Lumps of labour

Economists are good for some things. One is coming up with concise explanations (and catchy names) for concepts that kind of make logical sense, but it would take a course of in-depth research to prove why they do. Such is the case with me and the ‘lump of labour’ fallacy. I discovered this fallacy this morning after experiencing it dancing just beyond my comprehension for about a week, unable to properly explain why I thought something was wrong, but knowing nonetheless that it was.Politician David Willets suggested a little over a week ago that the rise in the number of women working has led to a reduction in social mobility for working class men, arguing that middle class women were taking the jobs that working class men could rise into, leaving them nowhere to go except working class jobs. He was not making an attack on gender equality, but he was nonetheless misguided and duped by the lump of labour fallacy, as many (including myself for a few short moments) are.

The idea that there is a limited pool of jobs and they are filled in an orderly manner by those most qualified is surely a fallacy. There is a reason it is called the labour ‘market’. It is a supply and demand business, dictated by geography and fickleness on both sides. The Government have reported that social mobility has stagnated for the last forty years. While there are now a higher percentage of women in the workplace, isn’t it more reasonable to assume that the trend coinciding with the past forty years is not gender equality in the workplace, but the decline of manufacturing jobs - the previous training ground for future managers from working class backgrounds? The supply-side dynamics of the labour market has undergone huge change in the UK in the last forty-years, while the demand-side has not changed significantly enough. Those who find they can acquire the new skills required have succeeded while the rest of the workers remain sluggish.

Willets’ argument, at this point, still sounds plausible. He says the higher number of women attending university has taken places from working class men and therefore access to the education route to social mobility has been reduced, therefore working class men are less prepared for shifts in the labour market. However, the dramatic increase in the number of university places in general and the increase in the proportion of the general population attending have also risen. According to this BBC article in response to Willets’ comments, in the early 1960’s, only about one in twenty people went university, as opposed to 45% now, so access to education at the university level is not the problem.

The core of the fallacy, however, the part that is so hard to wrap you head around, is that the number of jobs available is not fixed. To take an example, greater equality has created new markets for new products which would not have been produced, bought or sold without independently wealthy women. A women who is dependent on her husband or partner for income is unlikely to treat the amount of her income as disposable as most women do today. Magazines, cosmetics and fashion are big winners, creating more jobs to meet the demand from female consumers. Also, regardless of gender, more workers mean more consumers in general, leading to growth in consumer-led areas of the economy, leading to more jobs. Having one extra person in the economy, working, spending and paying tax will contribute a portion towards the creation of another job.

This became clear to me this morning after reading an article in the Economist about retirement ages, as the lump of labour fallacy plays a part also in the fears that older people working until they are older will take jobs that should go to younger people. In this case as well, older people staying in work longer simply mean they are contributing to the labour market for longer and, as the pension crisis looms, they will be propping up an economy at risk of stagnating under the pension burden.

The same fallacy is at the root of many populist policy mistakes in the area of immigration, as well. Immigrants do not come and ‘take our jobs’. In most cases, they do the opposite. They enable the economy to grow by contributing to it. In some cases the argument for immigration is simplistic: immigrants will take jobs where supply (the number of jobs) far exceeds demand (for employment in that sector). This applies also to women in some cases (women are overrepresented in many unskilled occupations). But even if a skilled immigrant arrives and takes a job which many citizens could have taken, they are still contributing to the creation of similar jobs, which otherwise may not have been created at all.

Labour market economics is not an exact science, so it is impossible to say exactly what the employment situation would look like had women not increased their prominence in the workplace. But because the economics isn’t an exact science, it is important to keep in mind that the labour market is fluid, it is always changing and job creation is supported by areas of economic growth, which are, in turn, supported by workers in jobs. I don’t have the solution to social mobility for working class men, but I don’t doubt that women in the workforce have contributed more than they have taken from the system.