No Bernie, Labor is not a Fixed Pie

Bernie Sanders has committed a fixed pie fallacy. It is the belief that an economy is static and doesn’t change or grow. While he is correct about manufacturing employment, he ultimately uses this political claim to form his platform about the economy. However, we can render it meaningless by looking at the economy as a whole and as it has changed and grown.

A little Econ 101, economies have scarce resources and unlimited demand. We must allocate our scarce resources, such as labor, as efficiently as possible by utilizing them in the production of the most highly valued goods. In other words, why make trinkets if you can make next generation industrial equipment.

As a result, our manufacturing labor demand has declined (per Bernie Sanders) while output has remained the same. We are producing more value with less. That does not mean, however, the demand for labor has permanently disappeared. Quite the contrary, it has found new specialties in other areas.

Per the BLS, 3,060,000 jobs were created in NET TOTAL from 2002 to 2012 (2). Consistent with the claim, manufacturing employment has declined. Other fields, however, have increased.

Notable increases from 2002 to 2012:

  • Health Care and Social Assistance: 3.4 million
  • Professional and Business Services: 1.9 million
  • Leisure and Hospitality: 1.7 million

As you can see, the economy does not necessarily produce goods anymore, but we are still creating jobs. The AVERAGE WAGES of our three largest:

Now consider that manufacturing average wages are $19.93 to $25.33. From this, we can deduce that higher paying jobs are growing in the economy. Even if 5.2 million manufacturing jobs have been lost, they have been replaced by growth in other industries.

Labor is a resource. Just because it’s doing one thing and not the other does not mean there is a net loss anywhere. Like any resource, it should be used as productively as possible.

 

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