Climate change & the fallacy of the lump of labour fallacy.

posted by Geoff on 30th Nov 2017

30th,Nov

Climate change & the fallacy of the lump of labour fallacy.

Janesville Assembly Plant is a former automobile factory owned by General Motors located in Janesville, Wisconsin. Opened in 1919, it was the oldest operating GM plant when it was largely idled in December 2008, and ceased all remaining production on April 23, 2009.

Listening to the BBC World Service Business Daily programme on Tuesday morning that old angry amateur feeling came back. The programme, Jobs for the World’s Young, was billed like this:

Young people make up 35% of the world’s unemployed, and it’s a global problem. Pulitzer prize-winning reporter Amy Goldstein, author of Janesville: An American Story, tells us how retraining doesn’t always work when it comes to finding people new jobs in the rust belt of America.

In her review of Janesville in the New York Times, Jennifer Senior wrote

In the case of the many laid-off workers in the Janesville area, the outcomes are decidedly worse for those who have attended the local technical college to learn a new trade.

Training and jobs on my first website, FAXFN.ORG (1997)

My old website.

The interview took me back to my first website, faxfn.org, where I repeated a Royal Economic Society press release:

James Heckman

How Effective Are Active Labour Market Policies Like The New Deal?

According to new research by Professors James Heckman and Jeffrey Smith, published in the latest issue of the Economic Journal, programmes [like the new deal] make almost no difference to the level of unemployment or the wage rates of those gaining employment.

So, training schemes for the newly unemployed are not much good. Another note on Faxfn by Professor Kim Swales, came to a similar conclusion to Amy Goldstein: Training schemes could be worse than useless.

Professor Kim Swales

New Deal web site shoots government in foot.

A careful look at the Department of Education and Employment’s web site gives the game away (United Kingdom Employment Action Plan). This claims 70,000 young people have moved from the New Deal into sustained jobs. With the “64,000 on other education, training and work experience options” the New Deal has succeeded in removing about half its entrants from unemployment.

Figures also published in the action plan suggest that before the New Deal about half of people unemployed for six months (who would now be New Deal entrants) left unemployment in the following six months.

So according to the government’s web site, the New Deal does not seem to have made any difference.

A messianic message on education and training

Back in 1993, I was asked by Professor Lord Megnad Desai to write a note for the Fabian Society’s newsletter on the use of labour subidies to create jobs. They decided not to publish Jobs, training and video games. Subsequently, Lord Desai didn’t like what I had written and told me he thought it was ‘messianic’. Here is an excerpt from the piece:

The first lesson is that our education and training system may have much less to offer in creating high-tech employment than many suppose. Or indeed in creating much employment at all. The only really successful courses in the Training and Enterprise Councils, in terms of job creation, are those that correspond to old-fashioned apprenticeships. They are for selected young people who are attached to a particular firm and they give on the job training. Success rates fall for courses if they are for older people or if they are not job-specific or they are not on-the-job. And success rates can become very small. And if retraining is off-the-job forget it.

The fallacy of the lump of labour fallacy

Congratulations to Amy Goldstein – excellent work – but I get depressed by this stuff, having been trying to write about it for decades, being put down by some economists with their Lump of labour fallacy:

In economics, the lump of labour fallacy is the idea that there is a fixed amount of work—a lump of labour—to be done within an economy which can be distributed to create more or fewer jobs.

Lump of labour thinking is accompanied by an assumption that output will continue to rise with the progress of society and technology. Main stream economists concede there will be “frictional adjustments”, like local and time limited pockets of unemployment, but in the long run increased production will generate the necessary jobs.

This thinking morphs into a fallacy itself when it is assumed there there are no long-run limits to output. Frighteningly, we are now close to a “long run in which we are all dead”, which will occur if most species on Earth (including humans) disappear in a sixth mass extinction event. The economists’ fallacy comes from the assumption that extinction can be avoided and we can have economic growth.

What the dimmer economists don’t understand is that the world economy cannot reduce greenhouse gas emissions fast enough to prevent an extinction event – unless there is a fall in economic activity. i.e. de-growth. Without de-growth there will be no long run. This is the fix we’ve got into.

No long run means no humans. No humans means no jobs. No jobs means no lump of labour. No lump of labour means no lump of labour fallacy.

That’s the fallacy of the lump of labour fallacy.

Productivity and training

If the world produces less and aims for full employment, each worker must produce less and be less productive. We must train our economists to accept this and rework their theories for the new reality.

Imagine (© John Lennon 1971) we reach “a point at which all the necessaries and comforts of life shall be produced without human labour” (© Robert Owen circa 1840). Would we abandon work altogether?

Peter Breugel showed us, labour can have it’s own value – even if productivity is low.