Arnold Kling  

Labor Supply and Demand

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About a year ago, the big story in our local suburban newspaper was the adoption of a "living wage" bill in our county. This summer, the big story was the shortage of teenage jobs here. I was tempted to write a letter to the editor suggesting that one could connect the dots.

Ed Tinsley, the CEO of a restaurant chain, has written about how the "living wage" enacted in Santa Fe affects his business decisions.

While I truly wanted to open a K-Bob’s in Santa Fe, the huge labor-cost hikes would force me to jack up prices to such unreasonable levels that I decided to stay out of town.

In another sign that the law of supply and demand is alive and well in the labor market, this article talks about the end of the teacher shortage.

The American Association for Employment in Education said preliminary results of its annual survey of hiring patterns indicate that demand for teachers has fallen for the second straight year and is at its lowest level since 1998.

The group's executive director, B.J. Bryant, said the soft economy has meant more people willing to work for a teacher's pay, and fewer jobs to go around. Instructors in a few subjects do remain tough to find - most notably math, bilingual education and all areas of science and special education, Bryant said.

For Discussion. If the excess supply of teachers were to persist, would it be fair to argue that teachers are overpaid?

COMMENTS (5 to date)
David Thomson writes:

I thank God that Texans marginalize the goofy Left. Our governor is a Republican and likewise the majority of our state senators and house representatives. Those states like New Mexico that indulge these silly ideologues have nobody to blame but themselves. I will make it real simple for everbody: don’t vote for Democrats and liberal Republicans! It’s just that simple. These folks stupidly advance economic policies which will impoverrish us all.

The free market can be somewhat cruel. Those teachers who can’t find a job in education must find another way to earn a living. The world doesn’t owe them a thing.

Matt Young writes:

The excess in teachers is due to a restricted market for teachers because of the government monopoly in education.

Mcwop writes:

Teachers are arguably not underpaid.

From the Am Fed Tchrs:
"The $41,820 average teacher salary continued to lag behind the average annual wages of other white-collar occupations. For instance, an attorney earned an average of $77,150; an engineer brought home $72,427; a computer systems analyst earned $66,849; a buyer/contract specialist earned $57,035; while an accountant earned $52,323."

They fail to account for great pensions, summers off (at least 2 months), job security (teachers don't get fired easily), and a lower skillset than some of the professions mentioned (becoming an Attorney is harder than becoming a teacher - at my University you only need to add 1 year to get your masters for teaching versus 3 more years and a tough bar exam for an attorney). They also don't mention that some professions listed here can require long workweeks to get more billable hours (attorneys, accountants). They also do not account for the fact that many teachers may reside in locations with very low costs of living, which may bring the averages down. Some of the other professions may be concentrated in urban areas with higher costs of living. I could go on, but my research shows that teachers are paid just fine.

Lastly, a teacher eraning $45,000 married to someone earning $75,000 probably put them in the top 10% of taxpayers.

Bernard Yomtov writes:

Does the excess supply of teachers mean teachers are overpaid?

It depends, doesn't it, on whether the "excess supply" is of people willing to teach or of people qualified to teach. Lots of people (me included) would be happy to pitch for the Yankees, even for a paltry $500K/year. But the number of those who could actually get anyone out is quite small.

It also depends on the subject in question. It is still hard to find math and science teachers, almost surely because people with these skills have better opportunities elsewhere. It is hard to find special education and bilingual teachers also, so they are also underpaid.

So maybe some are overpaid, and some are underpaid. To the extent the current system does not have the flexibility to pay differently for different specialties it is creating these problems.

Boonton writes:

"The excess in teachers is due to a restricted market for teachers because of the government monopoly in education."

There is no government monopoly in education. If you are a supplier of education (i.e. teacher) you are perfectly free to apply to both public schools as well as private schools (or even market yourself as a private tutor).

You may want to argue that gov't has a near monopsony (single buyer) of education but this wouldn't be accurate IMO. Schools are usually run by a local gov't. If the school system in one district doesn't like your style you can usually try to get a job in another one. Compare this to road construction where usually the state government is the only significant buyer.

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