Lump Of Labor Fallacy

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DEFINITION of 'Lump Of Labor Fallacy'

The assumption that the quantity of labor required in an overall economy is fixed. This assumption in often regarded as fallacious, as the consensus view amongst economists today is that the quantity of labor demanded varies with respect to many factors. Foremost, these economists argue, employment of labor can expand the overall size of the economy, leading to further job creation. Reducing the amount of labor employed would decrease overall economic activity and thus further decrease the demand for labor.

INVESTOPEDIA EXPLAINS 'Lump Of Labor Fallacy'

The lump of labor fallacy originated to refute claims that reducing working hours would also reduce unemployment. As the reasoning goes, the remaining quantity of work would be left undone, and firms would be required to hire additional workers. The fallacy also has application to claims that immigration decreases the amount of jobs available for domestic workers. Controversy remains concerning whether the assumption of a fixed quantity of labor is actually contrary to the economic reality. Notably, the Government of France acted in 2000 to restrict regular working hours to 35 per week, in an attempt to alleviate unemployment.

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