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July 15, 2013

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Ralph Musgrave

Mortensen and Pissarides got a Nobel prize for making that statement of the bleedin’ obvious?

pablopatito

Chris, where do you stand on the lump of labour fallacy, and is it relevant here or have I misunderstood it (I've been shot down before on this in the comments section)?

Rick Stein's Bin

I was about to say something similar. When it comes to the immigration debate you seem to have said in the past that the new workers (even if they're low-skilled) can create more jobs than they "take up", whereas with the current, native unemployed you don't seem to make that argument.

Apologies if I've entirely misinterpreted your arguments.

FromArseToElbow

@Pablopatito, the lump of labour fallacy is actually a strawman, i.e. a slur invented to undermine those who question the ability of the market to provide full employment.

The premise of the counter to the supposed fallacy is that more people creates more demand which in turn produces more jobs (this is of a piece with theories of structural unemployment and general equilibrium - Say's and Walras's laws).

The "glut of labour" that we face today is less to do with the number of workers and more to do with long-run increases in productivity that have not been offset by reductions in working time. Automation means we need fewer workers, but societal norms mean that those that have jobs tend to "hoard time".

Metatone

@FATE - surely the glut is also to do with the medium term entry of vast swathes of labour from countries that previously were isolated from the trading system in various ways (e.g. China, India)

FromArseToElbow

@Metatone, the issue is not about the growth in the global labour force, i.e. the quantum of workers, but the changing composition of capital vs labour in production.

If the global workforce doubled over a year, but there was zero productivity growth, then the increase in production would be matched by an increase in consumption, as every producer is a consumer. Employment would not halve (this is the "lump of labour" counter).

However, if productivity increased 10%, due to capital-labour substitution (i.e. automation), then the workforce could grow at a relatively lower rate, while consumption could be maintained by commodity deflation (i.e. productivity gains can be split across lower costs and lower real prices).

If those productivity gains were remitted in time to workers (i.e. shorter hours, same pay), this would erode profit margins. Consequently, capital prefers to reduce the cost of labour, and therefore its share of the composition of production.

chris

@ Rick Stein's bin, pablopatito.
I was just making the innocuous point (supported by John Aziz) that we now have an excess supply of labour. Quite why this is so is irrelevant to my point.
This is quite separate from the lump of labour claim. That claim is that labour demand is flexible in the face of several shocks. Maybe. But it's not so flexible as to eliminate the excess supply of labour. To see the proof of this, open your eyes.

John King

It's hard to imagine many unemployed people able to resist the negative imagery being applied for political purposes.

Which is ironic: most taxpayers don't pay nearly enough to cover the benefits they get from living in a developed state. Most of us are net scroungers.

Richard Gadsden

One way of looking at the lump of labour fallacy is that the amount of employment is proportional to the amount of consumption, so adding people won't affect the unemployment rate, as you're adding consumers at the same rate as workers.

Having established that consumption is proportional to employment, we find that the ratio is determined by productivity - if one person's consumption can be filled by less than one person's labour, then not everyone will be employed - initially, improvements in productivity allow people to retire, children to extend their education and working weeks to drop, but, eventually, you have to either increase consumption (which, you may have noticed, we're not doing because pcGDP isn't growing) or you have to increase unemployment.

The fact is that there aren't enough jobs to go around. Wouldn't society be much healthier if work was a choice? People who don't want to work would stop trying to get jobs, so people who do want to work would face less competition, making it easier to get one.

Phil Sealey

Where does the rise in voluntary work fit into this? Also what used to be called "home making" - caring for children, sick and elderly parents, etc? Why do more married women work now (at least in the UK) than in the past? Is it because they have to or because they want to? No one in the 1950s called married housewives "work shy".

One further point - Hunter-gatherer societies generally "work" far fewer hours than either agricultural or industrial societies.

Sorry, I'm not making any particular point. I'm not an economist, so it all baffles me.

Ralph Musgrave

Pablopatito and Rick both have a point in throwing down the lump of labour gauntlet in front of Chris.

Chris says “shouldn't we also tell the least productive workers: "don't make yourself miserable wanting a job that isn't there"? An answer to that point is that the number of jobs available is related to the number of people actively looking for work, all else equal. E.g. immigrants have arrived in the US at the rate of about a million a year over the last two centuries which means the US has been able to create jobs at the rate of very roughly a million a year.

Same applies to the unemployed in the UK: if X thousand unemployed persons switch from refusing to seriously look for work to actively seeking work, that will enable X thousand jobs to be created.

Re Chris and Aziz’s point that “we now have an excess supply of labour”, that is very vague. One could argue that we’ve always had an excess supply of labour in that there have always been hundreds of thousands unemployed in the UK, if not millions.


chris

@ Ralph. You say "if X thousand unemployed persons switch from refusing to seriously look for work to actively seeking work, that will enable X thousand jobs to be created."
I'm not sure. The immigrants (and farmers and women) who entered the industrial labour force had a marginal product sufficiently high that they were attractive to employers at reasonable wages. I'm not sure the same is true for the most unskilled workers now, who might have a v. low MP indeed (lower than the minimum wage). Evidence for my hypothesis is that very many unemployed are looking for work, and can't get it.
Maybe you're right that there has often been an excess supply of labour. But it's unusually acute now.

Luis Enrique

I find the norm about the desirability of work per se hard to separate from the norm about the desirability of looking after yourself and not imposing on others more generally.

I'd defend the later - I think taking responsibility for yourself is generally a good thing - but if you hold that norm, I would require some pretty strong mental accounting to separate out paid employment from that

pablopatito

Chris says "I'm not sure the same is true for the most unskilled workers now, who might have a v. low MP"

What exactly is the definition of unskilled? There must be very few unskilled workers who couldn't become skilled given enough time and resources. Skilling (is that a word?) the unemployed is a better policy than accepting a significant proportion of the population will remain unskilled and unemployed, surely?

Also, a weaker welfare state may encourage people to make more of the free education they're provided when they're young?

Ralph Musgrave

Chris, If there has been a big fall in demand for unskilled labour, and such labour just can’t be trained up to the standards required by employers, then there are then just two options. One is to create very low output “make work” or Job Guarantee type work for the hords of unskilled folk. The second is to accept that “robots and skilled robot technicians” can produce much of what we need, so a significant proportion of the unskilled might as well be allowed to live a life of leisure. Which is a long winded way of me saying “You’ve got a point”.

However, I doubt there has been a HUGE change in the demand for and supply of unskilled labour since before the crunch. So I’d guess we ought to be able to get back to pre-crunch levels of employment.

As to the very long term, “robots and skilled robot technicians” will be able to produce most of what we need, so as per your suggestion, we’ll continue with a process that has been going on for decades: taking a gradually more relaxed attitude to the unskilled doing nothing.

Luis Enrique

I suppose the norm ought to be something like "one should look after oneself, so long as that's possible, for a reasonable definition of possible"

so if there aren't any jobs to be had, you don't feel like you ought to have one.

SteveH

There are some very hard working people, employed by firms such as KPMG, who are working tirelessly to enrich the already filthy rich. Give me the workshy over these anyday.

Mat

Well, to echo the point already made here;

1) If capitalism is only capable of producing so-many jobs (which are productive enough to be filled), and that is a justification for "bribing" some to not work; then it necessarily follows we should actively try and prevent those jobs from being filled by foreign-labor UNLESS there is absolutely no-one at home capable of doing them. I mean, surely?

2) Is it really fair to say that all (or even a large chunk) of the dis-utility arising from not working is because of social stigma? I mean, that may well be the case for short unemployment spells; but idleness is deeply corrosive, and filling your days with day-time TV can't be happy making for anyone. And, by definition, those unable to find work will be the least likely to be self starters capable of disciplining themselves to make use of their free-time in ways that actually do make them happy. I fear that removing the social opprobrium might actually make the unemployed less happy over time, if it encourages some to drift into idleness and the hellishness that brings..

ortega

And, just as we share our money with those without work, should we then share our partners with the least lucky ones?

GaHp

Yes ortega, that is why polygamy is somewhat frowned upon.

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