I had a long talk with a guy getting his general contractor's license yesterday. He told me that down in San Diego they are continually short on construction workers, so much that one of his friends said that there is 10 years worth of construction that needs to be done and no one to do it. Wages at ~$45/hr, and probably rising, some projects paying perdiems for commutes from Orange County.
I always find it a bit strange when people talk about shortages of non-price-controlled goods and services. When you say that the industry is "short on construction workers", there's an implicit "who will work for what we used to pay them." It seems to me like it's someone who hires in that industry trying to entice more talent to come help lower the price again, rather than an accurate description of the state of the world.
To be sure, bona-fide shortages can occur transiently. For example when a natural disaster happens, it will take time for the local tradesmen to work through the backlog. But at a relatively steady state, it seems silly to talk about a shortage of construction workers. Pay a bit more than the next guy, and my guess is, your shortage will quickly disappear.
In my very limited personal experience, it's not that hard to get a worker to come do a job on my house. It is EXTREMELY hard to get someone who actually does quality work and is reliable. You could argue that I'd get better and more reliable people if I paid them more, but the fact is, I pay them what they ask for. I have very low confidence that just offering to pay double would make a bad worker into a good one.
Consumer services aren't really the point being made upthread, it's employers looking for supervised labor who can tolerate some spread in skills.
But you can do this too: call up the elite contractors who you can't schedule because they're "too busy" and give them a big number upfront. "I need my carpets replaced, I figure this will be $30k, does that sound right?". They'll be there.
But you have to do the work to know what the right wages are. Employers already know this stuff, obviously.
If someone called me up and said, "I've got a software development contract opportunity for you in Country X, $1000/hr, job should be about 6 months." My ass would be on a plane that afternoon. So much for the shortage of software developers.
However, there's quite a lot of friction hiring unknown software developers (so I guess that's why I don't get those offers - I'm not actively hunting for them).
I used to hire temporary workers all around the country as part of my job as GM of a small travelling pro sports league.
I always found that there is some "market price" where people are decent and paying less gets you less quality and paying more tends to get you better quality.
Specific example: we needed security guards for an event in Las Vegas circa 2006.
* $150/day got us off duty professional guards who were fantastic
* $125/day got us college kids/retired folks who were pretty good
* <$100/day high school kids or people with questionable backgrounds who were usually terrible
I remember Joel Spolsky saying something like "You don't always get what you pay for but it's true enough of the time to be a useful phrase"
Shortage at what price? There’s always a shortage of bread for people willing to pay 1 cent per loaf, and never a shortage for people willing to pay $10.
One could argue that, while you think you’re experiencing a shortage, reality is that you’re simply not willing to pay enough.
Which gets right to the point. Bread supply is elastic,you could quickly set up shop and produce more bread to satisfy demand whereas skilled labor is highly inelastic. Training, gathering hands-on experience, it's all a time-consuming process so there's a long time delay between when demand rises and when supply can rise to meet it
> there's a long time delay between when demand rises and when supply can rise to meet it
Yes, exactly. The demand curve shifts right and the markets find a new equilibrium (most likely at a higher wage than the old equilibrium), but there’s no “shortage”. It’s just markets clearing at a different price level than what people are used to.
Calling it a “shortage” is like saying every time Starbucks raises their prices there is a shortage of coffee — at the old price, sure, but not in absolute terms. That’s not how equilibriums work.
A. Takes time for new workers to be adequately trained.
B. Takes even longer to get people that have been raised to look down on the trades to change their worldview and all of a sudden consider working with their hands, no matter how much money is involved.
You do not normally get a shortage in the labour market because as price goes up, the appeal of hiring someone goes down. As you would expect, the formal definition of shortage is not "not being able to get what you want", a shortage is defined as "a situation where an external mechanism, like government regulation, prevents price from rising."
There are real cases of shortages in the labour market. Where I live, the law defines a fixed rate for doctors. Even if I had all the money in the world, I could not legally pay more than my neighbour to employ the services of the doctor in town. Here, a shortage is a real possibility as there is no monetary way to decide who gets the appointment with the doctor. But these tend to be exceptional cases.
Without that legal requirement, I could simply offer more than my neighbour to get the appointment and the neighbour would have to choose to go without seeing the doctor. There is not a shortage in that scenario as the neighbour was not in the market to begin with. This is the same reason we don't say there is a shortage of Ferraris, even though the vast majority of people will never be able to get their hands on one, no matter how much they wish they could have one. They are simply unaffordable to most people.
It really doesn't matter how long it takes to train someone. As long as the price is able to rise, the business who really need the existing people will pay more, taking them from the businesses that cannot afford them, until everyone who still needs that service is fulfilled.
If there was a shortage of pilots and you "happily" offered to fly me safely to my destination for $100k, I'd happily ask the security personnel to escort you off the plane. Nobody is flying that day, and your naive idealism can't change that.
If you see two loaves in a store that are basically the same kind, you normally won't think too hard about which one you pick. As mechanical and indifferent as some hiring processes are, they don't approach that level of indifference.
But certainly somebody would weld for 10k an hour, and therefore the person willing to pay that will have as much welding labor as they need, and everybody else will have to match that price, bamboozle their workers into taking less, or find some way to complete their project with fewer welds.
Technically, a shortage is defined as a situation where price is unable to rise due to an external mechanism, such as government setting a price ceiling. As long as you have an opportunity to pay more, there cannot be a shortage. Rather demand for the given product/service shrinks.
That's not a shortage. That's just a time lag. It would be a shortage if nobody trains to become a construction worker because of price controls like minimum wage or maximum wage in an alternate universe.
How is that not a (temporary) shortage? When did it become part of the definition that all shortages must be permanent?
What if nobody trains to become a construction worker (for whatever reason) and then over the next 5-10 years demand goes down because people get used to making do with the buildings that already exist? Is it also not a shortage then?
You can't just create 100,000 new construction workers in San Diego because you raise wages from $45 to $60 per hour.
Labor availability + skill + time + market awareness = it takes a helluva lot longer than months or 2-3 years to meaningfully boost a skill trade.
Labor availabity means: how many people - heavily influenced by the unemployment rate - are interested in putting in the time to go retrain themselves to do a new job. Many people will not kill themselves to do so, if they're making $45/hour and you tell them the upside is $60/hour. A deep level of comfort sets in for a large percentage of the population once you get to $30-$45 per hour.
Skill means: it takes years to train someone to an appropriate level at being a professional anything, whether we're talking roofing or plumbing.
Time means: well, it simply takes time to rotate large numbers of people into blue collar jobs. The whole process takes a lot of time, from start to finish. There's only so much that can be done to speed that process up.
Market awareness: it can take years for people to believe that blue collar work demand is going to be sustained (history say otherwise, and people know that such work is often inconsistent; and they know that the downturns are brutal). It can take years to get the word out in just a mid-size city like San Diego, that there is high demand. It requires new entrants to take risk, which most people do not like doing. To be convinced to take a life change risk if someone is even remotely comfortable, the reward has to be extreme in most cases.
I believe the trick is the following: if wages increase from 45 to $60/hr, a lot of the planned constructions no longer make sense financially, and are abandoned.
For perspective, the going wage for a skilled (journey level) carpenter in the SF Bay area is essentially the same today as it was in 2005 (the last time I was part of the labor force). This is from a quick survey of Craigslist ads. If anything, the real wage seems to have decreased.
Apart from "packing donuts" type jobs, most jobs require some degree of knowledge and skill. Some jobs have higher knowledge half-life than others. While IT has notoriously short knowledge half-lifes, construction has rather long half lifes.
Suppose that we train x+y construction workers a year, x work in the industry until retirement, y - retrain to different profession. This means that there are y*years dormant specialists that can be brought back to industry.
Construction is becoming more and more specialized. There are many machines that need to be operated, together with regulations it requires high skilled people.
Strange.