I was listening to a great podcast about this. They said they asked owners of businesses, "If you're having trouble hiring, why don't you offer more money?". Their response was all a variation on, "because then I'd have to pay all my other workers more when they found out, and it's cheaper to just pay the current folks overtime at their lower rate than give everyone a raise".
Under normal market conditions, they would hemorrhage current employees to any alternative local employers who raise their wages. But if all local business owners are freezing their wages while unemployment is low, then the liquidity of the workforce freezes, and you get into a weird equilibrium. Workers might want to leave, but there's no alternative that improves their compensation. Businesses are engaged in a natural cartel behavior, but where the incentives to cheat are reversed - the first to raise wages hurts themselves the most.
This is the crux of the issue. Let's take a staff of 100, at salary level 100. Total wage cost is 10000.
The owner wants a 10% increase in labour. How much will it cost? Let's assume they can only find new labour at 110, but if they pay this they must pay existing labour 110 as well.
110 * 110 = 12100. A 21% salary increase for a 10% labour increase.
Also it probably won't be a straight 10% labour increase, as some % will have to go to admin and the organizational costs associated with size.
So, that's why. It's also potentially zero sum, as if one employer raises wages, then others will follow, and there may not be a 10% gain in employees. Just increased costs all around. (There will be some gain in employees of course, as workers are pulled in from less efficient sectors)
I dont have much sympathy for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all.
I mean sure, paying more can help alot, but first of all, just fix your Hiring process. The hiring process at these some of the companies I've heard about are absolutely abysmal. I've heard first hand: They get great candidates who pass the phone screen and all the in person interviews: then at the last minute change their mind about hiring.
I've seen this at software companies when I was on the hiring side of the equation. HR told us we had an extra slot open. We don't wanna waste the slot so decide to hire somone. we wasted months turning down excellent candidates because engineers don't know how to interview a candidate because there's never time to train someone when teams are changing every year. Then we finally find a perfect one that everyone likes, and the manager above us decides to cancel the position and use the slot to hire a college buddy of his for a completely different role.
My theory is, a lot of these so called job openings are for jobs that aren't really needed. And the stake holders don't realize that the jobs aren't needed until the final hiring decision sign off is needed.
> I have no sympathies for companies that turn down highly qualified intelligent workers by the truckload. There are so many people with MBAs who, for years struggle to get any kind of job at all.
An "MBA" doesn't make you "highly qualified". People (especially those with an MBA) should realize that it's about supply and demand: There's too many MBAs and too few jobs where just an MBA makes you a good candidate.
Companies are never complaining about finding workers, they are complaining about finding workers at the right price. For obvious reasons, they don't phrase it that way though.
> My theory is, a lot of these so called job openings are for jobs that aren't really needed.
At least they're not desperately needed. I assume you have a computer. I also assume you'll replace it at some point. As long as the old one is still working or you have a spare, you could you delay that purchase for months, even years. In the meantime, you can just go window shopping.
> My theory is, a lot of these so-called job openings are for jobs that aren't really needed. And the stakeholders don't realize that the jobs aren't needed until the final hiring decision sign off is needed.
This. It's a free option (pay if you use it, free if you don't - or, more precisely, it's the candidates who pay, with time and hope.
Many businesses have very small profit margins, so paying staff more or training staff could turn them unprofitable.
When you're buying products cheaply it's likely that somebody (or someone's environment) is paying a price for it. Once you bear that in mind there is such a thing as products being uncomfortably cheap.
(I live in Norway where nothing is cheap but almost everyone earns a good wage. The result is that people don't buy so much stuff but lead good lives.)
My last job that I quit I had worked for a "growth stage" startup. Our valuation was probably in the 500~M range and we had a real shot at making it to unicorn status. The entire time I worked there, every couple months the CEO would give this inspiring talk at the company all hands about how we're doubling down on recruiting and we're about to grow like you've never seen and change the world, etc.
When I left after two years, the number of engineers was about the same as when I joined, but they were almost all different engineers. The company both struggled to hire and retain because the salaries were just ok, the options pitiful, and the management downright awful.
We talked about getting the best and brightest from top universities, but at one point I learned our recruitment strategy was to look for "bargain" hires, which we defined as really bright & competitive new grads coming out of top schools, willing to work long hours, but willing to accept low salaries.
(Yes, I was one of those bargain hires, minus the long hours. I quit after suspecting that my lack of long hours was holding me back from getting promotions in spite of the significant responsibilities I had as one of the more tenured engineers).
"Pay more" works fine for companies that are at the top of the pyramid: google, amazon, facebook, etc. For the rest of the employers there's a hard stop at some point well below what the top 5 are paying.
The next thing to consider is training.
Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker).
> Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker).
Wow, I'm so glad that I am part of a company culture that values mentorship and teaching younger employees. Since joining in August last year I have spent a large proportion of my time both mentoring and pair programming.
Our team of 8 developers is fairly junior with 3 graduating last year and one this year. It's been great to see last year's graduates grow to become very independently productive members of the team, and I like to think that they would not have grown as much without my support and trust.
The article is kind of saying the opposite of what the headline implies. It says that Kashkari had previously been making the argument about paying more, but that, with unemployment falling to its lowest level in 49 years, we might now be getting to a point where there might actually be truth to the notion that there are just not enough bodies out there.
I see a solution to the problem: Remote work. Put people who are on site into jobs that actually require people to be on site, and fill jobs that don't have that requirement remotely. That way you can get around the absence of bodies in the U.S. (coupled with the tight immigration regime) and the skills shortage.
There is so much demand for non-mindless consumption these days, and in some areas certainly also the money for it, that I wonder why American companies don't start to signal.
Like, put a huge sign in front of the door:
"America needs higher wages, but someone needs to start! Our prices include fair wages to our workers, 25% above industry average".
Or something more clever.
Building this into the company ethos has the advantage, in the current economy, to not only take higher prices for hopefully little drop in demand, but also to attract better workers.
Since there are almost no labor related laws in the US, the only way to afford above average wages is to generate demand by differentiation.
And that might be done, after all, Americans are willing to tip ridiculous amounts (like 25%) just so that waiters or delivery drivers get to make a living.
Has this ever been attempted? I have no prior on whether it actually works, people might care too much about the price...
I haven't seen this ethos specifically with respect to workers, but have definitely seen it with respect to ethically sourced materials, sustainable environmental practices, etc. It seems to work well in wealthy areas where people can afford to care about these things. It does not work at all in lower income areas, which is most of the US. Price tends to trump pretty much everything else for the vast majority of consumers.
The gas station chain, Buccee's, in Texas posts the average starting wage of their employees in their stores, and the amount that it is above the average in the area. Or at least the did several years ago.
1) I've been saying this for years, but nobody wants to hear it. In particular, an oft-repeated maxim from the immigration debate is “these are jobs Americans will not do!”. This statement is plainly and obviously false. Most Americans will not do these jobs FOR THE WAGE YOU ARE WILLING TO PAY.
Picking tomatoes is backbreaking soul-killing work. I won't do it for minimum wage. I will do it for $10,000/hr. Somewhere between these extremes is the optimal wage (from the employer's point of view) which will attract a field full of pickers. Perhaps that wage is $100/hr. Now, I hear the grower growling “$100/hr is not a reasonable wage for a tomato picker”. To which I reply, “define ‘reasonable’ ”. Is it not a tenet of Republican free-market orthodoxy that the fair value of a commodity is that which is determined by market forces? Why is this orthodoxy so quickly extinguished when applied to wages, and especially when its application argues for better wages for low-status people?
2) I've referred to products and labor as commodities with prices set by market forces. However, I caution against viewing the employer-employee relationship as being exactly analogous with the manufacturer-customer relationship. Both business and labor make money by selling something -- the manufacturer sells his goods to a customer; the laborer sells her labor to an employer. But the two are very different in one regard: companies (mostly) have a multitude of customers, while a worker generally has ONE customer: her employer.
Most companies strive to avoid overreliance on a single customer. They diversify their offerings and try to establish a large customer base. The IT company selling its software to Walmart, and only Walmart, is surely aware of the inherent peril.
Laborers can't do this. An employee is selling his time; he cannot slice his day into 5-minute segments and sell each 5-minute labor period to a different buyer. He may even be contractually constrained from trying this (“no moonlighting”).
A laborer selling her time is not really in the same boat as a producer selling a product. [There are exceptions, generally to the benefit of the laborer. For example, self-employed physicians and lawyers really do have many customers who purchase small segments of their time].
What, there is a shortage of workers willing to work for low pay?
The Answer. Create competition in the labour sector by relaxing border controls and let in immigrants. Keep there status as illegal, so that you don’t need to pay all the costs that legally protected employees are entitled to
The alternative is trying to get cheap workers from abroad, which worked quite well in the past and still seems to do well to some extent - if you can accept all the challenges this way of doing business carries along on social/security/national level.
Times are changing, though, and absolute poverty is thankfully not everywhere an issue anymore, which leaves it to relative poverty: I can't afford Netflix => I am poor. In such cases, people are much less likely to do that "shitty not-well-paid job" for long. Selling drugs is much more convenient and profitable, for example. Also, more and more countries are restricting their borders, making it harder for cheap workers from abroad to come and do such jobs.
So, yes, the other alternative is: raise the salary!
> Selling drugs is much more convenient and profitable, for example.
I know its not related to the original topic, nor the core point of your comment but I'd be fascinated to know why you think this.
Based on my knowledge of the market WRT wholesale prices/retail (street) prices/legal risks/product expiry/supply chain reliability as well as just the statistics around anyone towards the bottom few levels of the pyrmaid on this I'm almost certain that this is roughly never the case.
I find it interesting that this assumption seems to still exist, and suspect that a suprising number of people would harbor a fallback position of "if shit gets really bad I could just sell drugs" which makes a lot of assumptions about how profitable it could possibly be.
I’m pretty convinced that as the realization that most work is meaningless, combined with concepts like basic income, employers will need to provide more-and-more incentives to get motivated workers.
Maybe they should study how trash men, sewer cleaners and other “undesirable” jobs are staffed?
Ugggghhhhh, there is absolutely no data to back up the proposition that throwing more money at the problem is a magical fix. This is a guess based on vapor out of convenience and desire.
As a software developer in the Dallas metro I make over 6 figures, twice the average income. The work isn't that hard and the perks are amazing. At EVERY software development job I have ever held I have worked with a huge number of immigrants.
If the pay is so damn good (already) and the benefits are so damn fantastic why aren't more Americans writing software? Why aren't so many of those people who are writing software so incompetent?
I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated.
So let's propose a hypothetical. Let's say entry level were $150,000 and senior were $500,000. A ridiculous increase. Would more people be interested in programming: absolutely. Would there would be a substantial increase in senior developers? I suspect there would be a minor increase, because it takes effort. Competence isn't a gift and gifting additional income won't work.
Now, I could be wrong, but as it stands all the objective evidence is on my side on this.
There are other jobs that are not software development. I don't think a fed chairman has "no data". Many companies are not trying to hire software developers at $150k. They're trying to hire truck drivers, warehouse workers, and accountants. At the minimum possible market wage. What he is saying is that if you raise your wage off "bare minimum possible" you may actually fill some open jobs.
I agree, talent isn't infinite, but, workforce participation rates are low and part of that is that for a given job there are those qualified to do it that won't do it for the prices on offer. There are also those who would be highly qualified and would switch into different jobs if the salaries were competitive.
> I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated.
That's a good point, and I know exactly the kind of people you mean, but that's not because those people lack the drive to struggle for more money. It's because they really have no interest in programming whatsoever but become convinced that they can overcome that lack of interest long enough to learn how to do it. But they all underestimate how freaking boring programming can be and how it really takes a certain personality type to do it. Honestly, I think if programmers all got $500,000 a year and our own private jets, it wouldn't increase the pool of competent programmers by all that much.
This is a phenomenon that's pretty unique to programming, so I don't think that's what Kashkari was talking about. I feel like he's talking more about people who want a better job in their same field but perhaps all the better jobs are a little bit too far away from them, or maybe the better jobs contain more responsibility than they can handle at their pay rate, etc. So if you just bump the salary up a little bit, you expand your circle of applicants just enough to include a few more qualified people.
While I agree that massively raising salaries wouldn't necessarily cause a corresponding increase in the overall labor pool of programmers, it likely would increase a number employers care more about.
Specifically, such a move would likely deepen the pool of programmers who want a W-2 job with a company that is the ultimate target of their work (as opposed to services firms). I would guess a lot of contractors would sign up for steady work at salaries in the range you mentioned. This applies across the experience spectrum, but more especially to more experienced people, who are less valued by current employment structures.
A lot of contractors basically act like employees now, and are only contractors for exogenous labor market reasons. For example, independent contractors can easily make more than the prevailing total W-2 comp for their level of experience. Closer to entry level, large system integrators (think: Accenture, IBM, etc.) pay marginally more with better benefits than most entry level jobs at F500 companies, where programmers usually do not make $150k to start. A $150k entry level salary would draw this talent directly into the F500 and away from the middlemen. (This is all to the extent that there are even entry level programming jobs at those firms anymore, since so many have been shifted to consulting firms).
Overall, it could end up being cheaper in both short and long terms for many of those roles to be filled by W-2 employees than by system integrators. I'd bet good money that these salary levels would make it relatively easy to hire formerly independent consultants and/or out of the big system integrators.
There is also a decent number of mid-career software people who have switched into other fields (law, project management) for potential financial upside. Programming can be a demanding field, and by mid-career for many people the compensation doesn't balance against the relatively low social status, being on call, etc. Many of these people might prefer to be programmers at a F500 making $400k with benefits, but in the main that job doesn't exist.
And that's before we look at people running small businesses that are semi-successful. The bar for continuing to run those goes up substantially if the alternative is make $40k/month at a +/-40 hour/week job.
To answer your question: yes, a senior development comp of $500k would increase the number of senior development employees.
> There is no such thing as "shortage" of anything. Just pay more, and you'll get it.
Businesses are also limited by how much their customers are willing to pay for the item/service their workforce produces.
If a company's labour costs are higher than the price their customers are willing to pay for the product they are selling, then that product won't be produced.
e.g. if the labour that goes into making raspberries means the customer has to pay $6.99 for a tiny little package of raspberries at the grocery store, and no one in the world is willing to pay that, then raspberries will no longer be sold.
I'm not saying that there currently isn't room to pay higher wages, I'm just saying there is a practical limit to "just pay more".
I'd love to move back to Silicon Valley and work for an early stage startup. But, now that I'm a bit more established and have kids, that means that I want something more than a budget 2-bedroom apartment. (And, I also want a reasonable commute.)
The cost of living is just too darn high for many businesses to afford to "pay more."
So, part of the problem isn't just paying more. Part of the problem is ensuring that areas with job openings are affordable for employees at what the employers can afford to pay.
Only wanting young employees with many years of experience, and that time the Dutch government tried to get unemployed people to work in the green houses. They got hundreds of people on buses, drove them to the green houses "look how wonderful it is to work here", a few million investment later, two people started working there. Both because this was a good way to meet others, and they didn't mind getting a lot less money if they took the job over government payment.
The greenhouses paid less because unemployed have many benefits that don't apply to working people, so getting a minimum wage job would be 40 hours + travel of your life gone for effectively a few % of more expendable income.
The people that actually do the work are people from Eastern Europe that don't get that kind of money from welfare in their own country if it exists at all.
If welfare would be less or preferably the actual minimum wage would be taxed less the gap between having a job and not having a job would be really worth the effort.
It's utterly strange that within some of the people that are rescued from war there's up to 80% of unemployment while The Netherlands needs to import people to do unskilled labor.
Paying more could work for certain kinds of jobs, but others are simply not productive enough to justify paying more. I recently went to a country without a minimum wage and it was amazing what they were paying people (presumably very little) to do, such as sell napkins and straws in a market. Without a regulatory requirement to do so, it's simply impossible for an employer to extract a U.S. minimum wage's worth of productivity doing that kind of activity.
That's not to say that every low paying job is like this.
We in the U.S. have gotten used to certain blue collar jobs paying very little because of massive numbers of new immigrants, legal and illegal. Now that the spigot is being turned off, there's a labor shortage at the low end. Maybe, e.g., food and construction ought to cost more to compensate, which will certainly change the type of offerings of each, but we might get more efficient usage as a result.
I agree that increasing wages is definitely a good way to get more folks in the door!
That said, a very real problem here is the fact that health care and basic benefits costs have been increasing significantly over the past 10 years but it's much harder to convince an employee of that value vs. dollars in the door on a salary number.
Just keeping your health care premiums steady year over year as an employer could be the equivalent of a huge wage increase, but your employees won't see it that way because nobody understands the true costs of care.
Nobody says "Thanks for the 10% raise" when they get to keep their benefits. This is only part of the problem with "you should try paying more." as an argument.
That said - for jobs without benefits especially, paying more should be the first reaction to this, 100%.
The companies appear to be complaining that they can't hire skilled people.
Paying more is one solution - hire the skilled people away from their current job.
But so is training. Training could be considered a benefit, but at one time it was the standard assumption - all jobs include training, particularly jobs that are in any way skilled. And not just training at the beginning, but ongoing. Every year. Like a salary, vacation and sick time. As part of the standard budget. Not the first thing to be cut - because it is just as necessary as salary, vacation and sick time.
Unless of course, the job isn't really skilled, and companies doesn't actually need skilled people.
One missed point is that companies should also fill jobs with people who are willing to do the work. Most of the time, their economics and hiring processes are blurred by trying to get what they perceive the best and those who usually have a lot of clout based off some social media information they have gathered.
It is far easier to train and make an expert of someone who wants to work with you than getting someone who has all the nice credentials that pretends their expertise. People who embrace what you are providing are generally more inclined to stay and contribute.
[+] [-] jedberg|7 years ago|reply
[+] [-] DanTheManPR|7 years ago|reply
[+] [-] graeme|7 years ago|reply
The owner wants a 10% increase in labour. How much will it cost? Let's assume they can only find new labour at 110, but if they pay this they must pay existing labour 110 as well.
110 * 110 = 12100. A 21% salary increase for a 10% labour increase.
Also it probably won't be a straight 10% labour increase, as some % will have to go to admin and the organizational costs associated with size.
So, that's why. It's also potentially zero sum, as if one employer raises wages, then others will follow, and there may not be a 10% gain in employees. Just increased costs all around. (There will be some gain in employees of course, as workers are pulled in from less efficient sectors)
[+] [-] mattm|7 years ago|reply
[+] [-] danieltillett|7 years ago|reply
[+] [-] breitling|7 years ago|reply
[+] [-] megaman8|7 years ago|reply
I mean sure, paying more can help alot, but first of all, just fix your Hiring process. The hiring process at these some of the companies I've heard about are absolutely abysmal. I've heard first hand: They get great candidates who pass the phone screen and all the in person interviews: then at the last minute change their mind about hiring.
I've seen this at software companies when I was on the hiring side of the equation. HR told us we had an extra slot open. We don't wanna waste the slot so decide to hire somone. we wasted months turning down excellent candidates because engineers don't know how to interview a candidate because there's never time to train someone when teams are changing every year. Then we finally find a perfect one that everyone likes, and the manager above us decides to cancel the position and use the slot to hire a college buddy of his for a completely different role.
My theory is, a lot of these so called job openings are for jobs that aren't really needed. And the stake holders don't realize that the jobs aren't needed until the final hiring decision sign off is needed.
[+] [-] zeroname|7 years ago|reply
An "MBA" doesn't make you "highly qualified". People (especially those with an MBA) should realize that it's about supply and demand: There's too many MBAs and too few jobs where just an MBA makes you a good candidate.
Companies are never complaining about finding workers, they are complaining about finding workers at the right price. For obvious reasons, they don't phrase it that way though.
> My theory is, a lot of these so called job openings are for jobs that aren't really needed.
At least they're not desperately needed. I assume you have a computer. I also assume you'll replace it at some point. As long as the old one is still working or you have a spare, you could you delay that purchase for months, even years. In the meantime, you can just go window shopping.
[+] [-] tomaskafka|7 years ago|reply
This. It's a free option (pay if you use it, free if you don't - or, more precisely, it's the candidates who pay, with time and hope.
[+] [-] dominicr|7 years ago|reply
Many businesses have very small profit margins, so paying staff more or training staff could turn them unprofitable.
When you're buying products cheaply it's likely that somebody (or someone's environment) is paying a price for it. Once you bear that in mind there is such a thing as products being uncomfortably cheap.
(I live in Norway where nothing is cheap but almost everyone earns a good wage. The result is that people don't buy so much stuff but lead good lives.)
[+] [-] nawitus|7 years ago|reply
[+] [-] IshKebab|7 years ago|reply
[+] [-] esotericn|7 years ago|reply
There's a ton of stuff that goes on outside of the actual mechanics of 'company hires for job and person applies for job'.
Unless you've been pretty lucky you've almost certainly dealt with euphemisms at work when it comes to discussions around pay, for example.
It's kind of annoying that we can't just speak frankly about these things, but such is life.
[+] [-] helen___keller|7 years ago|reply
When I left after two years, the number of engineers was about the same as when I joined, but they were almost all different engineers. The company both struggled to hire and retain because the salaries were just ok, the options pitiful, and the management downright awful.
We talked about getting the best and brightest from top universities, but at one point I learned our recruitment strategy was to look for "bargain" hires, which we defined as really bright & competitive new grads coming out of top schools, willing to work long hours, but willing to accept low salaries.
(Yes, I was one of those bargain hires, minus the long hours. I quit after suspecting that my lack of long hours was holding me back from getting promotions in spite of the significant responsibilities I had as one of the more tenured engineers).
[+] [-] collyw|7 years ago|reply
[+] [-] crispyambulance|7 years ago|reply
The next thing to consider is training.
Unfortunately, it is now fashionable for medium-sized businesses to be over-run with project management types that hold everyone nose to the "deliverables" grindstone and enforce performance measures that are hostile to anyone who needs to pick up new skills on job and anyone that deigns to mentor colleagues (god forbid, they slip on a trite deliverable because they were cultivating the next generation of grindstone-licker).
[+] [-] krigath|7 years ago|reply
Wow, I'm so glad that I am part of a company culture that values mentorship and teaching younger employees. Since joining in August last year I have spent a large proportion of my time both mentoring and pair programming.
Our team of 8 developers is fairly junior with 3 graduating last year and one this year. It's been great to see last year's graduates grow to become very independently productive members of the team, and I like to think that they would not have grown as much without my support and trust.
[+] [-] stakhanov|7 years ago|reply
I see a solution to the problem: Remote work. Put people who are on site into jobs that actually require people to be on site, and fill jobs that don't have that requirement remotely. That way you can get around the absence of bodies in the U.S. (coupled with the tight immigration regime) and the skills shortage.
[+] [-] zwaps|7 years ago|reply
Like, put a huge sign in front of the door: "America needs higher wages, but someone needs to start! Our prices include fair wages to our workers, 25% above industry average". Or something more clever. Building this into the company ethos has the advantage, in the current economy, to not only take higher prices for hopefully little drop in demand, but also to attract better workers.
Since there are almost no labor related laws in the US, the only way to afford above average wages is to generate demand by differentiation. And that might be done, after all, Americans are willing to tip ridiculous amounts (like 25%) just so that waiters or delivery drivers get to make a living.
Has this ever been attempted? I have no prior on whether it actually works, people might care too much about the price...
[+] [-] scarejunba|7 years ago|reply
Cash tips are usually tax frauded away.
[+] [-] mdorazio|7 years ago|reply
[+] [-] lazerpants|7 years ago|reply
[+] [-] hinny|7 years ago|reply
1) I've been saying this for years, but nobody wants to hear it. In particular, an oft-repeated maxim from the immigration debate is “these are jobs Americans will not do!”. This statement is plainly and obviously false. Most Americans will not do these jobs FOR THE WAGE YOU ARE WILLING TO PAY.
Picking tomatoes is backbreaking soul-killing work. I won't do it for minimum wage. I will do it for $10,000/hr. Somewhere between these extremes is the optimal wage (from the employer's point of view) which will attract a field full of pickers. Perhaps that wage is $100/hr. Now, I hear the grower growling “$100/hr is not a reasonable wage for a tomato picker”. To which I reply, “define ‘reasonable’ ”. Is it not a tenet of Republican free-market orthodoxy that the fair value of a commodity is that which is determined by market forces? Why is this orthodoxy so quickly extinguished when applied to wages, and especially when its application argues for better wages for low-status people?
2) I've referred to products and labor as commodities with prices set by market forces. However, I caution against viewing the employer-employee relationship as being exactly analogous with the manufacturer-customer relationship. Both business and labor make money by selling something -- the manufacturer sells his goods to a customer; the laborer sells her labor to an employer. But the two are very different in one regard: companies (mostly) have a multitude of customers, while a worker generally has ONE customer: her employer.
Most companies strive to avoid overreliance on a single customer. They diversify their offerings and try to establish a large customer base. The IT company selling its software to Walmart, and only Walmart, is surely aware of the inherent peril.
Laborers can't do this. An employee is selling his time; he cannot slice his day into 5-minute segments and sell each 5-minute labor period to a different buyer. He may even be contractually constrained from trying this (“no moonlighting”).
A laborer selling her time is not really in the same boat as a producer selling a product. [There are exceptions, generally to the benefit of the laborer. For example, self-employed physicians and lawyers really do have many customers who purchase small segments of their time].
[+] [-] sbhn|7 years ago|reply
[+] [-] toxik|7 years ago|reply
[+] [-] mk89|7 years ago|reply
Times are changing, though, and absolute poverty is thankfully not everywhere an issue anymore, which leaves it to relative poverty: I can't afford Netflix => I am poor. In such cases, people are much less likely to do that "shitty not-well-paid job" for long. Selling drugs is much more convenient and profitable, for example. Also, more and more countries are restricting their borders, making it harder for cheap workers from abroad to come and do such jobs.
So, yes, the other alternative is: raise the salary!
[+] [-] hvindin|7 years ago|reply
> Selling drugs is much more convenient and profitable, for example.
I know its not related to the original topic, nor the core point of your comment but I'd be fascinated to know why you think this.
Based on my knowledge of the market WRT wholesale prices/retail (street) prices/legal risks/product expiry/supply chain reliability as well as just the statistics around anyone towards the bottom few levels of the pyrmaid on this I'm almost certain that this is roughly never the case.
I find it interesting that this assumption seems to still exist, and suspect that a suprising number of people would harbor a fallback position of "if shit gets really bad I could just sell drugs" which makes a lot of assumptions about how profitable it could possibly be.
[+] [-] keiferski|7 years ago|reply
Maybe they should study how trash men, sewer cleaners and other “undesirable” jobs are staffed?
[+] [-] austincheney|7 years ago|reply
As a software developer in the Dallas metro I make over 6 figures, twice the average income. The work isn't that hard and the perks are amazing. At EVERY software development job I have ever held I have worked with a huge number of immigrants.
If the pay is so damn good (already) and the benefits are so damn fantastic why aren't more Americans writing software? Why aren't so many of those people who are writing software so incompetent?
I get asked all the damn time by young people in my side job how they can become software developers so they too can make the big bucks. Simple, put fingers on keyboard, struggle, and figure it out through practice. None of them follow through. None. Some of these guys make far less than the national average and they still aren't motivated.
So let's propose a hypothetical. Let's say entry level were $150,000 and senior were $500,000. A ridiculous increase. Would more people be interested in programming: absolutely. Would there would be a substantial increase in senior developers? I suspect there would be a minor increase, because it takes effort. Competence isn't a gift and gifting additional income won't work.
Now, I could be wrong, but as it stands all the objective evidence is on my side on this.
[+] [-] abakker|7 years ago|reply
I agree, talent isn't infinite, but, workforce participation rates are low and part of that is that for a given job there are those qualified to do it that won't do it for the prices on offer. There are also those who would be highly qualified and would switch into different jobs if the salaries were competitive.
[+] [-] tboyd47|7 years ago|reply
That's a good point, and I know exactly the kind of people you mean, but that's not because those people lack the drive to struggle for more money. It's because they really have no interest in programming whatsoever but become convinced that they can overcome that lack of interest long enough to learn how to do it. But they all underestimate how freaking boring programming can be and how it really takes a certain personality type to do it. Honestly, I think if programmers all got $500,000 a year and our own private jets, it wouldn't increase the pool of competent programmers by all that much.
This is a phenomenon that's pretty unique to programming, so I don't think that's what Kashkari was talking about. I feel like he's talking more about people who want a better job in their same field but perhaps all the better jobs are a little bit too far away from them, or maybe the better jobs contain more responsibility than they can handle at their pay rate, etc. So if you just bump the salary up a little bit, you expand your circle of applicants just enough to include a few more qualified people.
[+] [-] runako|7 years ago|reply
Specifically, such a move would likely deepen the pool of programmers who want a W-2 job with a company that is the ultimate target of their work (as opposed to services firms). I would guess a lot of contractors would sign up for steady work at salaries in the range you mentioned. This applies across the experience spectrum, but more especially to more experienced people, who are less valued by current employment structures.
A lot of contractors basically act like employees now, and are only contractors for exogenous labor market reasons. For example, independent contractors can easily make more than the prevailing total W-2 comp for their level of experience. Closer to entry level, large system integrators (think: Accenture, IBM, etc.) pay marginally more with better benefits than most entry level jobs at F500 companies, where programmers usually do not make $150k to start. A $150k entry level salary would draw this talent directly into the F500 and away from the middlemen. (This is all to the extent that there are even entry level programming jobs at those firms anymore, since so many have been shifted to consulting firms).
Overall, it could end up being cheaper in both short and long terms for many of those roles to be filled by W-2 employees than by system integrators. I'd bet good money that these salary levels would make it relatively easy to hire formerly independent consultants and/or out of the big system integrators.
There is also a decent number of mid-career software people who have switched into other fields (law, project management) for potential financial upside. Programming can be a demanding field, and by mid-career for many people the compensation doesn't balance against the relatively low social status, being on call, etc. Many of these people might prefer to be programmers at a F500 making $400k with benefits, but in the main that job doesn't exist.
And that's before we look at people running small businesses that are semi-successful. The bar for continuing to run those goes up substantially if the alternative is make $40k/month at a +/-40 hour/week job.
To answer your question: yes, a senior development comp of $500k would increase the number of senior development employees.
[+] [-] justin66|7 years ago|reply
If that's the actual advice you're giving, I wouldn't expect anyone to follow through.
[+] [-] feefie|7 years ago|reply
Businesses are also limited by how much their customers are willing to pay for the item/service their workforce produces.
If a company's labour costs are higher than the price their customers are willing to pay for the product they are selling, then that product won't be produced.
e.g. if the labour that goes into making raspberries means the customer has to pay $6.99 for a tiny little package of raspberries at the grocery store, and no one in the world is willing to pay that, then raspberries will no longer be sold.
I'm not saying that there currently isn't room to pay higher wages, I'm just saying there is a practical limit to "just pay more".
[+] [-] gwbas1c|7 years ago|reply
I'd love to move back to Silicon Valley and work for an early stage startup. But, now that I'm a bit more established and have kids, that means that I want something more than a budget 2-bedroom apartment. (And, I also want a reasonable commute.)
The cost of living is just too darn high for many businesses to afford to "pay more."
So, part of the problem isn't just paying more. Part of the problem is ensuring that areas with job openings are affordable for employees at what the employers can afford to pay.
[+] [-] mrarjen|7 years ago|reply
Only wanting young employees with many years of experience, and that time the Dutch government tried to get unemployed people to work in the green houses. They got hundreds of people on buses, drove them to the green houses "look how wonderful it is to work here", a few million investment later, two people started working there. Both because this was a good way to meet others, and they didn't mind getting a lot less money if they took the job over government payment.
[+] [-] dep_b|7 years ago|reply
The people that actually do the work are people from Eastern Europe that don't get that kind of money from welfare in their own country if it exists at all.
If welfare would be less or preferably the actual minimum wage would be taxed less the gap between having a job and not having a job would be really worth the effort.
It's utterly strange that within some of the people that are rescued from war there's up to 80% of unemployment while The Netherlands needs to import people to do unskilled labor.
[+] [-] georgeburdell|7 years ago|reply
That's not to say that every low paying job is like this. We in the U.S. have gotten used to certain blue collar jobs paying very little because of massive numbers of new immigrants, legal and illegal. Now that the spigot is being turned off, there's a labor shortage at the low end. Maybe, e.g., food and construction ought to cost more to compensate, which will certainly change the type of offerings of each, but we might get more efficient usage as a result.
[+] [-] sailfast|7 years ago|reply
That said, a very real problem here is the fact that health care and basic benefits costs have been increasing significantly over the past 10 years but it's much harder to convince an employee of that value vs. dollars in the door on a salary number.
Just keeping your health care premiums steady year over year as an employer could be the equivalent of a huge wage increase, but your employees won't see it that way because nobody understands the true costs of care.
Nobody says "Thanks for the 10% raise" when they get to keep their benefits. This is only part of the problem with "you should try paying more." as an argument.
That said - for jobs without benefits especially, paying more should be the first reaction to this, 100%.
[+] [-] penglish1|7 years ago|reply
Paying more is one solution - hire the skilled people away from their current job.
But so is training. Training could be considered a benefit, but at one time it was the standard assumption - all jobs include training, particularly jobs that are in any way skilled. And not just training at the beginning, but ongoing. Every year. Like a salary, vacation and sick time. As part of the standard budget. Not the first thing to be cut - because it is just as necessary as salary, vacation and sick time.
Unless of course, the job isn't really skilled, and companies doesn't actually need skilled people.
[+] [-] AngeloAnolin|7 years ago|reply
It is far easier to train and make an expert of someone who wants to work with you than getting someone who has all the nice credentials that pretends their expertise. People who embrace what you are providing are generally more inclined to stay and contribute.