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Comment by unprepare | Hacker News Reader

A shortage is a lack of supply, a company unwilling to pay above $X is not a shortage of supply, it is a shortage of demand.

If we have a shortage of carrots, we dont have enough carrots at ANY price. If people are unwilling to pay 5$/LB for carrots but thats what they cost in the store, that is not a shortage.

What this discussion is about is substitute goods[1] replacing standard goods. In this case US workers are the standard goods, and they are being replaced by foreign workers, or substitute goods at lower cost.

[1]http://en.wikipedia.org/wiki/Substitute_good

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>A shortage is a lack of supply

No, a shortage is the discrepancy between the quantity supplied and quantity demanded at a given price.

When wages offered are too low, there is a shortage of labour supply. Increase those wages and that shortage disappears.

>If we have a shortage of carrots, we dont have enough carrots at ANY price.

This is simply not true.

>If people are unwilling to pay 5$/LB for carrots but thats what they cost in the store, that is not a shortage.

The shortage of carrot occurs at every price below $5/lb. You cannot talk about shortages in the economic sense without prices. Period.

I'm not sure why people are insistent on arguing the semantics of the word "shortage", rather than the far more interesting supply/demand dynamics underpinning the markets being discussed.

I did some looking around and you're absolutely correct about economic shortages.

From wikipedia: "In most cases, a shortage will compel firms to increase the price of a product until it reaches market equilibrium. Sometimes, however, external forces cause more permanent shortages—in other words, there is something preventing prices from rising or otherwise keeping supply and demand balanced."

In this case, the H1-B visas are the external force, and are preventing supply and demand from being balanced. Basically because of the availability of cheaper labor, companies are willing to pay less for ALL labor which creates the shortage.

My completely misremembered thinking was that simply because they don't WANT to pay a higher wage, does not create a lack of labor - but i see know that it does in fact create an economic shortage of labor AT THAT PRICE. I was thinking of 'labor shortage' meaning that there is not enough actual people qualified to perform a job; when really in this case it is much more reflecting employers unwillingness to increase wages to the level that qualified people would be willing to compete.

thanks for the discussion!

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