Recent eruptions of the lump-of-labor fallacy claim
In the wake of concern about stagnating employment growth in Europe, particularly in France, the lump-of-labor fallacy claim has been resurrected to justify rolling back reduced working time policies on the grounds that such policies impede economic growth and are ineffectual or even counterproductive in the fight against unemployment. For example, in a report to the French Ministry of Finance, Michel Camdessus, former managing director of the International Monetary Fund, attributed the original rationale for the French 35-hour workweek to the supposed belief in a fixed amount of work, “La logique de partage repose sur l’hypothèse qu’il existe, dans l’économie, une quantité d’emplois déterminée et fixe.”
A pair of articles appearing in the Journal of Economic Perspectives also attributed French working time policies to belief in the alleged fallacy. Gilles Saint-Paul claimed that the lump-of-labor fallacy was “repeatedly put forward” in the debate over working-time reduction and “has led to many misguided policies, such as pre-retirement to ‘make room’ for the young, or working time reduction." He further asserted that such policies are likely to have harmed employment growth in France and other European countries. Saint-Paul’s conclusion that working-time reduction has harmed employment was based on his selective embrace of one econometric study by Bruno Crépon and Francis Kramarz of the 1982 law that reduced the hours of work in France from 40 to 39 and his sweeping dismissal of “a large number of macroeconometric studies” on the grounds that those findings were based on “short-run Keynesian models that were unsuitable for dealing with these kinds of issues, given their very crude approach to wage formation and aggregate supply."
Olivier Blanchard was less judgmental regarding the impact of policies allegedly based on a lump of labor fallacy. He developed a tentative hypothesis that growth of productivity has been inhibited because firms have been under considerable pressure to avoid layoffs and plant closings. This pressure has come from government policies aimed at “job rich growth.” Such policies Blanchard described as “a direct descendant of the lump-of-labor fallacy.”
In a report whose approach was endorsed in a foreword by UK Prime Minister Tony Blair, Jaap de Koning et al. deplored the lump-of-labor fallacy, attributing this “profound error” to anyone who doubted that increasing the supply of labor is the sole effective way to reduce unemployment. Their analysis echoed an earlier claim by Tito Boeri et al. that pessimism about welfare-to-work policies was an expression of belief in a lump-of-labor fallacy. The Boeri report was presented jointly to the Council of European Premiers in 2000 by Blair and Italian premier Massimo D’Alema.
The authors of an OECD Policy Brief cited evidence from OECD countries "that would seem to bear out arguments that reductions in working time can increase employment and help to cure high unemployment." In spite of such evidence, however, they claimed that "this argument relies on the idea that there is a fixed volume of work which can be shared more or less broadly across the adult population – the so-called 'lump of labour fallacy'..."
In an article devoted to exorcising the demon of the lump-of-labor fallacy, Timothy Taylor cited the fallacy as the source of fears that US employment would continue to stagnate – as it had for the previous three years – and for “the recurrence of the true believers’ favorite fix: a shorter workweek or an earlier age of retirement.” Taylor concluded with a plea: “The appropriate mix of these labor policies is a matter for debate. But the lump-of-labor fallacy has been impeding and confusing the legitimate arguments about jobs for more than a century now, and it’s time to give it a rest.” Taylor’s concern to remove impediments and confusion from the debate is welcome, but it needs to be asked whether it is the lump-of-labor fallacy per se or dubious claims about the role of such an alleged fallacy that is primarily responsible for the confusion.
Posted by sandwichman at June 18, 2005 10:59 AMI don't know whether lump of labor is a fallacy. Although my gut tells me it is not a fallacy, I do not really care whether or not unemployment is resulting from reduced work hours. As a committed idler myself, the reduction of employment per se doesn't seem like a bad thing. If the results of U.S. policies are an overworked populace obsessed with work, promotions, advancement, money, and consumption, I still prefer the situation in Europe.
I am certainly not going back to work based on the notion that I should care whether or not the overall employment is high. What I really want to know is who has the better overall quality of life, who has the best attitude, and who is moving to a sustainable society.
If we cannot sustain our consumption patterns, it will not matter who won the race to lessor overall unemployment. Economists, as usual, tend to take a very narrow, limited, and dangerous view of the overall needs of the society and the planet. We need to break the system whereby it's all or nothing. Work a 60 hour week or not at all!! Bah. Humbug.
Posted by: tstreet at June 18, 2005 02:36 PMIt seems to me that reduced worktime has been an overwhelming success wherever it has been tried inasmuch as the needs of the populace have been met while requiring fewer hours of work. I have never heard of people going without basic neccesities or having a reduced quality of life because not enough work was being done.
Whether or not unemployment has been reduced is irrevelant. It is probably fairer to have everyone working about the same number of hours rather than some working 30 hours and others not at all. But this is a separate issue.
Or do I have it all wrong?
Posted by: Beto at June 21, 2005 01:21 PMtstreet,
The opponents of shorter working hours are claiming that advocates for shorter hours base their arguments in favor of reduced hour policies on a false premise. Advocates for shorter hours are doing no such thing. The opponents are using a classic strawman attack. It's the same as if I said your support for sustainable consumption patterns was based on the belief that the earth is flat.
Posted by: Harry at June 24, 2005 01:34 AM