The economic pie and labor’s dwindling piece

IN a recent piece for Bloomberg, Noah Smith discusses the ongoing debate about the tech worker shortage and immigration.  In that piece, he writes the following (my emphasis):

But in a modern rich economy, a lot more people care about distribution than about efficiency, so everyone will keep on arguing about “shortages.” I wish we could focus on expanding the pie, but the fact is, most people are more concerned about how the pie gets divided.

You hear this a lot.  Economic growth will cure inequality, hence, policy needs to focus on economic growth rather than inequality.  It’s a canard.  Growing the proverbial economic pie does not resolve the question of inequality.  If it did, then someone needs to explain to me the following:


In short, economic output has more than doubled in the past 30 years, while labor’s share of income has declined, and median household income has declined since the late 1990s.  This is not to suggest that we should enact policy to stifle economic growth.  However, the ‘growth is the panacea’ argument doesn’t hold water.  The pie’s gotten bigger, labor’s slice is smaller.

John Haskell

About John Haskell

John graduated from the University of Southern Maine with a degree in Political Science, and from the University of Maine School of Law. He has worked in both the public and private sectors, and currently, works with a small business services company in the Mid-Coast area.