No Shortage of Labor for Walmart
Walmart is providing another illustration that here is no “shortage” of labor if we take the word in its economic meaning of empty “shelves” at free-market prices (or wages, which is the price of labor). If we take the word in its confusing sense of “high prices,” then there is a shortage of everything: diamonds, Porsches, olive oil, Bourgogne, etc. (We must distinguish “shortage” and “smurfage.”) Because resources are relatively scarce in relation to human desirers, no economic good has a zero price—except perhaps when property rights are not well defined.
Much of what producers (including intermediaries, as economic usage goes) call shortages of inputs such as labor is not actually of the nature of shortages, except perhaps in the short run, and usually the very short run. What they mean is simply high prices they don’t want to pay because final consumers would not pay the corresponding price increases. When consumers are willing to pay higher prices because market demand has increased or supply has decreased or both, it is this willingness to pay more that leads producers to bid up input prices. The demand for an input, economists say, is a “derived demand”—derived from consumer demand for the final product.
When consumers prefer to pay more rather than going without a good and its price is not capped by government edict, there is no supply-chain “snarl”or other vain emotion, only a higher consumer price and, if the industry is large in input markets, higher input prices. This is quite obvious in the current case of personal computers, whose prices have jumped enough to persuade producers to bid up the price of microchips to make sure they get them. It is an important result of economics that only free market can make these complex calculations; government planners (bureaucrats or politicians) cannot.
Consider Walmart (“Walmart Dangles $110,000 Starting Pay to Lure Truck Drivers,” Wall Street Journal, April 7, 2022). Because consumer demand for its wares is increasing, Walmart needs more truck shipping capacity than provided by its current 12,000 drivers. The company needs to retain its drivers and to hire new ones. In the meantime, the supply of truck drivers seems may be decreasing as some are attracted to other occupations. Thus, the company is now offering an annual salary up to $110,000, plus sign-on bonuses in certain cases, to divert drivers from other industries where consumer demand is not as pressing; the offer is also available, together with a 12-week training program, to some of its own employees from elsewhere in the company.
I suppose a socialist would say that this is how a capitalist company exploits workers and cheats consumers! Note also that each time another employer is hiring a truck driver, he is successfully bidding for labor against Walmart.
On the supply-chain front, we have seen a similar phenomenon before last Christmas when companies such as Walmart, Home Depot, and Target chartered their own cargo ships to bring to the shores of America what their customers wanted (see my Econlog post “The Supply-Chain Myth, November 18, 2021).