The story begins in Lancashire in 1779. For several days in October large crowds of workers marched through the towns north of Manchester smashing machines and burning down factories. After a week or so, the commotion died down. The next year, a local magistrate wrote a pamphlet aimed at educating the workers about the beneficial effects of machines.
The magistrate, Dorning Rasbotham, made a huge and questionable assumption about the rioters' motivation. He thought they didn't appreciate that the machines are almost entirely good things. Later historians have pointed out that the rioting workers were not superstitious fools but were fighting back against intolerable conditions. Karl Marx argued, in The Poverty of Philosophy, that capitalists introduced machines for the purpose of undermining the power of skilled workers to demand and get higher wages.
So the first question is who are you going to believe about the workers' motives? The workers themselves or a member of the landed gentry?
The next notable episode in the lump-of-labour story came in response to the agitation for a Ten Hour factory law in 1833. To head off the legislation on the brink of its being passed, the governing Whigs appointed a Royal Commission to look into and white wash the condition of children in factories. After the commission had finished its work, one of the assistant commissioners, E.C. Tufnell, wrote a report basically arguing that everything the supporters of the bill said was a lie, the unions were conniving cheats and the employers were saints. He went on to write an anti-trade union diatribe, Character, object and effects of trades unions, that became the model for subsequent anti-union diatribes. Some thirty-four years later, James Ward "plagiarized in the most shameless manner" entire sections of Tufnell's book in his Workmen and Wages.
When Newcastle engineers struck for the nine-hour day in 1871, the London correspondent for the New York Times chided them for their folly and duplicitous, parroting the spurious claims Tufnell had originated 37 years earlier. The argument was that workers didn't really want a shorter day, what they wanted was higher pay. But since "the market" had already correctly determined their pay, their efforts were futile and based on the fallacious idea that there was a fixed amount of work.
I've left out a lot of connecting threads but the story so far is that the fallacy claim was exclusively an argument against higher wages, shorter hours, factory regulation and trade unions. All of the connecting threads reinforce that story. There is no convolution so far, just straight forward anti-union, anti-worker polemic.
The story gets a little more convoluted in the 20th century when the lump of labour fallacy claim started getting presented in textbooks as if it was an authentic piece of economic wisdom rather than the partisan rhetoric... and slander... that it was.
Fast forward to 2010 and the NBER book, Social Security Programs and Retirement around the World: The Relationship to Youth Employment, which repeatedly framed the issue of early retirement programs of the 1970s and 80s in terms of them having been motivated by a lump-of-labour fallacy on the part of advocates.
I happen to remember the late 1970s and early 1980s when early retirement programs were in vogue, say about 1976 to 1982. The rationale I remember most had to do with using early retirement as an alternative to layoffs in workforce reduction, especially in the traditionally highly unionized 'smokestack' industries like steel.
Now the difference between using early retirement as an alternative to layoffs and using it as a way to open up positions for new hires may be subtle. But it boils down to this: no young people get hired to replace the retirees. In fact, some young people may still get laid off if there aren't enough retirees to meet the workforce reduction goals.
O.K. now we have two possible explanations for early retirement programs: 1. as a workforce reduction alternative to layoffs or 2. as a way to "open up" positions for younger workers. Which one is the more plausible explanation? How does one find out? Interviews, content analysis, survey research, literature reviews...
Did the authors of any of the six chapters in Social Security Programs and Retirement around the World: The Relationship to Youth Employment that discussed the alleged lump-of-labour fallacy conduct any research to verify that it was indeed the main motivating idea behind the early retirement schemes they were analyzing? No.
As the authors of the chapter on Belgium shamelessly stated, "Those who make the fallacy claim fail to offer specific evidence of the supposed belief in a fixed amount of work." (a sentence they plagiarized -- inadvertently no doubt -- from me). They went on to argue that it was "too convenient to yield the burden of proof," which no doubt lost something in translation but from the context obviously meant that they, too, would eschew offering actual evidence for the supposed belief.
But here things are perhaps getting a bit convoluted. Let's back up a step and focus on the question, "what was the motive for the early retirement programs?" If the programs were motivated by business and governments' need to eliminate redundancy and not by popular demands to "make room for the young," the regression analyses carried out by the economists are not only "inconclusive," they are a digression into utter nonsense -- attempts to "measure" implausible effects that aren't even intended by the policies in question.
Of course there is (at least) a third possibility. Perhaps the early retirement programs were designed by government and business as a politically palatable form of labour shedding to deal with redundancy but were sold to the public as a way to "open up jobs" for the young. This scenario gains some credence, at least for one country, in the following observation from a study of "Redundancy and the Public/Private Mix" by Harald Russig (1986):
But there is an interesting twist to the emerging political argument. A new political deal may emerge: in West Germany, major unions are demanding a shorter work week in order to get more people employed. Employers and governments find that early retirement is a more attractive alternative than these union demands for a shorter work week. Thus, it is crucial to keep early retirement benefits attractive to workers and to those unions that prefer elaborate early retirement schemes to a shorter work week.Hmmm...
Now why would anybody be concerned with the outcomes of early retirement schemes in 2010? Gosh. Could it be because governments are proposing to raise the standard retirement age and they want to discount fears that prolonging workforce participation will crowd out younger workers? But what relevance could studies of those earlier schemes have to that question? In a word, none. That is unless the motivation for the early retirement schemes could be retroactively revised to be one of opening up jobs for the young rather than workforce restructuring and labour shedding.
"O.K. now we have two possible explanations for early retirement programs:...."
ReplyDeleteI think there may be one other explanation which is subtley different from the "retire them rather than fire them" rationale. I worked for NY State in the '70s and '80s and clearly recall that so-called early retirement programs were offered as a way to reduce the number of older, e.g. higher paid, workers and thereby reduce payroll costs by replacing early retirees with new and lower paid hires. Jobs were not created, but labor costs were reduced.