Blog of Sara Jakša

How Do We Recognize A Shortage Of Workers

In some industries, we hear it all the time. We need to let more of the foreigners in, because there is a shortage is workforce.

But what they are forgetting, that in a market based system, things life shortage show themselves in many different aspects.

If we start with only demand and supply theory. If the demand is getting bigger, and the supply is not changing, then the wages of the workers are going to go up. Because the wages went up, there are more people, that want to deliver a supply at that price. The end results is, that more people are employed and have higher wages.

On the long run, there are going to be people, that are willing to learn the skills, and we will have people, to fill in every position that is in demand. Because there is more people than before in the work market, the wages go down, but the number of people employed is higher.

The only recent information I could find was from Canada and for specifics jobs. In that definition, the shortage is shown in the next jobs: oil drilling supervisor, transportation supervisor, geologist, school counselor and metal-forming supervisor.

But these are percentages. That means, if the job market for that job is small, than even a small shortage will bring a bigger increase in salary, than if the job market is bigger.

That was a simple model. But we should not forget, that in reality, job markets are more complex. The salaries can change also based on the union organization, the salaries of the workers outside of the country, how easy is it to outsource, how many foreign worker can came or will come or how necessary some jobs are.

Unions can negotiate with either companies or government, depending on the country, about the salaries of the people involved. They usually want bigger salaries for their workers, even if that leads to bigger unemployment.

But the unions can sometimes work for bigger employment, even if the end result are smaller salaries.

If the salaries outside of the country are lower, than the company can keep the salaries of domestic workers, by importing some of the foreign ones, if they are ready to work for a smaller salary. Here the regulations about the foreign workers, made by the government play a big role. The harder it is, the less likely they will go this way.

Or they can simply move a part of their production or company in the different county. Using the workforce in the lower costing country can also keep the shortage of jobs to the minimum and with that the salaries do not increase.

For the last thing, if the job is not necessary, it is still possible, that the salaries can go up a lot, but only in the time of economic growth. In the recession, this jobs are one of the first to go.

But while past can be a good indicator of the future, changes, that nobody can predict can happen. That is why it is so hard for economist to predict anything right. So take analyses like that with just a tiny grain of salt.