Lump of labour fallacy
Encyclopedia
In economics
, the lump of labour fallacy (or lump of jobs fallacy) is the contention that the amount of work available to labourers is fixed. It is considered a fallacy
by most economists, who hold that the amount of work is not static. Another way to describe the fallacy is that it treats the demand for labour as 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.
Historically, the term "lump of labour" originated to rebut the idea that reducing the number of hours employees are allowed to labour during the working day would lead to a reduction in 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 worker
s, 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.
As a fallacy, the lump of labour often takes the form of a false premise
. In rhetoric
it is usually a hidden premise
, which makes the conclusion of ones argument a non sequitur
. That means that the lump of labour is usually either a subtype of a false premise fallacy, a non-sequitur fallacy, or both.
The lump of labour rebuttal argues that (1) is false. (1) is the basis of a Straw Man
argument. In all historical real-world economies, the number of hours of labour per day has always been, and always is, subject to natural variation. Thus (1) is an inadmissible claim to make in present-day economics when describing processes that are applicable to the real world. A common superficially similar yet unequivalent position to (1) is at times taken by credentialed economists: namely that at certain specific moments in time, in certain areas, the number of hours of labour per day that are demanded by the market does not vary to the threshold required for statistical significance. The Straw Man argument continues as follows: given that there is naturally an administrative cost to hiring more workers, there is no reason to expect that production will be unchanged. People may simply keep their present employees and work them harder for the same time, or find ways to cope with the reduced output.
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
, in the 35 hour working week
(though in France various exemptions to the law were granted by later centre-right governments). Many economists contend that such proposals are likely to be ineffective, alleging that there are usually substantial administrative costs associated with employing more workers, such as recruitment, training, and management, that would increase average cost per unit of output, leading to reduced production, and ultimately to even lower employment. However, in the case of preventing rather than alleviating unemployment, retaining existing workers in the face of a declining amount of total work to be done would not incur administrative costs, whereas firing and later re-hiring them could.
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". Tom Walker holds that the lump of labour idea is a straw man
, arguing that most proponents of restriction on working hours do not hold the simplistic view. He argues that a reduction of working hours can have similar labour-saving impacts as the introduction of technology into the production process.
as machines and software begin to match and exceed the capability of workers to perform most routine jobs.
As robotics and artificial intelligence develop further, even many skilled jobs may be threatened. Technologies such as machine learning may ultimately allow computers to do many knowledge-based jobs that require significant education. This may result in substantial unemployment at all skill levels, stagnant or falling wages for most workers, and increased concentration of income and wealth as the owners of capital capture an ever larger fraction of the economy. This in turn could lead to depressed consumer spending and economic growth as the bulk of the population lacks sufficient discretionary income to purchase the products and services produced by the economy.
(For a more thorough treatment see Ramon Marimon , Fabrizio Zilibotti, Employment and Distributional Effects of Restricting Working Time, www.cepr.org/pubs/dps/DP2127.asp)
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, the lump of labour fallacy (or lump of jobs fallacy) is the contention that the amount of work available to labourers is fixed. It is considered a fallacy
Fallacy
In logic and rhetoric, a fallacy is usually an incorrect argumentation in reasoning resulting in a misconception or presumption. By accident or design, fallacies may exploit emotional triggers in the listener or interlocutor , or take advantage of social relationships between people...
by most economists, who hold that the amount of work is not static. Another way to describe the fallacy is that it treats the demand for labour as 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.
Historically, the term "lump of labour" originated to rebut the idea that reducing the number of hours employees are allowed to labour during the working day would lead to a reduction in unemployment. In modern times, economists often use the term in other contexts – often to highlight errors of reasoning when ceteris paribus
Ceteris paribus
or is a Latin phrase, literally translated as "with other things the same," or "all other things being equal or held constant." It is an example of an ablative absolute and is commonly rendered in English as "all other things being equal." A prediction, or a statement about causal or logical...
assumptions are counterfactual
Counterfactual conditional
A counterfactual conditional, subjunctive conditional, or remote conditional, abbreviated , is a conditional statement indicating what would be the case if its antecedent were true...
. 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 worker
Domestic worker
A domestic worker is a man, woman or child who works within the employer's household. Domestic workers perform a variety of household services for an individual or a family, from providing care for children and elderly dependents to cleaning and household maintenance, known as housekeeping...
s, 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.
As a fallacy, the lump of labour often takes the form of a false premise
False premise
A false premise is an incorrect proposition that forms the basis of a logical syllogism. Since the premise is not correct, the conclusion drawn may be in error...
. In rhetoric
Rhetoric
Rhetoric is the art of discourse, an art that aims to improve the facility of speakers or writers who attempt to inform, persuade, or motivate particular audiences in specific situations. As a subject of formal study and a productive civic practice, rhetoric has played a central role in the Western...
it is usually a hidden premise
Premise
Premise can refer to:* Premise, a claim that is a reason for, or an objection against, some other claim as part of an argument...
, which makes the conclusion of ones argument a non sequitur
Non sequitur (logic)
Non sequitur , in formal logic, is an argument in which its conclusion does not follow from its premises. In a non sequitur, the conclusion could be either true or false, but the argument is fallacious because there is a disconnection between the premise and the conclusion. All formal fallacies...
. That means that the lump of labour is usually either a subtype of a false premise fallacy, a non-sequitur fallacy, or both.
Origins
The phrase was originally used to dismiss the claim that reducing the number of hours employees are allowed to work in a day inevitably reduces unemployment. This claim is based on the following reasoning:- The number of hours of labour per day that are demanded by the market is constant.
- Suppose we reduce the hours any single person can work in a day.
- Now workers will produce fewer hours of labour.
- The difference between the constant in (1) and the reduction of productivity in (3) must be made up by employing more workers.
- Therefore the strategy in (2) increases employment rates.
The lump of labour rebuttal argues that (1) is false. (1) is the basis of a Straw Man
Straw man
A straw man is a component of an argument and is an informal fallacy based on misrepresentation of an opponent's position, twisting his words or by means of [false] assumptions...
argument. In all historical real-world economies, the number of hours of labour per day has always been, and always is, subject to natural variation. Thus (1) is an inadmissible claim to make in present-day economics when describing processes that are applicable to the real world. A common superficially similar yet unequivalent position to (1) is at times taken by credentialed economists: namely that at certain specific moments in time, in certain areas, the number of hours of labour per day that are demanded by the market does not vary to the threshold required for statistical significance. The Straw Man argument continues as follows: given that there is naturally an administrative cost to hiring more workers, there is no reason to expect that production will be unchanged. People may simply keep their present employees and work them harder for the same time, or find ways to cope with the reduced output.
Application to employment regulations
This economic argument is commonly invoked against attempts to alleviate unemploymentUnemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
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
Herbert Hoover
Herbert Clark Hoover was the 31st President of the United States . Hoover was originally a professional mining engineer and author. As the United States Secretary of Commerce in the 1920s under Presidents Warren Harding and Calvin Coolidge, he promoted partnerships between government and business...
in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and Lionel Jospin
Lionel Jospin
Lionel Jospin is a French politician, who served as Prime Minister of France from 1997 to 2002.Jospin was the Socialist Party candidate for President of France in the elections of 1995 and 2002. He was narrowly defeated in the final runoff election by Jacques Chirac in 1995...
in France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, in the 35 hour working week
35-hour workweek
The 35-hour working week is a measure adopted first in France, in February 2000, under Prime Minister Lionel Jospin's Plural Left government; it was pushed by Minister of Labour Martine Aubry. The previous legal duration of the working week was 39 hours, which had been established by François...
(though in France various exemptions to the law were granted by later centre-right governments). Many economists contend that such proposals are likely to be ineffective, alleging that there are usually substantial administrative costs associated with employing more workers, such as recruitment, training, and management, that would increase average cost per unit of output, leading to reduced production, and ultimately to even lower employment. However, in the case of preventing rather than alleviating unemployment, retaining existing workers in the face of a declining amount of total work to be done would not incur administrative costs, whereas firing and later re-hiring them could.
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". Tom Walker holds that the lump of labour idea is a straw man
Straw man
A straw man is a component of an argument and is an informal fallacy based on misrepresentation of an opponent's position, twisting his words or by means of [false] assumptions...
, arguing that most proponents of restriction on working hours do not hold the simplistic view. He argues that a reduction of working hours can have similar labour-saving impacts as the introduction of technology into the production process.
Criticism
Martin Ford, author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future, argues that the lump of labour fallacy is merely an historical observation, rather than a rule that applies indefinitely into the future. Ford suggests that as information technology advances, robots and other forms of automation will ultimately result in significant unemploymentUnemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
as machines and software begin to match and exceed the capability of workers to perform most routine jobs.
As robotics and artificial intelligence develop further, even many skilled jobs may be threatened. Technologies such as machine learning may ultimately allow computers to do many knowledge-based jobs that require significant education. This may result in substantial unemployment at all skill levels, stagnant or falling wages for most workers, and increased concentration of income and wealth as the owners of capital capture an ever larger fraction of the economy. This in turn could lead to depressed consumer spending and economic growth as the bulk of the population lacks sufficient discretionary income to purchase the products and services produced by the economy.
Economic Analysis of the Issue of Lump of Labour
The issue of the lump of labour, as well as that of the consequences of technological progress on employment, can be enlightened recurring to simple tools of economic theory, by distinguishing the substitution and the scale effect of a change of the conditions of employment. The substitution effect considers the consequences on employment given the output level, the scale effect considers the consequence on employment of the change in the costs of production by way of the effect of the latter on the production level. In case of a reduction in labour time we have two possibly contrasting effects: given technology you need more employees to produce the given level of output, but this can be offset or more than offset by the scale effect. Therefore a priori you cannot tell whether the reduction in the hours of employment will increase or decrease the number of employees. Obviously the scale effects depends on what happens to wages and the other conditions of employment. For instance, if monthly wages remain constant when the labour time is reduced the costs of production increase and this produces a negative scale effect on employment. But if wages are reduced to the extent to compensate for the consequences of the reduced labour time on the costs of production the scale effect can be neutralized leaving only the substitution effect to operate. Another way could be to change the conditions of employment so as to compensate for the consequences of the reduction of labour time on costs. For instance the reduction of labour time in France was accompanied by a liberalization of the number of shifts, increasing the utilization of plants in the 24 hours, offsetting to some extent at least the consequence of the reduction of labour time on costs. The same analytical tools can be utilized for considering the consequences of technical progress on employment. Historically the gigantic increase in labour productivity induced by technological progress since the industrial revolution has resulted in the dominance of the scale effect, bringing about both a massive increase in real wages and a decrease in labour time. There is no reason to expect that this same process cannot be continued in the future.(For a more thorough treatment see Ramon Marimon , Fabrizio Zilibotti, Employment and Distributional Effects of Restricting Working Time, www.cepr.org/pubs/dps/DP2127.asp)
See also
- Labour (economics)
- Broken window fallacy
- Luddite fallacyLuddite fallacyThe Luddite fallacy is an opinion in development economics related to the belief that labour-saving technologies increase unemployment by reducing demand for labour. The concept is named after the Luddites of early nineteenth century England.The original Luddites were hosiery and lace workers in...
- Indivisibility of labourIndivisibility of laborIndivisibility of labor in macroeconomics refers to the concept that labor cannot be used in continuous units but must be purchased from workers in blocks of time such as eight hours a day or forty hours a week...