Lump of labour fallacy

The lump of labour or lump of jobs fallacy is an argument generally considered to be fallacious that the amount of work available to labourers is fixed. Contending that the amount of work is flexible not static, most economists oppose such arguments. Another way to say this is that it treats a quantity as if it were an exogenous variable, when it is not. It may also be called the fallacy of labour scarcity, or the zero-sum fallacy, from its ties to the zero-sum game.

As a fallacy, it often takes the form of a false premise. In rhetoric it is usually a hidden premise, which makes the conclusion a non sequitur. That means that this fallacy is usually either a subtype of a false premise fallacy, a non-sequitur fallacy, or both.

Historically, the term originated to rebut the idea that reducing the number of hours workers are allowed to work in a work day would in turn reduce unemployment. In modern times, economists often use the term in other contexts – often to highlight errors of reasoning when ceteris paribus assumptions are counterfactual. The term has also been used to describe the commonly held beliefs that increasing labour productivity and immigration cause unemployment. Whereas some argue that immigrants displace domestic workers, others believe this to be a fallacy, arguing that such a view relies on a belief that the number of jobs in the economy is fixed, whereas in reality immigration increases the size of the economy, thus creating more jobs. [ John Bercow [http://www.smf.co.uk/index.php?name=UpDownload&req=getit&lid=136 Incoming assets: Why Tories should change policy on immigration and asylum] , Social Market Foundation, October 2005, accessed 16 September 2006 ] [ Laurence Cooley, Macha Farrant and Dhananjayan Sriskandarajah [http://www.ippr.org.uk/members/download.asp?f=/ecomm/files/selecting_wisely.pdf&a=skip Selecting wisely: Making managed migration work for Britain] , Institute for Public Policy Research, November 2005, accessed 16 September 2006 ]

Origins

The term originated to rebut the idea that reducing the number of hours workers are allowed to work in a work day would in turn reduce unemployment. The argument being rebutted would be:

# The amount of hours of labor per day that will be demanded by the market will be constant.
# Suppose we reduce the hours any single person can work in a day.
# Then the current employment will produce fewer hours of labor.
# The difference between the constant in (1) and the fewer hours in (3) must be made up by employing more workers.
# So the strategy in (2) would increase employment rates.

The lump of labour rebuttal asserts that (1) is false. Given that there is naturally an administrative cost to hiring more people, there is no reason to expect that production will be unchanged. People may simply keep their present workers and work them harder for the same time, or live with the reduced output.

Application to employment regulations

This economic argument is commonly invoked against attempts to alleviate unemployment by restricting working hours. Such attempts sometimes assume that there is a fixed amount of work to be done, and that by reducing the amount that those are already employed are allowed to work, the remaining amount will then accrue to the unemployed. This policy was adopted by the governments of Herbert Hoover in the United States and Lionel Jospin in France (though by various exemptions to the law were granted by later right-wing governments in that latter country). Economists contend that such proposals are likely to be ineffective, alleging that there are usually substantial administration costs associated with employing more workers, such as recruitment, training, and management, that would increase average cost per unit of output that would reduce production, and ultimately lower employment.

This common argument against the use of restricted working hours to reduce unemployment has recently been questioned, with one scholar arguing that "substituting a dubious fallacy claim for an authentic economic theory may have obstructed fruitful dialogue about working time and the appropriate policies for regulating it". [cite journal|last=Walker|first=Tom|date=2007|title=Why economists dislike a lump of labor|journal=Review of Social Economy|volume=65|issue=3|pages=279-291|url=http://www.informaworld.com/smpp/content~content=a783865842~db=all] Walker argues that the idea that the lump of labour is a fallacy often goes unsubstantiated, and that the reduction of working hours can have similar labour-saving impacts as the introduction of technology into the production process. [cite book|last=Walker|first=Tom|title=Working Time: International Trends, Theory and Policy Perspectives|editor=Golden, Lonnie; Figart, Deborah|publisher=Routledge|location=London|date=2000|chapter=The 'lump-of-labor' case against work-sharing: Populist fallacy or marginalist throwback?|url=http://hussonet.free.fr/lumplab.pdf]

References

External links

* [http://www.pkarchive.org/column/100703.html Paul Krugman essay on the Lump of Labour Fallacy]
* [http://www.economist.com/research/Economics/alphabetic.cfm?LETTER=L#LUMP%20OF%20LABOUR%20FALLACY The Economist Glossary: Lump of Labour fallacy]
* [http://www.fool.com/news/foth/2000/foth000912.htm Zero sum fallacy in stock trading]

ee also

* Labour (economics)
* Broken window fallacy
* Indivisibility of labor