Lump of Labor Fallacy

Just learned this new term, Lump of Labor Fallacy.   Per wikipedia
"In economics, the lump of labour fallacy (or lump of jobs fallacyfallacy of labour scarcity, or the zero-sum fallacy, from its ties to the zero-sum game) is the contention that the amount of work available to labourers is fixed. It is considered a fallacy by most economists,[1] who hold that the amount of work is not static. Another way to describe the fallacy is that it treats the demand for labour as an exogenous variable, when it is not."
The fallacy appeals to struggling lower and middle class workers, especially older displaced workers, who are finding it difficult to find jobs.   If fewer people are allowed to apply for the job I was rejected for, doesn't that improve my odds, and won't employing me decrease unemployment and boost the economy?

Generally the fallacy is applied when minimum wage or overtime policy is discussed.  Limit overtime, or cut the work week to 35 hours, and more work will spill over into the unemployment line.  Economists groan, as these policies limit the 20 percent who add 80 percent of value.  Try applying that to baseball - limit the number of innings the best pitchers are allowed to pitch, give them vacations in the middle of the season, and pitchers cut from the team are brought back onto the field, increasing employment...?  Pele, Zidane, Messi, Maradona, Beckham... please sit on the bench for awhile so that an American soccer player can earn some field time.

The same zero-sum argument can be applied - fallaciously - to global trade and immigration.   Cap the number of workers or ban the export of work over state and national lines, and please the second best and third best in the workforce.  Eliminate Dominicans from baseball, and the USA economy should slightly improve as 69 mile per hour pitchers are hired from minor leagues.

No.  It makes the league play worse, and makes the world economy worse.    The USA economy is the strongest indicator of a strong state economy, a state economy is the biggest predictor of a strong city economy, and the world economy is the best indicator for the USA economy.

The problem behind the "lump of labor" solution is that we live in a global economy.   There is no way to make the same rule across every team in the league.  The Red Sox might decide to hire only USA-born players, but they have to play against the Yankees.  If the USA cannot hire the best of India's software engineers, it still must play against India on the field.  The Red Sox not only hurt their own team, they actually give the Yankees better pool to recruit from.

CAER is still making the arguments that most exports of used electronics are simply dumped and burned, Trafigura-style, on poor country beaches.  That's baloney, study after study disproves that, and the "source" of the 80 percent statistic has gone curiously missing.

CAER's second argument to ban trade in used commodities overseas is that the work will be done here in the USA, that we will create more jobs.

So instead of selling a USA asset, like a 27 inch television, for $20 in Lima Peru, we keep the TV here in a nation where no one wants it.   We pay people (no illegals please) to break it into pieces, worth collectively about 2 dollars, at a labor cost of about 9 dollars.  Losing 7 dollars on the unit is supposed to boost the economy and reduce unemployment... and giving up 20 dollars in revenue and a plug-and-play testing job is a small sacrifice.

Multiply that times a million televisions and you have California - a loss of 70 million dollars plus the 20 dollars in lost export revenue.  270 million dollars in the hole, California is.

Economists will tell you how it is that the world is getting better and better - it is through trade.  It's the same thing that made basketball and baseball better.  Interracial leagues, letting the best players play.

I know the fear of losing my income.   Know it very well.  And I can understand the impulse to blame competitors, and to limit competition.

Competition just needs to be fair.   Ban me from interracial marriage, and decrease the number of white spinsters.  The loss of creativity and love is more difficult to measure than the increase in divorce rates.

The comic above is bitter and I feel for USA programmers who had terrific jobs 15 years ago, but who must increasingly compete hard with programmers from India and China.  I know what it's like to have your kids college plans threatened, to look at downsizing your car and home.   It's frustrating.

But it's part of aging.  Sports stars have to learn that their incomes will fall - precipitously - after a couple of decades, and they need to plan and save.  That's my lesson to my kids.   They may become pilots or doctors or programmers or lawyers, but in a world of competition, the will have to plan on younger people from all kinds of nations competing with them for work as they grow older.  They cannot plan on a rule that bans young people, or colored people, or non-native people, to save them.  The key is to save a nest egg, put money aside.

That's the lesson America corrupted in my generation.  They taught us to borrow tens of thousands of dollars for college degrees, at the very time when saving the same dollars would have led to decades of compounded savings.  Now my generation is left, crabby from debt and late savings, complaining about competition from young people and foreigners.  Racism and segregation were steeped in fear of competition.

Plan on it and recruit the best players.

No comments: