What it means
The reasoning of the fallacy sounds natural. If there are, say, a million jobs, then letting more people in, or letting machines do more, must leave fewer jobs for everyone else.
On this view the sensible response is to share the work out, perhaps by shortening the working week or by pushing older workers into early retirement. The mistake is that the number of jobs is not set in advance.
When more people work, they earn and spend, which creates demand for goods and services and so for more workers. When technology raises productivity, goods get cheaper or better, which increases spending elsewhere and creates new kinds of work.
The fallacy is useful to know when you hear policy arguments. Early retirement schemes introduced to free jobs for the young have generally failed to lower youth unemployment, because older workers also spend and produce.
Likewise, a business that assumes a fixed market will tend to shrink its ambitions, while one that expects growth plans for more hiring. There are important nuances.
Individual workers and individual industries can suffer real losses when technology or trade changes, and the new jobs may need different skills or be in different places. Saying the total pool of work is not fixed does not mean that the transition is painless.
The term is also the reverse of another error, the idea that a growing economy automatically guarantees jobs for everyone. In the short run, weak demand can leave workers idle, so the lump of labour fallacy is a warning against a fixed-pie assumption, not a promise that employment will always adjust quickly.
The idea has a practical business reading as well. When a company plans for a fixed market size, it tends to treat every new hire or competitor as a threat, whereas a company that expects the market to grow looks for ways to serve new customers and create new roles.
In practice
Real-world examples.
Example
A town council debates whether to restrict new arrivals to protect local jobs. An economist on the panel points out that new residents also buy groceries, rent homes and use services, creating demand that supports additional jobs, so the number of jobs is not fixed.
Example
A warehouse introduces automated scanners that reduce the labour needed per parcel. Costs fall, the company wins more contracts and ends up hiring drivers and customer service staff, even though fewer people now scan parcels.
Example
A union proposes a shorter working week at the same pay, arguing that it will create jobs by spreading the work. The finance team warns that if costs rise sharply the firm may cut output or move work abroad, which shows that sharing a fixed amount of work is not a simple solution.
Case study
Seen in the real world.
Larkspur Printing is an illustrative, fictional company with 120 staff. When it bought digital presses that could do the work of ten people, managers expected redundancies. The finance director argued that printing cheaper and faster would let the company win customers that had been too expensive before.
Over the following two years, sales grew by 40%, and the company hired fourteen people in design, sales and delivery. Some of the former press operators retrained for these roles. In this illustrative story, the total number of jobs rose, though the transition required investment in training and some people left rather than change roles.
The illustrative finance director later used the same reasoning when a competitor entered the market. Rather than cutting hours to protect jobs, she increased marketing spend, and the fictional company ended the year with higher sales and a larger team.
Watch out
Common mistakes.
- Assuming that every job taken by one person is a job lost by another, when extra workers also create demand for goods and services.
- Believing technology always destroys more jobs than it creates, when history shows both losses and new roles, with the net effect depending on policy and timing.
- Using the fallacy to dismiss real hardship, since individual workers can face genuine losses even if total employment grows.
Questions
People also ask.
Who coined the term?
It is usually attributed to the economist David Schloss, who criticised the idea in the nineteenth century as a belief held by some trade union supporters.
Does the fallacy mean job sharing never works?
No, work-sharing can help in a short-term downturn by avoiding redundancies, but it does not create more work in the long run.
How does it affect business decisions?
Managers who treat the market as fixed may underinvest in growth, while those who understand that demand can expand are more likely to hire and invest.
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