Sandwichman,
It's not often I get requests, so this deserves my concentration. Sorry for the delay in responding.
Your question involves the relationship (if any) between the lump of labor theory or as we like to say fallacy and the Jubilee principle from Leviticus. Also, the comment cited that the passage of the 1868 law for federal employees to work an 8 hour day, and if this could be a "Jubilee of Labor".
First, I should say that from the look of your blog (and your obsession with lump of labor"), that you probably are smarter than I, and certainly more engaged with "the lump". I am sure you will find this post disappointing.
Regarding the "lump". I find discussion of the lump in economic circles to be a bit obtuse. I think it better discussed in business theory and management. My way of thinking has "lump" as something to be defeated by clever managers like say...moral hazard. If we were to use a restaurant as a testing ground. The bus boy could assume that he will enjoy x number of tables per day to bus, and if paid by the hour should stretch out his time, as x is all he is going to produce. The clever manager, should show him that if table turnover is increased and the demand for dinning there variable, he can both produce more bussed tables, work more hours and contribute to the greater good of the restaurant and his co-workers financial well-being. Now if the table turnover rate is not variable, and the demand not variable (as in the case of an office building where the firm enjoys 100% market share and no one becomes impatient and leaves before seating), than the bus mans "lump" assumption is correct and his work is fixed.
My view of the economics in Leviticus is that God's (or the author's) view of a just society is one where every citizen is guaranteed a certain level subsistence and income by virtue of the continuance the land ownership his ancestors acquired in the past. The Jubilee just "resets" the beginning land title (as best it can) every so often, so that no single bad event (bad crop, poor debt service decision etc) can cause more than one generation to suffer. It should be noted that this principle was seldom followed, and the Jews were both scolded by profits and punished by God for their "greed" in not following both the Sabbath and Jubilee principles to the fullest extent.
I admit my understanding of the 8 hour day movement to be very limited, and my frailty hurts my ability to respond correctly (if there is a right answer). It appeared to me that the 8 hour movement was motivated by a desire both to have a better home life and to start the process of increasing wages. In fact much of the debate over the movement was whether or not the wage for 8 should be the same as the wage for 12 hours of labor. What we think about "lump" is largely irrelevant as it was not our motivation that fed the movement.
The comment cited that some said the success of the 8 hour movement would be a "Jubilee of labor" seems to point to a difference in understanding about the motivation and effect of a properly executed Jubilee between myself and the speaker cited. If he believed that the laborer would raise his standard of living closer to the robber barron's of the day with the adoption of the 8 hour day, we both know that that could'nt and didn't happen. The 8 hour Day did not change (appreciably) the capital accumulation of the working class, so there was not real gain made in class differentiation. Did the 8 hour day "reset" the class and wealth differences that the author(s) of Leviticus sought? I say no. So the "Jubilee of Labor" comment was way off, in my view.
My view of the 8 hour day movement is that it was the beginning of a more just view of the working class, and perhaps the start of a burgeoning middle class. This middle class, has its own importance in our History.
I would like to know your thoughts on these issues.
My Best,
Tom
Saturday, September 19, 2009
Thursday, September 10, 2009
Lump of Labor… and other items in Labor Economics
“Ours is a laboristic rather than
A capitalistic society...” Sumner Slichter
Continuing in our Keynesianism refresher series, we now look at labor through the economic lens. Unless we are either hoboes or the idle rich, work is a primary activity for all society. Whether we labor at supervision or the hardest manual work, 80% of national income is derived from work. The “economic problem” as it applies to labor concerns, who will do what tasks, how they will do them, how much they will be paid, and under what rules.
Labor is not the typical good or service that we think of in economic terms, we are a little uncomfortable pondering someone’s (or some firm’s) demand for our help. We would much rather ponder the demand for hamburgers or cars, than to think in terms of our own labor as having a demand curve. But, labor like any other good would have a supply curve, or demand curve and a theoretical equilibrium (or proper wage and amount consumed). Like some other markets the market for labor is not free to react to supply increases (or decreases) or similar changes in demand. Keynes recognized that labor was not as elastic as other goods back in the 1930’s even prior tot the development of the Federal minimum wage laws. Keynes knew that people generally aren’t willing to take pay cuts whether or not deflation is present in the economy. With price floors, (which is what a minimum wage is minimum wage recipients don’t generally worry about whether inflation or deflation is present in the economy. Price ceilings (like rent control)are less common in labor wages and still relatively unheard of until the recent congressional action taxing certain higher paid – high profile executives effectively limiting their pay. Of course we should recall that any price control will result in either labor shortages (price ceiling) or gluts (the increase in unemployment).
Generally when mechanisms other than price determine the distribution of scarce resources (like labor or any good) shortages or gluts are created. This forms the origin of the critique of minimum wage laws as they contribute to unemployment. Most economists believe that unemployment has a natural rate that will exist in a healthy economy. Variances in the natural rate would result from variances in fictional unemployment (which occurs when a worker moves from one job to another), structural unemployment (which is caused by a mismatch between workers and jobs) combined with the effects of minimum wage laws. A good example of a structural miss-match between workers and jobs is the tech bubble that was created in the late 1990’s (causing labor shortages) followed by a tech burst in 2001, resulting in a corresponding amount of unemployment.
Opportunity cost which is the purest measure of cost is defined as the next best thing, or the thing that is given up to obtain something. With labor as the “good”, opportunity cost is entertaining to consider. Initially we give up only our leisure in exchange for work so the opportunity cost of working is watching TV or the like. Later in our lives the opportunity cost of a job is a more lucrative second job. Think of the busboy who considers waiting tables; every day he keeps the lower wage job he loses a little income. Adam Smith’s invisible hand indicates this will be unsustainable, that our innate desire to better ourselves may take over. Lastly, perhaps, (if we are lucky) we could describe our own personal supply curve as backwards leaning that is, when our wage is high enough we begin to value our leisure as highly as our work.
The “Lump of Labor” fallacy is a commonly heard but mostly miss-understood theory. It started life as an effort to reduce unemployment and has reared its head notably in both Hoover and Roosevelt’s administrations labor policies. The theory follows that if hours of work are reduced, more employees would be needed, presto, no unemployment. Some obvious problems with the theory are increased costs due to increases in recruitment, training, and supervision costs. Unfortunately, the lump of labor fallacy has effected how citizens view topics as diverse as immigration to labor saving devices, this has been to the detriment of society, remember the Luddites’ rebellion. The Luddites rebellion was a movement based in England 1812 where workers violently objected to easier to operate looms. The Luddites reasoned that less skilled workers would “push” down their wages, and protested. Ultimately workers were arrested, tried and convicted of treason by the government. It could be argued that the introduction of these large stacking frame looms solidified the dominance of British woolens. The fallacy of the Luddite-loom problem is that it assumes employers would chose reduced workforce size over increased production. Other factors that make the lump of labor theory fallacious are increased administration costs due to higher recruitment, training and management costs.
Labor is an economic good like any other with a supply and demand curve, and an equilibrium amount demanded and wage for every job. If we allow false concepts to enter our arguments we might end up with an error in judgment. As with every other input we use in creating our products, a failure to value it properly in relationship to other inputs may leave us less competitive and ultimately less successful.
“Ours is a laboristic rather than
A capitalistic society...” Sumner Slichter
Continuing in our Keynesianism refresher series, we now look at labor through the economic lens. Unless we are either hoboes or the idle rich, work is a primary activity for all society. Whether we labor at supervision or the hardest manual work, 80% of national income is derived from work. The “economic problem” as it applies to labor concerns, who will do what tasks, how they will do them, how much they will be paid, and under what rules.
Labor is not the typical good or service that we think of in economic terms, we are a little uncomfortable pondering someone’s (or some firm’s) demand for our help. We would much rather ponder the demand for hamburgers or cars, than to think in terms of our own labor as having a demand curve. But, labor like any other good would have a supply curve, or demand curve and a theoretical equilibrium (or proper wage and amount consumed). Like some other markets the market for labor is not free to react to supply increases (or decreases) or similar changes in demand. Keynes recognized that labor was not as elastic as other goods back in the 1930’s even prior tot the development of the Federal minimum wage laws. Keynes knew that people generally aren’t willing to take pay cuts whether or not deflation is present in the economy. With price floors, (which is what a minimum wage is minimum wage recipients don’t generally worry about whether inflation or deflation is present in the economy. Price ceilings (like rent control)are less common in labor wages and still relatively unheard of until the recent congressional action taxing certain higher paid – high profile executives effectively limiting their pay. Of course we should recall that any price control will result in either labor shortages (price ceiling) or gluts (the increase in unemployment).
Generally when mechanisms other than price determine the distribution of scarce resources (like labor or any good) shortages or gluts are created. This forms the origin of the critique of minimum wage laws as they contribute to unemployment. Most economists believe that unemployment has a natural rate that will exist in a healthy economy. Variances in the natural rate would result from variances in fictional unemployment (which occurs when a worker moves from one job to another), structural unemployment (which is caused by a mismatch between workers and jobs) combined with the effects of minimum wage laws. A good example of a structural miss-match between workers and jobs is the tech bubble that was created in the late 1990’s (causing labor shortages) followed by a tech burst in 2001, resulting in a corresponding amount of unemployment.
Opportunity cost which is the purest measure of cost is defined as the next best thing, or the thing that is given up to obtain something. With labor as the “good”, opportunity cost is entertaining to consider. Initially we give up only our leisure in exchange for work so the opportunity cost of working is watching TV or the like. Later in our lives the opportunity cost of a job is a more lucrative second job. Think of the busboy who considers waiting tables; every day he keeps the lower wage job he loses a little income. Adam Smith’s invisible hand indicates this will be unsustainable, that our innate desire to better ourselves may take over. Lastly, perhaps, (if we are lucky) we could describe our own personal supply curve as backwards leaning that is, when our wage is high enough we begin to value our leisure as highly as our work.
The “Lump of Labor” fallacy is a commonly heard but mostly miss-understood theory. It started life as an effort to reduce unemployment and has reared its head notably in both Hoover and Roosevelt’s administrations labor policies. The theory follows that if hours of work are reduced, more employees would be needed, presto, no unemployment. Some obvious problems with the theory are increased costs due to increases in recruitment, training, and supervision costs. Unfortunately, the lump of labor fallacy has effected how citizens view topics as diverse as immigration to labor saving devices, this has been to the detriment of society, remember the Luddites’ rebellion. The Luddites rebellion was a movement based in England 1812 where workers violently objected to easier to operate looms. The Luddites reasoned that less skilled workers would “push” down their wages, and protested. Ultimately workers were arrested, tried and convicted of treason by the government. It could be argued that the introduction of these large stacking frame looms solidified the dominance of British woolens. The fallacy of the Luddite-loom problem is that it assumes employers would chose reduced workforce size over increased production. Other factors that make the lump of labor theory fallacious are increased administration costs due to higher recruitment, training and management costs.
Labor is an economic good like any other with a supply and demand curve, and an equilibrium amount demanded and wage for every job. If we allow false concepts to enter our arguments we might end up with an error in judgment. As with every other input we use in creating our products, a failure to value it properly in relationship to other inputs may leave us less competitive and ultimately less successful.
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