I tried to start a business yesterday. I needed 1,000 experienced employees willing to work for minimum wage and no benefits. I could not fill a single job. There must be a shortage of workers. Therefore, I would like these positions counted in the state's worker shortage study (as reported in the March 10 Star Tribune).

The above example, while extreme, suffers from the same faulty logic present in most media reporting on our so-called labor shortage. Week after week, for the better part of this decade, the media have given us reports about the labor shortage. These reports usually come in three flavors. Jim Bob's Burger Shack cannot find enough workers, even though he has raised wages from $6 to (gasp) $8. Bill's Computer Company is having trouble with employees being stolen by competitors. Or the local school district reports a teacher shortage because resumes are down for computer, math and ESL positions.

A shortage, by definition, requires more than complaints of insufficient supply by the demand side. That employers say they cannot fill positions does not necessarily imply a shortage. If I am only able or willing to pay $15,000 for a car costing $25,000, my inability to buy the car does not imply a shortage of cars. In an efficient market, a shortage is brought back into balance or equilibrium by market forces. In the case of the labor market, a shortage should increase wages until more workers enter the job market, or the employer can no longer earn enough revenue off the employee to offer that position. Either way, the shortage disappears.

What we have today is a persistently tight labor market that, for some reason, is not producing large wage gains. Despite what state Economist Tom Stinson says, hourly wages have not increased dramatically. Not until 1996 did inflation-adjusted wages recoup the real-wage losses of the early 1990s recession. And since then, hourly wage growth has bested inflation by the smallest of margins. Economists, particularly at the Federal Reserve, have been expecting (and fearing) strong wage growth for years, and remain puzzled by the lack of strong wage growth.

An equally puzzling phenomenon is the widespread fear of higher wages. The stock market can rise 30 percent year after year without worries of inflation, but as soon as the working person's wage growth exceeds inflation, economists act as if the sky were falling. Stinson sounded personally offended by a hardware store job that paid $11, because "those don't sound like particularly highly skilled jobs to me." Besides being wrong in his assessment of hardware-store skill levels, he is mistaken in implying this higher wage is bad.

Our current situation is more accurately described as a wage shortage. Rather than pay the wage necessary to attract or keep employees, employers complain of labor shortages. And unfortunately, the media eat it up.

The media should be more skeptical of these labor-shortage claims. They should ask why five years of low unemployment rates have not produced significant wage gains. They should ask why, with unemployment down, inflation down and job growth up, wages are mostly stagnant. They should focus on job quality, rather than job quantity.

Ryan Pulkrabek, Minneapolis. Computer programmer, former labor market economist with the state of Minnesota.

© Copyright 2000 Star Tribune.

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