Lump of Labour Fallacy - Application To Employment Regulations

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 who 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.