Wednesday, August 4, 2010

The lump of labour fallacy rears its ugly head again.

The U.K. government has recently announced a relaxation of the “retirement at 65” rule. Which means that more oldies will work longer. Which, entirely predictably, has meant that a number of lump of labour fallacy enthusiasts have piped up. That is they claim that more oldies filling vacancies means fewer jobs for youths.

The first flaw in this argument (which is quite separate from the lump of labour fallacy) is that youths to a significant extent complement rather than compete with oldies. That is, the two groups tend to fill different vacancies.

But even if the characteristics of oldies and youths are IDENTICAL, there still isn’t a problem. Reason is that an expanded labour force means demand can be bumped up (quicker than you can say “budget deficit”) which results in the extra labour being employed. Problem solved.

The U.S. as imported labour at the rate of about a MILLION people a year for the last TWO HUNDRED YEARS ! How did this VAST additional supply of labour find work? Mystery, isn’t it? At least it’ll be a mystery for those who adhere to the lump of labour fallacy.

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