If you want an executive assistant and can’t find one because of the labor “shortage,” a Wall Street Journal story of today gives the solution: pay her (or perhaps him) more than $200,000 a year and the shortage is over. If you still have problems finding the assistant you need, boost her title to “chief of staff” and bid up the prospects’ salary to $300,000 or $400,000. (“Paying $400,000 for an Executive Assistant? Do-It-All Aides Are Pricier Than Ever,” August 4, 2022). The subtitle gives the flavor of the story:
Wealthy executives are shelling out six figures for sophisticated aides smart enough to handle complicated tasks yet humble enough to take on tedious ones
One aspect of market complexity lies in the submarkets that characterize any good or (as in this case) service that is not perfectly homogeneous. There are different kinds of labor and different kinds of executive assistants. But in all cases, supply and demand determine wages if the market is free.
A less recent WSJ story, on which I considered writing an EconLog post at the time, illustrated the same phenomenon in another market where the price is not capped: if you really want to hire somebody, just pay the market wage or bid it up. If you don’t, it’s just that you don’t really want it given what you are willing to pay and what the other bidders pay. And don’t complain there is a “shortage”! The title of the story was self-explanatory: “Teen Babysitters Are Charging $30 an Hour Now, Because They Can” (May 19, 2022). The subtitle gave more flavor, although again the respectable newspaper did not use the term shortage in its economic meaning, the proof being that you do get a babysitter if you pay $30 an hour plus some perks:
Sitter shortage has parents treating teenagers like VIPs; ‘order anything you want for dinner’
One question as an exercise: Are teen babysitters “wage gougers”?
All this reminds me of an old economist joke. Walking on the sidewalk, an economist and his friend pass by a Ferrari dealership with a red 296 GTB in the window. (An economist, by definition should we say, thinks of individual choices in terms of individual preferences and outside constraints such as prices, income, etc.; but the friend still doesn’t understand that.) “I want this,” the friend says as they continue walking. “No, you don’t,” replies the economist.
READER COMMENTS
Craig
Aug 4 2022 at 6:18pm
I’d settle for the babysitter.
Pierre Lemieux
Aug 5 2022 at 10:27am
Craig: For a while.
Dylan
Aug 4 2022 at 7:20pm
So, not a Stones fan, I take it?
Pierre Lemieux
Aug 5 2022 at 12:31am
Dylan: No. Are they a philosopher’s stones. Did they say anything that I could use as a criticism?
MarkW
Aug 5 2022 at 6:55am
“You can’t always get what you want”. Jimmy Cliff disagrees.
I’m not sure the joke works very well, though — unless maybe the friend was so wealthy that buying the Ferrari would be a trivial expense and he’d just never bothered to get to a dealership. ‘Wanting’ roughly means ‘would like to have’, not ‘would give up everything else to get’. There are various things that I want, but will likely never get, because I just don’t want them badly enough.
robc
Aug 5 2022 at 10:11am
The “joke” depends on Austrian economics (I think). If desires are a ranked list, and not variable amounts of wants, then if it isn’t high enough on the list to actually buy, you don’t really want it.
If every want has a fractional value between 0 and 1, then it is possible to not want something badly enough (it is only a .2). If it is a list, then being #1327 on the list means you don’t want it.
Pierre Lemieux
Aug 5 2022 at 10:44am
robc: You get right the crucial idea in modern economics that individual preferences are just a ranking. I would add three points, though. First, it is not properly an Austrian idea, but a neoclassical one, formalized by Hicks and Allen (as I mention in my 90th-anniversary review of Lionel Robbins’s An Essay on the Nature and Significance of Economic Science). Second, since utility can only be ordinal, and we can’t measure it with a cardinal number on a scale from, say, 0 to 1, it can only be on a rank scale (as you otherwise mention): the first preferred, the second preferred, etc. Third, if there exist many goods, what you compare are baskets: do I prefer one Ferrari, McDonald’s meals, and renting a room in the slum or, instead, one Kia Rio, shopping at Whole Foods, and buying/renting a small house.
Pierre Lemieux
Aug 5 2022 at 10:26am
MarkW: Does any joke ever work? This one intentionally overemphasizes (which is what makes it funny) that, among the things one wants, there are some that he wants more (that he really wants), so he foregoes the others to get that one. There are always trade-offs.
You point another obvious way in which the the joke could not work. The friend is so rich that he meant, “Since I want this Ferrari, I will tell my executive assistant, when I get to the office, to phone the dealership and order it.” (“And, by the way, budget $2 million instead of $3 million for the house you are trying to find for my old mother-in-law.”)
Dylan
Aug 5 2022 at 12:18pm
Glad someone got it.
I think of wants as being exclusively things you don’t have. Once you have it, it doesn’t really make sense to describe it as something you want. And in that bucket of course there are the things you want that you can have and the things you want that you can’t.
Pierre Lemieux
Aug 6 2022 at 3:32pm
Dylan: If somebody doesn’t want his house, why doesn’t he sell it and buy another one?
Dylan
Aug 7 2022 at 8:43am
Pierre: Want is defined by the absence of, once you have something you no longer want for it. For a house you own, you may like it, enjoy living there, it may in fact be the absolute best house for you, but you don’t want it. That part is just definitional. Then there is of course the psychological component, where the desire comes from the work you need to do to get something, and whatever you wanted so badly before you had it, means little to you once you get it.
Pierre Lemieux
Aug 8 2022 at 11:19am
Dylan: Your’re right that the meaning of “want” is a definitional issue. “Demand” and “utility” are the useful technical terms. I think however, that “want” is much closer to the economic terms than many others such as “need.”
Imagine that you come back to your house after a vacation and find it occupied by squatters, who stop you from entering. “It’s ours,” they say. “Power to the people!” It would be unusual for you to reply: “OK, no problem, I don’t want it!”
Bill
Aug 6 2022 at 9:21am
Years back, we shopped for a used car. One local proprietor admonished that I should buy from him to support the local economy. My response was that if buying a car at a local dealer involved a price premium, this left less of my income available to support other local merchants.
Philo
Aug 9 2022 at 10:01am
The economist might more properly have responded: “You don’t want it enough (actually to buy it).” But he needn’t have said that out loud: it was already obvious to both parties.
Pierre Lemieux
Aug 9 2022 at 10:53am
Philo: Economists apparently like to speak in tongues!
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