I keep seeing organizations like the Wisconsin Manufacturers and Business Association crying for a shortage of workers because Here:
Kurt Bauer, WMC president and chief executive officer, stated that Governor Tony Evers has turned the state’s worker shortage into a worker emergency.
But if you have taken any economics course, you will see this picture:
source: Economic Help Network.
Now, as far as I know, Wisconsin has not imposed an upper limit on the wages that can be paid (for example, wage W1 indicates). So there is no shortage of classics. And the minimum wage (federal minimum wage) is not binding, so we have no classical unemployment. So what are people like WMC arguing about?
In fact, what they are saying is Under the salary that member companies are willing to pay, there are not enough recipients. In the neoclassical world, companies should be willing to increase the wages they provide until marginal workers are willing to pay the wages the company is willing to pay (which in turn should be equal to-in the form of product wages-marginal productivity) workers).
Instead, they are saying that the family’s labor supply curve is too high for their tastes, and either (1) the benefits paid to the unemployed increase the workers’ reserve wages, or (2) the workers’ wages are distorted. The dangers of working in a world where many people are still unvaccinated and delta variants are spreading rapidly. You have a feeling that they kind of hope that workers can alleviate their fear of death and/or illness, or figure out in some way how to provide cost-free daycare services for their children, etc.See this article Eric Gunn .
I think the term “availability” is more suitable for debate than “shortage”.
In my opinion, I am not particularly neoclassical, so if WMC wants to provide a different definition of shortage in some kind of formal analysis framework, I would be very happy.For example, I used the asymmetric information model of Shapiro and Stiglitz to analyze why involuntary unemployment occurred. This post.
In the latter case, it is clear why the management should cut benefits (in fact, in order to eliminate involuntary unemployment, the death penalty or similarly high penalties for not working will work).
So, please understand that when a business lobby says Wisconsin will have a “labor shortage” in mid-2021, they don’t really mean a labor shortage in the neoclassical sense; it’s just that the wages they are willing to pay will not Attract enough workers to join.
