Economics @ ITT

Employer Demands Mean Some Jobs Go Unfilled

Posted in economics, employment by ittecon on October 11, 2010

Given that the 2010 Nobel Prize in economics was granted on the basis of contributions in the analysis of labour market frictions, this MSNBC article fed from AP economic journalist, Christopher Rubager, outlines the mismatch between employer demands and job skills. Employers are demanding job roles to be expanded, so that what had been one role now umbrellas multiple roles. The goal of employers is to do more with less, but, frankly, this is poor economics and is flawed on a number of levels.

Think of this in terms of  productions possibilities and comparative advantage. Assume that a skilled programmer has been asked to now perform quality assurance tasks as part of a new job description.

First, we have diluted labour skills specialisation. Overachieving managers may assume that everyone can do multiple tasks with no degradation of output, but this is simply not true.

Next, I presume that each of these functions would have a different contribution margin to the firm. Previously, a software developer may have been “worth,” say, $100 per hour, and a QA analyst may be worth $90. Now, this $100 resource needs to split his effort performing a $90 task. With specialisation, I can pay the $90 in accordance with the lower contribution margin. With this new blend of responsibilities, the new wage requirement is presumably reduced to fall somewhere between $90 and $100 per hour. Assuming my need for each of these skills has not been diminished—say I need 1 software developer FTE and 1 QA FTE—, where is the gain to the firm?

Moreover, job satisfaction may diminish because the reasons for choosing to be a software engineer versus a quality assurance analyst are likely different, and the motivations are divergent. From the developer’s point of view, she is being asked to perform more  work, but with the lower contribution margin, she may be asked to forgo the next pay rise or, worse, take a reduction in pay.

Getting back to production possibility for the software engineer, any effort expended on QA tasks comes only at the expense of software development tasks. This is the trade off—opportunity costs.

So why does this seem to be working in the short run? Employees are sprinting this marathon, hoping not to end up on the unemployment roster. But this cannot be maintained. People are working longer hours out of fear. While this may be a motivator, it is not sustainable.


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