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Does Labor Exist on a Supply / Demand Curve?

Does Labor Exist on a Supply Demand Curve

  • Price, Supply, and Demand of Labor all impact each other

    Votes: 29 96.7%

  • Labor is not impacted by Price, Supply, or Demand

    Votes: 1 3.3%
  • Total voters
    30
cpwill said:
Is labor impacted by relative supply and demand? If there is a shortage of trained engineers, will their income go up? If there is a surplus of recent law-school graduates, will their income go down? If we increase the price of labor without altering supply, will demand go down?

In short, is labor effected by supply and demand? Or magically is it the one service / commodity that isn't, just because it happens to be the thing that most of us sell?

Poll is in response to several people that I have seen either explicitly or implicitly argue the latter, that somehow if you increase the cost of labor, you do not decrease demand when supply is held constant.
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For the most part, yes, labor is dictated by supply-and-demand, but it's not an absolute. There are companies that will keep employees in lean times and continue to pay them their full wage, even though demand would suggest they don't. On the flip side, there are also companies that will trim anything and everything even when things are going well.

I think supply-and-demand is closer to being the driving determiner regarding new hires, and less so regarding employees who already have the job.


Muddy Creek said:
No, it's created by congressional laws allowing lowering wages, shipping jobs overseas, and discriminating about races and sexes in wages.

Nothing more, nothing less.
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Sometimes I think you're trolling for your own amusement and make stuff up as you go along. Other times I have to remind myself that there really are people this out of touch with the world around them.
 
cpwill said:
Is labor impacted by relative supply and demand? If there is a shortage of trained engineers, will their income go up? If there is a surplus of recent law-school graduates, will their income go down? If we increase the price of labor without altering supply, will demand go down?

In short, is labor effected by supply and demand? Or magically is it the one service / commodity that isn't, just because it happens to be the thing that most of us sell?


Poll is in response to several people that I have seen either explicitly or implicitly argue the latter, that somehow if you increase the cost of labor, you do not decrease demand when supply is held constant.
Click to expand...

Leave it to cpwill to come up with a thought-provoking poll! Nice job!

The simple answer is yes.

When the labor supply increases, but labor demand remains constant, the price of labor will drop. The inverse is also true.

One could argue that the minimum wage artificially inflates the price of labor when the market labor demand is down.

Many people do not understand that increasing labor cost will:

1) drive up the price of a product or service and reduce sales due to noncompetitive pricing in the market

2) Force manufacturers to resource cheaper labor elsewhere, generally overseas

3) By artificially increasing labor costs (union contracts), the end product becomes more expensive, is less competitive in the market, and can drive down sales or add to inflation costs, negatively effecting the entire economy

If an employee gets more money, but has to pay more money for products due to rising labor costs elsewhere, they have gained nothing.

Any manufacturer cannot just increase their end selling price to offset increasing labor cost unless all of their competitors are doing the same thing, or they will become uncompetitive.
The UAW does not understand this concept, as they only look at wage parity amongst the Big 3.
That is why the Japanese US automakers are kicking the Big 3's asses.
Retirement cost requirements for a corporation also are a subset of labor cost - you must look at the entire benefits package..
Just my $0.02
 
ReformCollege said:
Not treating human capital like a resource is what can cause them to be mismanaged. You can treat human capital differently, but eventually it will catch up with you.

And when are the interests of one not dependent on the interests of the other? Society has less problems when the economy is growing and running smoothly. The economy has less problems when society is functional and stable. In the modern age where society revolves around human created goods and services, the two are quite inseparable.
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There is a problem with treating employees as human capitol. The problem is one of measurement. If measuring the value of human capitol done correctly is very difficult. It is generally not done correctly by large employers. (I was a low level design engineer managing a group of people. I made some ranking, and hire/fire decisions.) Here are three of the problems I have frequently seen in large corporations: Ignoring the basic culture of a person. Ignoring the true objective of a person. Equating the skill set to a diploma.
 
OhIsee.Then said:
There is a problem with treating employees as human capitol. The problem is one of measurement. If measuring the value of human capitol done correctly is very difficult. It is generally not done correctly by large employers. (I was a low level design engineer managing a group of people. I made some ranking, and hire/fire decisions.) Here are three of the problems I have frequently seen in large corporations: Ignoring the basic culture of a person. Ignoring the true objective of a person. Equating the skill set to a diploma.
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Then the basic measurement of human capital would be the distribution of diplomas. Would it not?
 
Not effected. Good times, bad times, salary pays the same.
 
cpwill said:
Is labor impacted by relative supply and demand? If there is a shortage of trained engineers, will their income go up? If there is a surplus of recent law-school graduates, will their income go down? If we increase the price of labor without altering supply, will demand go down?

In short, is labor effected by supply and demand? Or magically is it the one service / commodity that isn't, just because it happens to be the thing that most of us sell?


Poll is in response to several people that I have seen either explicitly or implicitly argue the latter, that somehow if you increase the cost of labor, you do not decrease demand when supply is held constant.
Click to expand...

It is effected by supply and demand, but its different than other commodities.

For example one can hold capital, workers cannot just hold labor (workers need wages to survive), also labor value changes all the time with productivity changes, at the same time as productivity goes up price does not necessarily go up, since the demand for work is stable its just equal to the working population, while the demand for labor may change based on aggrigate demand. The holder of capital will always pay the least while getting the most out of labor, also a difference is that labor is a PRODUCER of value, without any innate use value, its use is producing other use values, as such it would be priced differently from commodities whose value is its own use value.

Demand for labor however is not necessarily based on the price, its based on aggrigate demand in the economy, i.e. how much profit is able to be made. So for example if labor price goes up, supply is the same, yet aggrigate demand for goods and services is steady and profit is still being made the demand for labor will be steady.

Not to mention that a ton of aggrigate demand COMES from wages, putting a whole new spin on it.
 
RGacky3 said:
It is effected by supply and demand, but its different than other commodities.

For example one can hold capital, workers cannot just hold labor (workers need wages to survive), also labor value changes all the time with productivity changes, at the same time as productivity goes up price does not necessarily go up, since the demand for work is stable its just equal to the working population, while the demand for labor may change based on aggrigate demand. The holder of capital will always pay the least while getting the most out of labor, also a difference is that labor is a PRODUCER of value, without any innate use value, its use is producing other use values, as such it would be priced differently from commodities whose value is its own use value.

Demand for labor however is not necessarily based on the price, its based on aggrigate demand in the economy, i.e. how much profit is able to be made. So for example if labor price goes up, supply is the same, yet aggrigate demand for goods and services is steady and profit is still being made the demand for labor will be steady.

Not to mention that a ton of aggrigate demand COMES from wages, putting a whole new spin on it.
Click to expand...
It is possible to disconnect labor from demand, or at least put an extreemly long time delay in the loop. I have done it a few times. e.g. A small computers power supply made in the US was moved to Mexico, where workers didn't know how to build it to the required quality. And, where the workers were paid so little they would not be buying the product, directly or indirectly, i.e. the computer.
 
OhIsee.Then said:
It is possible to disconnect labor from demand, or at least put an extreemly long time delay in the loop. I have done it a few times. e.g. A small computers power supply made in the US was moved to Mexico, where workers didn't know how to build it to the required quality. And, where the workers were paid so little they would not be buying the product, directly or indirectly, i.e. the computer.
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We are talking macro economics, apples and oranges.
 
OhIsee.Then said:
Do you mean by cirtification of knowledge or by some other criteria?
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I mean a basic measurement of human capital. For instance, I forgot where I was reading this, but one Bloomberg article was talking about if employers just had a basic map of the U.S. that showed the concentrations of where the college graduates in various fields were, they would be much better off being able to recruit and employ people for job openings.
 
RGacky3 said:
We are talking macro economics, apples and oranges.
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I have been comparing my experiences with others for more than two decades. Everyone that is has experience with outsourcing has the same experiences and shares the opinion that this is happening everywhere and often, not just with apples and oranges. (Oh that's right, they did use the approved insecticide on those apples since they did certify that.)
 
ReformCollege said:
I mean a basic measurement of human capital. For instance, I forgot where I was reading this, but one Bloomberg article was talking about if employers just had a basic map of the U.S. that showed the concentrations of where the college graduates in various fields were, they would be much better off being able to recruit and employ people for job openings.
Click to expand...
I and others have found that the diploma isn't sufficient to certify the ability to do the work. What have you found?
 
OhIsee.Then said:
I and others have found that the diploma isn't sufficient to certify the ability to do the work. What have you found?
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Maybe, maybe not. But it is neccesary for the fields where the jobs are going to be growing the next few decades, or the STEM fields. You can't be an engineer if you can't do calculus.
 
ReformCollege said:
Maybe, maybe not. But it is neccesary for the fields where the jobs are going to be growing the next few decades, or the STEM fields. You can't be an engineer if you can't do calculus.
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You don't need a degree in order to do calculus

I've been a STEM worker for 30 years with no college degree
 
cpwill said:
Agreed. The relative price of capital, for example. However, my point is simply that I believe that the cost of labor impacts demand for it, and yet while I find this to be among the most obvious things in the world, I have repeatedly seen several others argue as though this were not true.
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And, vice versa, the demand for labor also affects the cost of it. Both statements are true.
 
OhIsee.Then said:
I have been comparing my experiences with others for more than two decades. Everyone that is has experience with outsourcing has the same experiences and shares the opinion that this is happening everywhere and often, not just with apples and oranges. (Oh that's right, they did use the approved insecticide on those apples since they did certify that.)
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Meaning you're talkinga bout Micro economic examples I'm talking Macro economics.
 
sangha said:
You don't need a degree in order to do calculus

I've been a STEM worker for 30 years with no college degree
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That seems to be the norm of your generation, not mine.

One cannot even get into the field of engineering today without having a graduate degree.
 
RGacky3 said:
Meaning you're talkinga bout Micro economic examples I'm talking Macro economics.
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So when your top down analysis using top level measurements gives you the answer, then you are confident that the answer is correct. However, if many of your low level samples don't show the same causality and and have a high level alignment you should question the high level analysis.
 
cpwill said:
You know, I was reading a book by the guy who works for the World Bank, and he made the note that countries with a higher lawyers - to - engineers ratio have slower rates of growth. Apparently when you attract your intellectual talent into redistributing wealth rather than creating it, the effects are negative for the nation at large.
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You think all those corporate lawyers who pen contracts are redistributing wealth instead of creating it? Try inter-corporate relations without contracts and see where that gets you.

You think holding companies financially responsible for defective and harmful products doesn't contribute to the economy by giving companies an incentive to produce better and safer products?!?

Considering your talk in other threads your comment here earns you 2/3 ... :lamo :lamo
 
ReformCollege said:
Not treating human capital like a resource is what can cause them to be mismanaged. You can treat human capital differently, but eventually it will catch up with you.

And when are the interests of one not dependent on the interests of the other? Society has less problems when the economy is growing and running smoothly. The economy has less problems when society is functional and stable. In the modern age where society revolves around human created goods and services, the two are quite inseparable.
Click to expand...
I have seen stupid employers try to keep pay too low, and equal among non-union workers....their best workers left as soon as they could find better pay elsewhere...
 
ReformCollege said:
That seems to be the norm of your generation, not mine.

One cannot even get into the field of engineering today without having a graduate degree.
Click to expand...
I know a few people who didn't attend college, but are paid as engineers...self taught, genius, types....the kind who COULD go out on their own but choose not to....and we all know people with graduate degrees who somehow lack the common sense/good judgement to do things right...
 
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