Lump Of Labor Fallacy

AAA

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.

RELATED TERMS
  1. International Labor Organization ...

    A United Nations agency that strives to serve as a uniting force ...
  2. Organized Labor

    An association of workers united as a single, representative ...
  3. Demand For Labor

    A concept that describes the amount of demand for labor that ...
  4. Labor Intensive

    A process or industry that requires a large amount of labor to ...
  5. Factors Of Production

    An economic term to describe the inputs that are used in the ...
  6. Structural Unemployment

    A longer-lasting form of unemployment caused by fundamental shifts ...
RELATED FAQS
  1. Is industrialization good for the economy?

    Industrialization is the process by which an economy moves from primarily agrarian production to mass produced, technologically ... Read Full Answer >>
Related Articles
  1. Economics

    The Economics Of Labor Mobility

    Loosening labor restrictions has both good and bad effects for a country and its workers.
  2. Economics

    The Unemployment Rate: Get Real

    Depending on how it's measured, the unemployment rate is open to interpretation. Learn how to find the real rate.
  3. Economics

    What You Need To Know About The Employment Report

    This widely watched indicator of economic well-being directly influences the market.
  4. Forex Education

    The German ILO: Why It Matters To Traders

    Germany sets the standard and tone for business in Europe, which makes its economic releases a source of great interest to traders.
  5. Economics

    Unions: Do They Help Or Hurt Workers?

    Learn the pros and cons of these organizations and how they fit into today's economy.
  6. Personal Finance

    Can A Family Survive On The U.S. Minimum Wage?

    As the political debate roars on, the numbers are clear: Even two full-timers at U.S. minimum wage can't keep a family of four above the poverty line.
  7. Budgeting

    5 Ways To Stretch Your Retirement Budget

    Living comfortably can be easy if you follow a simple plan.
  8. Economics

    What The National Debt Means To You

    The U.S. deficit seems to grow every year. But how does it actually affect you?
  9. Economics

    The Gini Index: Measuring Income Distribution

    A country with $100 billion in assets and four residents sounds good - unless three of them have $0.
  10. Retirement

    Downsize Your Home To Downsize Expenses

    Learn how to cut your mortgage, tax, gas and utilities bills.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center