assume every business is a FAANG and sitting on piles of cash. Most businesses (50-60%?) - even in tech - are small biz and biz owners are in the same boat. Very very few companies even come close to the level of your straw-man.
And you are very wrong with the (rather comical) assumption business-owners are scrooge mcducks sitting on piles of cash. In tech, programmer salaries are hyper-inflated (compared to most other professions) and already out of reach of many SMEs and we are scraping the bottom-of-the-barrel for talent. I'm a business owner myself and I have seen this first-hand, so don't tell me there's no labor shortage.
Strawmanning my arguments with insulting remarks does not change the reality of income and wealth inequality in the US.
> You assume every business is a FAANG and sitting on piles of cash
I never said that. The article is about labor shortage in general, not in tech only.
Big players drive market salaries. That includes baristas at starbucks, truck drivers and so on. This is a well known fact.
You can also look at how many restaurant/cafe' owners complain that they cannot hire employees at wages that would require the employee to work 40 hours a week only to pay for rent.
I wonder if you have an axe to grind here.
> I'm a business owner myself
Ah, there you go.
>Ah, there you go.
Ah, there you go to you as well.
Whereas workers have a strong incentive to both make a living wage and to keep the business profitable so they can continue to enjoy that wage.
I think the best move forward is to have more worker co-ops, so that the board is more in line with the interests of the workers vs. an owner who may not even be active in the management of the company.
I would also take issue about developer salaries being hyperinflated. Software companies are not losing money paying developers and then making it up in other areas of the business. Revenue per employee at Facebook was around $1.5 million per employee. The ridiculous thing about software is not only is it really, really scalable unlike any other profession's work product, it can and does continue to make money even if you don't put any more work into it. Look at Gumroad that basically stopped development but keeps on trucking.
Sure, price of stuff can be a problem. But talking about wages and people and empathy is specific and worthy of discussion…so dismissing this because of other problems is not helpful nor productive.
But there isn’t an infinite supply of qualified people.
There is no solution to this shortage other than simply subsidizing the cost of labor that does not increase human suffering. Because the only thing that will make someone more wiling to accept shit wages is desperation.