Thursday, October 29, 2009

Comprehensive Assessment

foothillsmike October 17th, 2009 at 2:49 pm:
It is my thought that the typical work week should be reduced from 40 hours.
James K. Galbraith October 17th, 2009 at 2:52 pm In response to foothillsmike:
Sacre bleu! The French tried this.

I haven’t seen a comprehensive assessment, but I don’t think that it worked very well as employment policy. It does change patterns of social life … but it’s not very clear that Americans want to spend more time at home.
Well, here's a comprehensive assessment.You may not agree with the author's conclusions but Anders Hayden gives sources so you can dig deeper if you're not satisfied.
Drawing on existing survey and economic data, supplemented by interviews with French informants, this article examines the 35-hour week’s evolution and impacts. Although commonly dismissed as economically uncompetitive, the policy package succeeded in avoiding significant labor-cost increases for business. Most 35-hour employees cite quality-of-life improvements despite the fact that wage moderation, greater variability in schedules, and intensification of work negatively impacted some—mostly lower-paid and less-skilled—workers. Taking into account employment gains, the initiative can be considered a qualified success in meeting its main aims.
But there are two sides to every story: the comprehensive assessment and the relentless media boilerplate that creates an impression of what the truthy truth might be. So below is a reprise of my arrangement of sentences from 17 articles over 12 years in The Economist that tell people what to think without them actually having to do the thinking.

Only So Much Work to Go Round

This idea cannot withstand a nanosecond of thought.

The idea that a fixed quantity of work exists, to be parcelled out among workers, is the so-called lump-of-labour fallacy. It is depressing that supposedly responsible governments continue to pretend to be unaware of the old 'lump of labour' fallacy: the illusion that the output of an economy and hence the total amount of work available are fixed.

The notion that there is a fixed amount of work to be shared out, so that shorter hours for all must mean more jobs, is widely derided by economists as the 'lump of labour' fallacy. The idea of the 35-hour week, derided by many economists as the 'lump-of-labour fallacy', is that if employees work less, companies, spurred by tax concessions, will hire more. Although mocked by economists as a prime example of the 'lump-of-labour' fallacy – the idea that there is only so much work to go around – the government claims that it had created 240,000 jobs by the end of 2000. But to conclude from this that overall employment will decline is to succumb to the lump-of-labour fallacy: the long-disproved idea that there is only a fixed amount of output (and hence work) to go round.

France's own Frédéric Bastiat had pointed out two centuries ago that there is no limit to the work that needs doing. Debunking the 'lump of labour fallacy' before it was even given that label, he suggested that to parcel out the limited amount of work available, people should be required to use only one hand, or even to have a hand chopped off. But -- the lump of labour fallacy strikes again -- the amount of work to be done is not fixed. The quantity of work is not fixed: such a notion is known to economists as the 'lump-of-labour' fallacy.

The lump of labour fallacy also lies behind paranoia about jobs being 'stolen' by low-wage countries. The accusation that migrants steal jobs is a version of the 'lump of labour' fallacy -- that there is only so much work to go around. In effect, export pessimism involves a fallacy of its own -- a 'lump-of-trade' fallacy, akin to the idea of a 'lump of labour' (whereby a growing population is taken to imply an ever-rising rate of unemployment, there being only so many jobs to go round).

This is a classic lump-of-labour fallacy (the idea that there is a fixed quantity of work and that if you take a job it is at my expense). Economists call this the 'lump-of-labour' fallacy. Economists call this the lump of labour (or sometimes the lump of output) fallacy.

The lump of labour fallacy is often to blame for confusion about whether productivity growth (due to more efficient working practices or to new technology) is a good or bad thing. Luddism is also commonly linked to the lump-of-labour fallacy in economics, which first-year students are taught to refute and according to which, as the demand for labour is fixed in the short run, labour-saving machinery is bound to 'kill jobs'. But the assumption that this results in fewer jobs rather than more output (and hence more goods, and more job-stimulating demand, in a beautifully virtuous circle) is based on an economic fallacy known as the 'lump of labour': the notion that there is only a fixed amount of output (and hence work) to go round.

If new technology or foreign competition do lead to net job losses it will not be because the lump of labour has become a fact rather than a fallacy, but because labour is not sufficiently mobile between sectors and regions, or because relative wages have failed to adjust. Nearly all of these mistakes boil down in the end to the most enduring of all economic fallacies: the idea that there is only so much output to be produced, or capital to be invested. (Europe is currently preoccupied with the 'lump of labour' version of this mistake, see page 18.)

A recent piece accused conservatives of embracing the 'lump of labour fallacy', the mistaken claim that there is a fixed quantity of work which governments must strive to allocate equitably. Hmm. Are those arguments entirely incorrect? Yes, entirely. The first is a myth. In fact, the paper he cited did not commit the lump of labour fallacy.

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Every sentence in the above article came from one of the 17 Economist articles published over the past 12 years deriding the chimerical lump-of-labour fallacy. The article used all sentences in those articles that included the phrase "lump of labour" and used each sentence only once.


"Cranks and Proud of It." Economist, 1/20/96, Vol. 338 Issue 7949, p86, 2p
"Eat Your NAFTA." Economist, 11/13/93, Vol. 329 Issue 7837, p15, 2p

"The End of Work?" Economist, 9/28/96, Vol. 340 Issue 7985, Supplement p19, 3p

"Europe Hits a Brick Wall." Economist, 4/5/97, Vol. 343 Issue 8011, p21, 3p

"Everyone Cross." Economist, 2/5/00, Vol. 354 Issue 8156, p47, 2/3p

"Frederic Bastiat." Economist, 7/21/01, Vol. 360 Issue 8231, p64, 1p

"Grinding the Poor." Economist, 9/29/01, Vol. 360 Issue 8241, Special section p10,

“Labours lost.” Economist, 6/15/02, Vol. 363 Issue 8277, p78, 1p

“Myths and reality.” Economist, 2/28/04, Vol. 370 Issue 8364, p53, 2/3p

"One Lump or Two?" Economist, 11/25/95, Vol. 337 Issue 7942, p67, 2p

"One Lump or Two?" Economist, 10/25/97, Vol. 345 Issue 8040, p17, 2/3p

"The One-handed Economist." Economist, 11/15/03, Vol. 369 Issue 8350, p62, 1p

"Room for Improvement." Economist, 3/16/02, Vol. 362 Issue 8264, p69, 3p

“Sharing the burden.” Economist, 11/13/93, Vol. 329 Issue 7837, p18, 2p

"Short Measure." Economist, 1/31/98, Vol. 346 Issue 8053, p79, 1/2p

"Thirty-five Hours of Misery." Economist, 7/17/04, Vol. 372 Issue 8384, p13, 2p

"A World without Jobs?" Economist, 2/11/95, Vol. 334 Issue 7901, p21, 3p.


Sandwichman said...

If I had a sock puppet, she would leave the following comment:

"Wait a minute. Are you saying that one of the most highly-regarded and progressive economists in the U.S. would summarily dismiss an employment policy option -- whose absence in has been called "a significant gap in U.S. social insurance" in an Upjohn newsletter article -- without so much as looking at the evidence and then the very next day write a policy brief on the jobs crisis that doesn't so much as mention either work time reduction or work sharing? Heaven help the 30 million unemployed and underemployed!"

Kurzarbeit für Ökonomen, jetzt!

Sandwichman said...

Yes, Jelly Roll, there is no Santa Claus (for "Jelly Roll" would be my sock puppet's name, if I had a sock puppet).

Anonymous said...

I expect that Mr Galbraith, professional that he is, will give this report a thorough treatment, or at least a glancing nod, in the near future - say, within the week.

This will be followed by a Krugman column to address the issues raised by Dean Baker's proposal on shorter working time. And the apparent success Germany is seeing in combating unemployment.

I will hold my breath until then...

jelly roll said...

Wait a minute. Are you saying... Walker! You naughty boy! That was spoze to be my line. What do you think this is? A monologue?

jelly roll said...

"I expect that Mr Galbraith..." That's perfesser G. to you, mr. A.

Min said...

"France's own Frédéric Bastiat had pointed out two centuries ago that there is no limit to the work that needs doing."

And let's not forget Parkinson's Law. :)