Bosses struggling to find workers need to lift wages

Bosses struggling to find workers need to lift wages

By Unconventional Economist in Australian Economy

August 5, 2019 | 9 comments

The Australian has published a one-eyed propaganda piece entitled Job snobs ‘are leaving bosses in the lurch’, which claims that ‘lazy’ Australians are “actively snubbing work opportunities”.

The article is based loosely upon a survey from the Department of Employment, which claims almost 60% of businesses looking for lower-skilled roles are finding it hard to find new staff, while almost 50% are finding it hard in general to recruit new employees. The report found, amongst other things, that many potential employees were disinterested in the job, lacked personal presentation skills or submitted applications that were of poor quality:

The department research showed employers were responding to hiring difficulty by “lowering their requirements, spending more time on training, changing staff arrangements to cover the vacancy, using labour hire or contractors and extending the recruitment process or readvertising”.

Employers noted that many applicants “submitted poor quality applications” and lacked “personal presentation skills”…

With industry leaders and small business operators calling for more support, with some now looking overseas and interstate for prospective new employees, Senator Cash said reforms were needed to improve job prospects and support employers.

Notice how employers haven’t bothered to respond to the worker ‘shortages’ by lifting wages? This is curious, given average employee compensation has fallen in real terms for around seven years:

As noted by the ACTU recently with regards to temporary migration:

Wright and Constantin (2015) surveyed employers using the 457 visa scheme and found that 86% state that they have experienced challenges recruiting workers locally. Despite identified recruiting difficulties, the survey found that fewer than 1 in one hundred employers surveyed had addressed ‘skill shortages’ by raising the salary being offered. Labour ‘shortages’ should first be addressed through a readjustment in the price of labour – increased wages. An inability to find local workers to work at a specified wage rate, coupled with an unwillingness to offer higher wages, does not necessarily imply a skill shortage – particularly where local workers would be willing and able to work if the wage rate was lifted. This differs from a skill shortage in which there are simply not enough people with a particular skill to meet demand.

That’s right. Except in very limited circumstances, there is no such thing as a shortage of labour. There is only a “shortage” of labour at the price/ wages firms are generally willing to pay. If companies lifted wages, and provided training, the so-called labour shortages would vanish.

What we definitely don’t want to see is the mass importation of migrant workers to alleviate these purported shortages. This would circumvent the ordinary functioning of the labour market by enabling companies to pluck cheap foreign workers in lieu of raising wages. It would also further discourage these companies from training locals, and would be deleterious for both workers and the broader economy.