Thursday, November 27, 2014

What High Tech Employee Shortage?

Noah Smith looks at the law of supply and demand and explains why there can't be a shortage of high tech workers.   If the demand for high tech employees exceeded the supply, wages for high tech workers would rise and the supply of workers increase in response to higher wages. However, the real wages for high tech workers have not increased since 1999.  This suggests that we have an over-supply of high tech workers.  High tech firms continue to pretend that a shortage exists so that they can bring in lower priced labor from overseas.  They are more interested in growing profits and their stock price than anything else.  The supply shortage that they use to increase the number of green card workers is a fiction.

Its easy to understand the motivation of high tech managers and their interest in increasing profits.  Smith raises a more interesting question, however, about economics.  Economists are trained to place the efficiency of the economy above all other concerns.  In fact, the recent attention that economists are devoting to the distribution of income, is a departure from the traditional focus of the profession on efficiency.  In fact, that assumption that wages are determined by the marginal productivity of labor,  precludes any discussion of income maldistribution.  According to this doctrine, everyone's wages are fairly earned by their contribution to production.  The rising share of income going to a small percent of the population suggests that more attention needs to be given to the institutional changes that have occurred in the rich nations.  The managers of our large corporations have figured out how to increase their share of the income.  This has little to do with their marginal contribution production.

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