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Trying to explains how a skills shortage in STEM fields could persist without increased wages, Adam Ozimek writes:

To put it concisely, I think what people may be observing is very elastic labor demand. Consider a manufacturing firm that is selling widgets in a global market. If they pay workers $15 an hour they can sell widgets for $1 and the global market will buy what from an individual firm’s perspective looks like pretty much however many they can make at that price. But at $15.50 an hour the widget cost and price goes up by one penny and they can sell zero on global market. This means the firm is willing to hire a marginal worker, and in fact many marginal workers for $15 an hour, but cannot profitably hire any more workers at more than that.

Technically this isn’t a shortage, and is similar to what the “skills shortage” critics would say is just business owners wanting to pay below market cost. But it does explain why the “just raise the wages” solution doesn’t really help the industry. If it’s a zero economic profit industry and prices are set on a global market they may be unable to.

He does qualify this by saying "[t]echnically this isn’t a shortage" but boy does that not do his first paragraph justice.

If there is a STEM skills shortage, what that means is "employers are demanding more of a certain kind of labor and there’s not enough to meet demand." It is helpful to reason a step backwards – why would employers be so interested in hiring workers with these skills if the demand for the final product is so elastic? Most demand curves are downward sloping, which means at least some people are willing to buy it at some price. The price elasticity of demand is our way of framing how much the quantity demanded by the market changes when the price changes. If, in this case, every widget is being purchased at the market price, but the quantity demanded at P $X+0.01 = 0 then there is no skills shortage because there is no supply shortage. A skills shortage flows from a supply shortage. By Ozimek’s argument there is a "shortage" in everything. Right now I am experiencing a "shortage" in time machines, unicorns, and Maseratis, but I live in Alexandria, VA so I’m experience a real shortage in housing which is why the price of housing in my neighborhood, city, and metro area continues to rise and rise.

By definition for an economically-meaningful shortage to exist there has to be some gap between supply and demand and that means there has to be actual supply and demand. Just because employers want cheap labor doesn’t mean they’re demanding it, in the economic sense.

[supply, demand, labor, STEM, skills, shortage, where's my time machine?, widgets, elasticity, Alexandria]