Labor Shortage in Iowa: Market Solution or Is This a Case of Monopsony Power?

John Leland has Dean Baker needing a vacation. Leland channels the frustrations of businessmen in Des Moines, Iowa:

As rising unemployment and layoffs beset workers around the country, Iowa faces a different problem: a surplus of jobs. Or to put it another way: a shortage of workers. A survey of companies by Iowa Workforce Development, a state agency, found as many as 48,000 job vacancies, in industries including financial services — Des Moines trails only Hartford as the nation’s insurance capital — health care and skilled manufacturing. One estimate projects the job surplus to reach 198,000 by 2014, with vacancies increasingly in professional positions. Greater Des Moines alone faces a shortfall of 60,000 workers in the next decade. The state provides a small, advance view of what some economists predict will be a broader shortage of skilled workers in the next 20 or 30 years, as tens of millions of baby boomers retire from the workplace, and the economy produces more new jobs than workers. Potential consequences include slower economic growth and competitiveness, as well as higher wages for skilled workers and greater inequality … Remedies are not simple. Companies want to be in Iowa because wages are lower than elsewhere in the nation or region, except South Dakota. But low wages also drive young college graduates out of the state, especially as student debt loads have risen, and they discourage workers from other states from moving to Iowa. Some, like Mr. Tew, accept relatively low wages in exchange for Iowa’s low cost of living. Companies compete on amenities and benefits more than salary, said Craig Jackman, president of Paragon IT Professionals, a recruiter and consultant firm.

Dean notes:

Arghhhhhhhhhhhh! There is a labor shortage in Iowa. Wages are the second lowest in the country. Come on folks, the NYT is supposed to be a serious newspaper. I need a vacation.

Dean’s assumption that there is a competitive market for labor certainly is a valid one for the nation’s future labor market. Leland is claiming that slower growth of the national labor force will lead to labor shortages. That’s just stupid unless one assumes there is some force that will prevent increases in real wages. OK, some rightwing idiots (e.g., those clowns who write for the National Review) think that increases in real wages is un-American or something but that’s how competitive markets respond to situations where the demand for labor rises relative to the supply of labor.

But could it be that there is some simple explanation why the quantity of labor supplied and the real wage are both low in Des Moines? This sounds like a movement along the supply curve, which just might be generated by a group of employees at least trying to exercise monopsony power. OK, Des Moines isn’t the classic example of a one company town but if there were a monopsonistic cartel, businessmen would certainly bitch if somehow their cartel was being eroded by other local businesses acting in a manner consistent with competitive behavior. Those of who actually celebrate market place solutions, however, should cheer rather than call this a problem.