>This example certainly constitutes a "shortage", especially from the point of the employer. He has a demand which he can't fulfill.

There are certainly localised shortages (hence the popularity of remote work)

>they can only hire new people if they embark on a potentially ruinous wage

Or cut profits or lower CEO wages to fund it, or move the company to a lower cost of living area.

If your a software company your biggest expenses are probably staff and offices and well cheaper areas also have excellent connections to cloud services.

You can pay half as much in salary in 1/4 area and everyone is better off.