A comment on OffShoring

A comment on offshoring was put by a reader- I am re-posting it entirely.

When you use the phrase “labor shortage” or “skills shortage” you’re speaking in a sentence fragment.  What you actually mean to say is:  “There is a labor shortage at the salary level I’m willing to pay.”  That statement is the correct phrase; the complete sentence and the intellectually honest statement.

Employers speak about shortages as though they represent some absolute, readily identifiable lack of desirable services. Price is rarely accorded its proper importance in their discussion.

If you start raising wages and improving working conditions, and continue doing so, you’ll solve your shortage and will have people lining up around the block to work for you even if you need to have huge piles of steaming manure hand-scooped on a blazing summer afternoon.

Re:  Shortage caused by employees retiring out of the workforce:  With the majority of retirement accounts down about 50% or more, most people entering retirement age are working well into their sunset years.  So, you won’t be getting a worker shortage anytime soon due to retirees exiting the workforce.

Okay, fine.  Some specialized jobs require training and/or certification, again, the solution is higher wages and improved benefits. People will self-fund their re-education so that they can enter the industry in a work-ready state.  The attractive wages, working conditions and career prospects of technology during the 1980’s and 1990’s was a prime example of people’s willingness to self-fund their own career re-education.

There is never enough of any good or service to satisfy all wants or desires. A buyer, or employer, must give up something to get something. They must pay the market price and forego whatever else he could have for the same price. The forces of supply and demand determine these prices — and the price of a skilled workman is no exception. The buyer can take it or leave it. However, those who choose to leave it (because of lack of funds or personal preference) must not cry shortage. The good is available at the market price. All goods and services are scarce, but scarcity and shortages are by no means synonymous. Scarcity is a regrettable and unavoidable fact.

Shortages are purely a function of price. The only way in which a shortage has existed, or ever will exist, is in cases where the “going price” has been held below the market-clearing price.

Posted in Analytics, India