Labor shortage
Encyclopedia
In its narrowest definition, a labor shortage is an economic condition
in which there are insufficient qualified candidates (employees) to fill the market-place demands
for employment
at any price. Such a condition is sometimes referred to by Economist
s as "an insufficiency in the labor force
."
are complex and controversial. Sometimes alleged labor shortages are used by employers to justify the importing of temporary foreign labor
(in the U.S., this would mean using the H-1 or L-1 Visa Program
to import each foreign worker). Mainstream organized labor groups and other critics of such practices argue that the laws of supply and demand
ought to correct such shortages as more citizens enter a field when wages go up due to the shortage. The more cynical critics charge that companies seeking foreign labor are in fact hypocritically
lobbying
the government to allow them to evade the free market rules that most such employers claim to cherish, simply so that they may hire cheaper and/or more docile employees.
have been suggested as one way to measure a labor shortage. However, this often does not match people's common perceptions. For example, if wages alone are the best measure of labor shortages, then that would imply that we should be importing doctors instead of farm workers because doctors are far more expensive than farm workers. However, there are institutionally-imposed limits on the number of doctors that are allowed to be licensed. If foreign migrant workers were not allowed into a nation, then farm wages may go up, but probably not enough to approach the wages of doctors.
The Atlantic slave trade
(which originated in the early 17th century but ended by the early 19th century) was said to have originated due to perceived shortages of agricultural labor in the Americas
(particularly in the American South
).
.
The theory suggests that the more skills that are involved, the higher the gap between primary matches and secondary matches. Combing the globe for candidates allegedly increases the chances of a better match. However, it may reduce the chance of a citizen being hired even though on the average their skills are on par. In other words, having a wider choice reduces the chances of a citizen being the best candidate due to probability field increase alone rather than lack of skills on the citizen's part.
A comparable analogy would be the opening of Jewelry store B next to the existing Jewelry store A. Even though store A may have similar prices and selection, their sales will still likely slide downward. A given customer will now purchase from the new store B half the time. Unless more customers in total come to the area, store A sales will be cut in half.
The solution proposed by proponents of free trade
appears to be more and tougher education.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
in which there are insufficient qualified candidates (employees) to fill the market-place demands
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...
for employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
at any price. Such a condition is sometimes referred to by Economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
s as "an insufficiency in the labor force
Labor force
In economics, a labor force or labour force is a region's combined civilian workforce, including both the employed and unemployed.Normally, the labor force of a country consists of everyone of working age In economics, a labor force or labour force is a region's combined civilian workforce,...
."
Economic impact
The rate of growth for labor and capital is the most important determinant of economic expansion. An aging population and a contracting workforce may curb U.S. economic expansion for several decades, for example.Measuring the labor force
Techniques for measuring the existence and level of shortages in the labor force of a nation's economyGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
are complex and controversial. Sometimes alleged labor shortages are used by employers to justify the importing of temporary foreign labor
Foreign worker
A foreign worker is a person who works in a country other than the one of which he or she is a citizen. The term migrant worker as discussed in the migrant worker page is used in a particular UN resolution as a synonym for "foreign worker"...
(in the U.S., this would mean using the H-1 or L-1 Visa Program
L-1 visa
An L-1 visa is a visa document used to enter the United States for the purpose of work in L-1 status. It is a non-immigrant visa, and is valid for a short amount of time, generally three years. L-1 visas are available to employees of an international company with offices in both the United States...
to import each foreign worker). Mainstream organized labor groups and other critics of such practices argue that the laws of supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
ought to correct such shortages as more citizens enter a field when wages go up due to the shortage. The more cynical critics charge that companies seeking foreign labor are in fact hypocritically
Hypocrisy
Hypocrisy is the state of pretending to have virtues, moral or religious beliefs, principles, etc., that one does not actually have. Hypocrisy involves the deception of others and is thus a kind of lie....
lobbying
Lobbying
Lobbying is the act of attempting to influence decisions made by officials in the government, most often legislators or members of regulatory agencies. Lobbying is done by various people or groups, from private-sector individuals or corporations, fellow legislators or government officials, or...
the government to allow them to evade the free market rules that most such employers claim to cherish, simply so that they may hire cheaper and/or more docile employees.
Wages as a factor in labor shortages
Wage levelsWage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
have been suggested as one way to measure a labor shortage. However, this often does not match people's common perceptions. For example, if wages alone are the best measure of labor shortages, then that would imply that we should be importing doctors instead of farm workers because doctors are far more expensive than farm workers. However, there are institutionally-imposed limits on the number of doctors that are allowed to be licensed. If foreign migrant workers were not allowed into a nation, then farm wages may go up, but probably not enough to approach the wages of doctors.
The Atlantic slave trade
Atlantic slave trade
The Atlantic slave trade, also known as the trans-atlantic slave trade, refers to the trade in slaves that took place across the Atlantic ocean from the sixteenth through to the nineteenth centuries...
(which originated in the early 17th century but ended by the early 19th century) was said to have originated due to perceived shortages of agricultural labor in the Americas
Americas
The Americas, or America , are lands in the Western hemisphere, also known as the New World. In English, the plural form the Americas is often used to refer to the landmasses of North America and South America with their associated islands and regions, while the singular form America is primarily...
(particularly in the American South
Southern United States
The Southern United States—commonly referred to as the American South, Dixie, or simply the South—constitutes a large distinctive area in the southeastern and south-central United States...
).
Apparent shortages and multitudes of skills
The Programming Wisdom Center has identified a possible conundrum whereby there may be a skills shortage from the employer's perspective but not the employee's perspective. This can happen when many "sub-skills" are involved in the selection process, such as requirements for multiple programming languages and computer tools often found in technical job ads. The phenomenon may account for seemingly contradictory complaints from both large companies and technical professionals regarding visa worker quotasVisa (document)
A visa is a document showing that a person is authorized to enter the territory for which it was issued, subject to permission of an immigration official at the time of actual entry. The authorization may be a document, but more commonly it is a stamp endorsed in the applicant's passport...
.
The theory suggests that the more skills that are involved, the higher the gap between primary matches and secondary matches. Combing the globe for candidates allegedly increases the chances of a better match. However, it may reduce the chance of a citizen being hired even though on the average their skills are on par. In other words, having a wider choice reduces the chances of a citizen being the best candidate due to probability field increase alone rather than lack of skills on the citizen's part.
A comparable analogy would be the opening of Jewelry store B next to the existing Jewelry store A. Even though store A may have similar prices and selection, their sales will still likely slide downward. A given customer will now purchase from the new store B half the time. Unless more customers in total come to the area, store A sales will be cut in half.
The solution proposed by proponents of free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
appears to be more and tougher education.
See also
- Supply and demandSupply and demandSupply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
- Free tradeFree tradeUnder a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
- Free trade controversy
- Foreign workerForeign workerA foreign worker is a person who works in a country other than the one of which he or she is a citizen. The term migrant worker as discussed in the migrant worker page is used in a particular UN resolution as a synonym for "foreign worker"...
- Labor forceLabor forceIn economics, a labor force or labour force is a region's combined civilian workforce, including both the employed and unemployed.Normally, the labor force of a country consists of everyone of working age In economics, a labor force or labour force is a region's combined civilian workforce,...
- WorkforceWorkforceThe workforce is the labour pool in employment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic region like a city, country, state, etc. The term generally excludes the employers or management, and implies those involved in...
- EmploymentEmploymentEmployment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
- UnemploymentUnemploymentUnemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
- UnderemploymentUnderemploymentUnderemployment refers to an employment situation that is insufficient in some important way for the worker, relative to a standard. Examples include holding a part-time job despite desiring full-time work, and overqualification, where the employee has education, experience, or skills beyond the...
- L-1 Visa ProgramL-1 visaAn L-1 visa is a visa document used to enter the United States for the purpose of work in L-1 status. It is a non-immigrant visa, and is valid for a short amount of time, generally three years. L-1 visas are available to employees of an international company with offices in both the United States...
- Occupational Outlook HandbookOccupational Outlook HandbookThe Occupational Outlook Handbook is a publication of the United States Department of Labor's Bureau of Labor Statistics that includes information about the nature of work, working conditions, training and education, earnings, and job outlook for hundreds of different occupations. The Handbook is...
- Labor supplyLabour supplyIn mainstream economic theories, the supply of labor is the total hours that workers wish to work at a given real wage rate....
External links
- Planning For The Looming Labor Shortage - A Supply Chain Perspective by HK Systems
- "America's New Immigrant Entrepreneurs" - A Duke University Study
- Criticism of high-tech shortage claims
- Disputation of High-tech Labor Shortage by Dr. Matloff
- RAND Study on Alleged Shortage of Scientists
- Shortage of skilled workers knocks red tape off top of business constraints league table - Grant Thornton IBR
- The Real Science Gap - "It's not insufficient schooling or a shortage of scientists. It’s a lack of job opportunities."