the myth of the "skills gap"

You clearly don't have a clue what I understand.

To repeat my question, If the product price doesn't increase, where does the extra money come from to pay a higher wage?

I understand what a supply shock is. What I asked is who indicated any shock was involved?

Why do you ignore the questions asked of you?

 

And transactions do take place. Some nurses, for example, actually are paid decent incomes. It is just that there will only be so many workers willing to work for lower pay. If employers want to hire more of these workers, they will have to pay higher incomes. But they don't want to do that, they want to bring cheaper workers from outside, even though there is a high unemployment rate and a problem of not enough decent paying jobs available for everyone.

 

Maybe it is a very stressful job (nursing for example). Many nurses are overworked and become "burned out", so try to transfer to other careers, even though sometimes it pays less. And an unemployed person might not have the motivation to spend so much time, effort, and money getting the education and/or training required to persue a new career if that career does not offer enough pay.

Is it really fair to be expecting people to obtain so much education just to obtain a mediocre paying job? If we expect the unemployed to become educated or train for a career, the career should at least be fairly decent paying. Yet many of these jobs we are expecting the unemployed to train for do not even pay enough to ever buy a house and have a car. It seems like people are expected to work harder and harder, and take ever more personal financial risks just to tread water and live a decent life.

For example, are we seriously blaming unemployed people for not getting a university degree, even though many university graduates are underemployed? I don't think it's fair to expect someone to spend four years of their life at school and accumulate student debt just so they have a chance at getting a decent job.

If there are "not enough" skilled workers of a particular type, the first two things we have to be looking at is (1) how much that job typically pays, and (2) how much education and training is needed to get that job. If it requires extensive education but does not pay well, there is not a shortage!

 

Given you made a very basic error over supply and demand, its obvious that you don't know much!

Labour demand is MRPL, which itself is from MPPL and P. You're assuming MPPL is constant. That's painfully silly. The supply shock represents a movement up the labour demand curve and that necessarily means higher MPPL.

Clearly you don't. In terms of the skills shortage we're talking about a supply shift that increases the equilibrium wage. To suggest that a product price rise is required illustrates that you're clueless over how supply and demand operates

 

There are several factors at work here. Generally if an employer has to pay higher wages, the price of the product or service will also go up, and it will be passed onto the consumer. But there may also be fewer consumers willing/able to pay the higher prices, so the employer's profits may go down (how much depends on the particular situation). In a macroeconomic perspective, however, higher wages (more evenly distributed income across the population) can result in higher consumption, since more people have more money to spend. This typically more than compensates the worker for the increase in prices.

But obviously if wage levels rise above the production output capacity, workers will not be any better off. It would (theoretically) just trigger an inflationary spiral. But in my opinion, the concept of a wage-price inflationary spiral is often just misused as justification for keeping wages down by free-market economists.

 

Basic error! You have to assume cost-plus pricing and therefore market power. As shown by efficiency wages, the impact on productivity and therefore profit is also ambiguous.

 

At least I know how to read - this is not a thread about supply and demand, it is about a mismatch in expectations.

Again, there is no shock. We are in a slow recovery.

When production volume goes up, does selling price increase, remain the same, or decrease? If demand is very high, the current selling price is already high. At best, increased production won't lower selling price. But, typically, increased supply, reduces price. Companies buy larger quantities, and expect volume discounts, or to increase sales, the supplier needs to entice reluctant buyers with a lower price.

Describe exactly how prices will increase.

If your grocer was selling apples at 50 pounds sterling each, and not one pence less, would the full bin represent a shortage?

 

Dig your hole a little deeper! You stated "Short supply only raises wages if the employer can sell the product of their labor for more". Supply and demand informs us that you're talking utter nonsense! This of course reflects nothing more than a knowledge deficiency. You haven't understood the determinants of labour demand and how, even if product prices are constant, there will be a wage increase created by the impact on marginal physical productivity of labour.

That you don't understand supply and demand is a little worrying. Off you pop to night school!

 

Are there any empty shelves in stores? Are there any shortages in the news?

Until the Fed set loose the printing presses, inflation has been held in check, not by Fed and / or government policy, but by competition. Every company I sell to has at least two approved suppliers, and the buyers give 70% of the business to the lowest price, and 30% to the next lowest price (so the lowest price company knows they can be replaced). I sell in high volume, the difference between the lowest and next lowest price is rarely more than 1%.

 

Again I'll ask, what magic happens that allows adding labor to create a higher rate of productivity?

You also conveniently ignore the impact on selling price with increased production. How droll.

 

Crikey, you know nothing about supply and demand! I assumed it was just a slight error. I was wrong!

The supply curve shift will lead to an increase in wage because marginal physical productivity of labour increases. You've already been told that. That reflects the nature of diminishing returns (which, for the labour market, ensures the law of demand holds). The only complexity is created by efficiency wage effects.

I haven't ignored anything. I've simply laughed at the stupidity of "short supply only raises wages if the employer can sell the product of their labor for more", referring correctly to the nature of supply and demand in the labour market (Note also that a change in price will lead to a shift in demand, whilst here we are referring to a shift in supply)

 

In more ways than you know.

Again, my question is why does productivity increase.

Diminishing returns:

The 10th employee will have less per unit value than the first - opposite direction to your assertion.
The 10,000 product will have less value than the first 1,000 - opposite direction to your assertion.

If I increase the price, demand goes down. If I increase the supply, the price goes down.

Do you understand supply and demand?

 

And I've already told you (but, because you know nothing about supply and demand, you haven't understood the answer). For the entertainment value I'll ask you a little question: why do you think the labour demand curve is downward sloping?

This amused me! You've been shown to know nothing, making errors that even a secondary school kid wouldn't make. No price increase is required. All that is required is for MPPL to increase. It will increase, by definition (given diminishing marginal product of labour). Referring to product price was particularly cretinous as that will refer to a shift in labour demand

 

And around we go, again - why does MPPL increase?

Lowering product price could increase volume (that isn't a given), requiring more labor to keep up with the demand. A lower selling price may well offset the increased in sales volume, providing no additional income. An increase in labor demand doesn't assure the income required to hire that labor.

 

Already told you! MPPL falls because of diminishing marginal product of labour. A supply shift leftwards will therefore ensure a higher MPPL and therefore a higher MRPL (ensuring a wage increase). This is all bleedin obvious, given its used to understand the law of demand. I'll ask you again (and don't hide this time): For the entertainment value I'll ask you a little question: why do you think the labour demand curve is downward sloping?

If you knew supply and demand you'd know that the decision is based on MRPL=MC (That's a basic requirement for profit maximisation). Its bleedin obvious that a price change will necessarily shift the labour demand curve and then change quantity demanded. Note, however, that it isn't required for a wage increase. Your position is cretinous as you've confused a supply shift (movement along a demand curve) with a demand shift. That informs me that you know nothing about the basics of economics

 

Because you say so? I don't want a vague assurtion, I want details. What is the mechanism that causes twenty people to put out more than twice what ten people do?

 

Because of basic economics. The law of diminishing marginal returns isn't difficult to understand!

I'll ask again (this is the third time now): Why do you think the labour demand curve is downward sloping? (Hint: the 'valid' answer will illustrate the stupidity of your position, but I'll be amused at the pig's ear you make of it)

 

Obviously, it is too difficult for you to explain, or even to provide a public domain link.

 

Note this statement "Although the marginal productivity of the workforce decreases as output increases", productivity (the number of widgets per employee) decreases, not increases.

 

This is very basic stuff. Econ 101. Its the nature of MPPL that ensures a labour demand curve is downward sloping. Of course, given you're talking from total ignorance, you've hid again after again from a simple question: Why do you think the labour demand curve is downward sloping? The answer confirms the stupidity of your original comment

 

First of all the actual numbers for recent grads are much MUCH better than drop outs and those with just a high school education. The issue is that in our current environment, there just isn't stuff they can do that generates enough value to merit what they have to be paid and given in benifits. So think less about college graduates and more about drop outs when you think skills gap. I think there is also a "no criminal record" gap. A lot of jobs simply require this, but our country has a pretty high incarceration rate.

It is also important to stress that all college degrees are NOT equivalent. I've seen things ever so often, let me see if I can find something for you quick.

Ah, maybe consider
http://www9.georgetown.edu/grad/gppi/hpi/cew/pdfs/Unemployment.Final.update1.pdf in regards to recent grads during the recession and

http://graphicsweb.wsj.com/documents/NILF1111/
for more detailed by general information.

The bottom line, if you're going to major in the very popular fine arts majors or psychology you might want to make sure your parents don't convert your bedroom into a den. However other have stayed solid even for new grads even back in 2010. I recall a different but similar study where I noticed that petrolium engineers made crazy money and the unemployment rate was zero.

Experience is vital. It's a horrible idea these days to just take classes and graduate. You really want to have a solid year of work (typically via an internship) and some good references prior to hitting the job market. There is a world of difference between getting a B in a class and actually being able to achieve something.

I think you're on to something there. Also it's harder to get rid of someone these days.

This is even more of an issue in Spain and France where youth unemployment is crazy high.

Lemmi see if I can find some numbers on that
http://www.washingtonpost.com/world...99a734-f1d1-11e1-b74c-84ed55e0300b_story.html

Geez! Over 50% youth unemployment in Spain.

 

More vague assertions, combined with "Reiverisms".

Chiding me for not answering your question, yet steadfastly refusing to answer mine. How childish.

 

Apparently there is another thread in this forum on the same topic:
http://www.politicalforum.com/political-opinions-beliefs/253475-skills-gap-jobs.html

 

Apparently there is another thread in this forum on the same topic:
http://www.politicalforum.com/political-opinions-beliefs/253475-skills-gap-jobs.html

 

Part of the problem lies with the education system itself, though. I have taken some "tech school" type training in computers, and it was mostly bunk on a stick. We weren't programming real systems, we never strung a cable, we never upgraded a router, we sat and took notes. If that is the quality of graduates for most of the skill-related fields, I'm not at all surprised that bosses want experience, as most grads have nothing more than theory. The other thing is that there's always the risk that the recent college grad is going to jump ship the instant he gets enough experience to apply for the "experience required" jobs. I watched it happen with nurses -- we had a CNA program, and so people would apply to the nursing home to get the free CNA training and job experience, then the minute they graduated, they'd jump ship for another employer offering a better deal elsewhere. So we paid to train the competition's workers. And it didn't cost the competition a thing.