Lump Of Labour Fallacy

The lump of labour fallacy in economics is referred to as a concept that states that an increase in the amount of productivity of each worker decreases the number of available jobs in any society. The lump of labour fallacy exists in the United States but had vanished in due course, which has again resumed with few alterations. Four years ago France’s Socialist government had intended to create jobs and in this process, they reduced extend of the workweek. In America, the lump of labour fallacy exists due to some administration policies of the Bush government.

In economics, a basic concept prevails that there exists a fixed amount of work in any economy, which is to be divided among the total supply of labour. Supply of labour and amount of work both changes with the economic climate. The lump of labour fallacy is considered as a standard term in economic theory, which is used to explain policies used for unemployment. The first step that is taken is shortening work weeks so that it can create jobs in the economy. When in an economy there is a high rate of unemployment, government advocates a shortened workweek or forces restriction on the number of hours workers can dedicate to their work. The basic idea here is to divide work equally among the available workforce so that jobs can be created.

The second step is to restrict the process of labour immigration. Ideal process to restrict labour immigration is to have lower labour costs. Foreign markets generally have lower labour costs and so immigration takes place. According to lump of labor fallacy amount of work available in an economy is not fixed , new jobs are created or get exhausted due to cost of labor, cost of money, innovation and several other economic variables. In simple terms, the labour scenario of any economy depends on the conversion of a goods-based economy to a service-based economy. Thus, the lump of labour fallacy is a concept that can be used to understand the concept of unemployment. This idea is used in making policies that can restrict the unemployment rate and increase job opportunity in any economy.

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