The Lump of Labour Fallacy Fallacy

Clever People like to tell you that there isn’t a fixed amount of jobs. So why do they then propose a structure with a finite amount of jobs and 5% unemployment?

Mainstream economists are very fond of throwing out the ‘lump of labour fallacy’ in response to concerns about migrant workers. The reason net migration doesn’t take ‘your job’, they explain (in as patronising a tone as possible), is because it ‘expands the economy’, replacing the job taken with another job the expansion has created.

Case closed. Open borders here we come.

Except of course this entire line of argument is similarly guilty of fallacy.

You can see it most clearly by observing a national economy with a Job Guarantee — where everybody who turns up gets a living wage job working for the public good.

The additional output that underpins these living wages is generated by:

  • dynamic expansion of the national economy from the additional spending,
  • the contributed output of the Job Guarantee job
  • and, where all that is insufficient, redistribution of output from the rich to the poor.

With national visa controls in place you can create a substantial differential to the rest of the world in support of those who vote for you, and provide a positive example for other countries to copy.

But if you put this structure in place with open borders there will always be somebody new turning up in your country after a job — exacerbating any supply side frictions and driving your country up rapidly against its natural carrying capacity limits.

Given the level of productivity increase and energy provision in your nation, you run into capacity issues and, very quickly, you end up in the situation where you are sharing the same amount of output amongst more and more people. The higher the differential you want to create for your own people, the greater the flow from the rest of the world and the faster the decline into penury and social disorder.

If you believe in open borders you must accept that you are still controlling the flow of migration into your nation, but you are doing it via different means. Whether that is by limiting the wage differential to other nations and keeping the poor in destitution, by keeping the entire economy short of demand so that it won’t create so many low level jobs — again keeping the poor in destitution, or by implementing a pseudo-visa system by trade union membership as Labour appear to be proposing. The result is a move to austerity and permanent depression. A system permanently operating way below its capacity because of a belief in ‘freedom’ that actually requires keeping quite a lot of people under the cosh.

The fallacy of free movement is one of failing to take a whole world view. You do not have control of the whole world, only your own national area. So you have to decide whether to fix the problem in the area you do control, or be ‘international’ and fix nothing.

There are three parties to the migration debate. The resident population in the destination country, the incoming worker and the resident population in the source country.

The resident population in the destination country wants to exclude unskilled incoming workers because they do compete with their access to the nation’s resources and add little to their lives other than overcrowding and tension.

The resident population abroad wants to keep its skilled staff because they invested limited time, resources and educational places to train them in the expectation that they would stay in the nation and, in turn, look after the people that trained them.

The incoming worker wants what is best for them as an individual.

So it boils down to whether an individual can override what the other affected populations want. How far does the lack of regard for others go in modern society?

The only viable solution to the dilemma is net zero migration — a policy target of a stable population within a nation and balanced flow of people between nations. That way you are neither stealing skilled staff from areas of the world that are less developed, nor are you taking their unemployed ahead of your own. It is, after all, for the other country to solve their unemployment problem with a Job Guarantee, not export them and hope they never come back.

The ‘British disease’ is one of colonial appropriation — trying to grow the British economy by stealing output from other countries. Net inward migration is just the continuation of the old Imperial attitude in a different guise that is acceptable to elements of the Left who believe in a form of extreme individualism.

Instead we ought to take the approach the Japanese have taken and work on solving the productivity problem with investment and innovation, rather than trying to import servants from the third world.

If you liked this article, please click the ‘heart’ below to recommend it to others, and use the share buttons to spread the word. Remember Modern Money Matters.