Kevin Drum vs. Priceless Economics
By Arnold Kling
So here’s the story. Union Pacific is offering $48,000 per year for skilled, highly specialized, journeyman work that’s physically grueling and requires workers to be away from home about half of each month. The competition is offering 50% more, but not only is UP not willing to increase their starting wage, they’re so certain they can fill all their positions that they make qualified candidates pay for their own aptitude test. And despite all this, they filled all 24 of their positions in ten hiring sessions.
Pointer from Mark Thoma.
Whenever you read a story about a shortage or surplus of workers of a particular type, you should ask what is preventing an adjustment of wages to restore balance to supply and demand. That is why so many economists look at unemployment and think that wages must be artificially high. When you’ve spent your professional life trying to correct the error of priceless economics (the fallacy of assuming that shortages and surpluses are permanent, with no price to clear markets), you apply your thinking to the labor market.
It is those of us who argue differently about unemployment that have to wave our hands and talk about discontinuous declines in marginal productivity. I am willing to do it, but I keep in mind the challenge.