Saturday, August 27, 2011

Richard A. Lester on the "Lump-of-Labor" Theory

From Economics of Labor (1941), excerpt reprinted in Unions, Management and the Public (1949), edited by E. Wight Bakke and Clark Kerr:

Restrictions upon the units of output per worker in order to “make the job last” arc especially characteristic of seasonal industries like the building trades, in which workers may seek to extend the period of their employment during each year. That helps to explain such restrictions as those upon the number of bricks that a bricklayer can lay, the number of bundles of laths that a lather can tack, and the number of barrels of lime that a plasterer can handle, in any one day. In non seasonal lines, however, workers may also try to “nurse the job along,” so that they “do not work themselves out of employment.”

Economists have been almost unanimous in their condemnation of restrictions upon output, which they claim arc based upon a false “lump-of-labor” theory. According to this theory there is just so much work to be done, so that a particular grade of labor may increase its total hours of employment by reducing the output per worker.

In this matter, the trade-unionists are arguing from the particular to the general and the economists are reasoning from the general to the particular. Consequently, neither group appreciates the position of the other side. A trade-unionist, a plumber for example, correctly assumes that the total costs of plumbing are such a small item in the total costs of constructing and maintaining a building that the wage-output ratio of local plumbers will have practically no effect upon total building construction in the locality. He, therefore, is inclined to take the common-sense view that there is a fixed amount of local plumbing work to be done in any one year and that a rapid pace would result in fewer hours of work for local plumbers.

The economists are correct in insisting that there is no fixed demand for all products or services and that the demand for a particular product or service, though it may be fixed in the short run (for example, after the building contracts have been let), is not fixed over longer period. But the economists may make a mistake in attempting to apply such genera] conclusions uniformly to all particular cases, and insisting upon a close relationship between the output of, say, one out of 20-odd building or railroad crafts and the demand for building or railroad service. Small sections of the total labor supply may increase their total real earnings by restrictive practices, even though the real income of the whole Community or of other laboring groups is reduced as a consequence.

Business leaders likewise favor restrictive practices that help to maintain prices and prevent any "spoiling of the market.” In reasoning that price-cutting is collective suicide because there is only a certain demand for a product or a certain amount of business to be had, they arc committing what might be called the “lump-of-business” fallacy. The price policies of employers in many industries seems to be based on the assumption that demand is fixed and that price reductions would not lead to increased sales.

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