Lump Labor Fallacy For you to get a job, someone has to be fired!...Just kidding!
Define the Lump of Labor Fallacy and explain
Define the Lump of Labor Fallacy and explain
Define the “Lump of Labor” Fallacy and explain how it impacts attitudes toward immigrant populations.
“Lump” and “labor” are two words that people don’t normally put together. However, the “lump of labor” fallacy is evident in many people’s thinking. The lump of labor fallacy is the assumption that there is a fixed amount of work to be done. If this were true, new jobs could not be generated, just redistributed. Those who believe the fallacy have often felt threatened by new technology or the entrance of new people into the labor force.
These fears are rooted in a mistaken zero-sum view of the economy, which holds that when someone gains in a transaction, someone else loses. It’s a tempting idea to some because it seems to be true. For example, jobs can be lost to automation and immigration. However, that is not the full story. In reality, the demand for labor is not fixed. Changes in one industry can be offset, or overshadowed, by growth in another.
And as the labor force grows, total employment increases too. This article provides two lessons that refute the lump of labor fallacy and explains a simple economic model that shows how the economy functions, shedding light on how technology and immigration can increase standards of living.
“Our machines increasingly do our work for us. Why doesn’t this make our labor redundant and our skills obsolete? Why are there still so many jobs?
—David Autor1
“Lump” and “labor” are two words that people don’t normally put together. However, the “lump of labor” fallacy is evident in many people’s thinking. The lump of labor fallacy is the assumption that there is a fixed amount of work to be done. If this were true, new jobs could not be generated, just redistributed. Those who believe the fallacy have often felt threatened by new technology or the entrance of new people into the labor force. These fears are rooted in a mistaken zero-sum view of the economy, which holds that when someone gains in a transaction, someone else loses. It’s a tempting idea to some because it seems to be true. For example, jobs can be lost to automation and immigration. However, that is not the full story. In reality, the demand for labor is not fixed. Changes in one industry can be offset, or overshadowed, by growth in another. And as the labor force grows, total employment increases too (Figure 1). This article provides two lessons that refute the lump of labor fallacy and explains a simple economic model that shows how the economy functions, shedding light on how technology and immigration can increase standards of living.
The Labor Force and Employment
The labor force has grown consistently over time, and the number of jobs has grown as well, although with more variance due to business cycle effects.
SOURCE: FRED®, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/graph/?g=qXmO, accessed September 23, 2020.
Lesson One: Job Losses in One Industry Can Support Growth in Other Industries
Machines, robots, and artificial intelligence are completing tasks that had been performed by human workers. The lump of labor fallacy would say that automation displaces human workers and results in fewer jobs. According to a 2017 Pew Research survey, this is a common fear: 72 percent of respondents expressed worry that robots and computers will take over many human jobs.2 Anxiety about automation is nothing new.
In 1589, Queen Elizabeth of England refused to grant the inventor of a mechanical knitting machine a patent, fearing it would put knitters out of work.3 Luddites, textile workers in the early nineteenth century, attempted to prevent mechanization of their industry. Even the famous economist John Maynard Keynes worried about technology causing unemployment.4 Thankfully, these fears did not become reality.
History provides an interesting example of automation displacing labor: In the year 1900, 41 percent of the U.S. workforce worked in agriculture. After a century of technological change in that industry, the number stood at 2 percent (in the year 2000). This transformation changed the work of farmers in dramatic ways, but it did not reduce total employment in the United States. As it happens, the mechanization of agriculture in the early twentieth century made possible the large increase in employment in new industry and factory jobs,5 a growing farm equipment industry,6 and cotton milling.7
So, automation can be a substitute for labor, but it is also a complement to labor. In doing so, it raises output in ways that can increase the demand for labor.8 Without the new factory jobs, such as in production, engineering, accounting, supervision, and management, in the latter half of the nineteenth and twentieth centuries, it would have been impossible to employ the millions of people exiting the agricultural sector and other labor-intensive jobs as automation replaced their jobs.9
Our first lesson, then, is that labor is a valuable economic resource: In a dynamic economy, job losses in a diminishing industry frees labor resources to move into other growing industries.
So, what guarantees that if one industry declines, others will grow? The answer is human wants—which are infinite. Indeed, many of the goods that we spend our money on now did not exist a century or even a few decades ago. And, many of the industries in which many people work today didn’t exist a century ago. As Thorstein Veblen said, “invention is the mother of necessity.
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