Sta Hungry Stay Foolish

Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

Why do we have labour shortages?

Recently, someone said to me – jokingly – that I am an example why we have labour shortages. Indeed, one could argue that I could work and that I do not work. However, my (post 2013 burnout) situation is already lasting for nearly 10 years. The post-Covid-19 situation is only since 2022. Where did all workers go?

Clearly, the 2020-2022 Covid-19 fatalities do not explain 2022 labour shortages as most retired long ago. Changing demographics might be an explanation because the outflow of ageing workers is already exceeding the inflow of young workers. This is also known as the greying of the (average) population.

The two most common explanations in life are time and space (eg, location). Regarding time: could the inflow of workers have stalled and/or the outflow of workers have accelerated during Covid-19? Regarding space: could there be a (temporary) mismatch due to a different allocation of labour?

I doubt there is a single cause for the effect of labour shortages. Usually, any explanation has multiple causes, although these will differ in frequency / likelihood and in impact. The fact that nobody seems to know the explanation (for labour shortages) would indeed suggest the existence of multiple causes.

Any market shortages would involve (1) demand & supply, being (a) increased demand and (b) reduced supply, and (2) time & space being (c) changing demographics, and (d) different allocation (eg, health, wages).

A quick and dirty analysis would argue that (a) is temporary, (b) is permanent due to (c), and (d) is temporary – by default. My situation involves (b) and possibly also (d).

It’s quite likely that the current labour market mismatch will – temporarily – disappear due to the impact of high inflation causing a reverse of (a) demand and (b) supply. Over time, changing demographics (c) will become dominant, which can be solved by importing excess labour from other countries.

The above analysis excludes a lesser known mechanism: (3) substitution; in this case economic substitution between human labour and technology. This will boost the Technical Revolution of 1800-2100.

Revolution (1968) by the Beatles
band, lyrics, video, Wiki-band, Wiki-song

Note: all markings (bolditalicunderlining) by LO unless in quotes or stated otherwise.

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