Lump of labour fallacy

Updated: Aug 20, 2021

The belief that the number of jobs in an economy is fixed. If this were true, it would be correct to argue that limiting hours worked would create more jobs, and making the elderly retire early would create jobs for the young. The fallacy is often the basis of arguments that immigration will result in unemployment because ‘there are not enough jobs to go round’. This view ignores the possibility that the demand for labour may depend on the this, preventing preventing employers from employing the most experienced workers, or from employing people for longer hours per week, might actually reduce total employment, by lowering the value of the work employers get for the wages they offer. Say’s law suggests why it is a fallacy: additional labour will create additional demand and the economy will adjust to a higher level of employment.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.