Krugman - Trump, immigration, and the “lump of labor” fallacy
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Of Luddism and lumpy thinking on labor
By Paul Krugman
Opinion Columnist
What did Kurt Vonnegut, the novelist, and François Mitterand, the socialist president of France from 1981 to 1995, have in common with Donald Trump? Both, at some point, believed in what economists call the lump of labor fallacy. This is the view that there is a fixed amount of work to be done and that if someone or something — some group of workers or some kind of machine — is doing some of that work, that means fewer jobs for everyone else.
And Trump clearly shares that belief. As I noted in my most recent column, it underlies his hostility to immigration — well, that and his belief that immigrants are “poisoning the blood of our country.” It also underlies his protectionism.
So this seems like a good time to talk about the lump of labor fallacy, how we know it’s a fallacy and why it’s a zombie — an idea that refuses to die and instead keeps shambling along, eating people’s brains.
First, about Vonnegut and Mitterand.
Vonnegut’s first novel, “Player Piano,” published in 1952, envisaged a grim future in which automation has led to mass unemployment: The machines can do everything, so there’s no need for human workers.
Mitterand, coming to power in a nation that had experienced a large rise in unemployment since the early 1970s, reduced France’s retirement age from 65 to 60, in part because he and his advisers believed that encouraging older French citizens to leave the work force would free up jobs for younger workers. Mitterand’s successors have spent decades trying to undo the damage.
Why is there always a substantial group of people — the lumpencommentariat? — who believe that there’s a limited amount of work to be done, so machines that increase productivity or immigrants entering the work force take away jobs? Many of these people probably haven’t even tried to think their views through. But it’s also true that something like the lump of labor story does make sense if you think about an individual industry in isolation.
For example, long ago one of my uncles operated a factory using plastic injection molding to produce lawn ornaments — basically, he was supplying the then-burgeoning suburbs of New York with pink flamingos. Since there was, presumably, a limited demand for pink flamingos, machines that allowed production of pink flamingos with fewer workers would reduce employment in the industry, while entry of new producers would take away jobs from existing pink-flamingo workers.
Or to take a less whimsical example, there are limits to the amount of food people want to consume, so rising productivity in agriculture leads to reduced need for farmers. America has about twice as many people now as it did when Vonnegut published “Player Piano,” but employs only around a third as many people in agriculture.
But while there’s limited demand for pink flamingos or wheat, there’s no evidence that there’s limited demand for stuff in general. When incomes rise, people will find something to spend their money on, creating new jobs to replace those displaced by technology or newcomers to the work force. Machines do, in fact, perform many tasks that used to require people; output per worker is more than four times what it was when Vonnegut wrote, so we could produce 1952’s level of output with only a quarter as many workers. In fact, however, employment has tripled.
Just to be clear, I’m not saying that technological progress can never hurt workers, or some groups of workers. Technology that makes a traditional occupation largely disappear — for example, the way freight containerization more or less eliminated the need for longshoremen — can be devastating for those displaced. And what’s referred to as biased technological change, which reduces demand for some inputs while increasing it for others, can reduce the real incomes of large groups. Many economists believe that skill-biased technological change, which raises the demand for highly educated workers as an input and decreases it for less skilled labor, has been a factor in rising inequality, although many others, myself included, are skeptical. It’s at least arguable that capital-biased technological change caused real wages to stagnate during the early stages of the Industrial Revolution.
But the crude argument that technological progress causes mass unemployment because workers are no longer needed is just wrong.
What about competition from new workers? If you’re worried about immigrants taking jobs away from native-born Americans, consider the effect of a truly huge influx to the labor market: the mass movement of American women into paid work between the mid-1960s and around 2000. Did working women take jobs away from men? I’m sure many men thought they would. But they didn’t. Here are rates of employment during prime working years, 25 to 54, for men and women over time:
FRED
The big rise in women’s employment didn’t come at men’s expense. True, there has been a small decline in male employment over the past six decades, perhaps reflecting the decline of manufacturing and the emergence of left-behind regions in the heartland. But the millions of women entering the paid work force clearly didn’t displace male workers.
Which brings me to current concerns about immigration. As I noted in my column, Trump and those around him clearly believe that immigrants take jobs away from native-born Americans. And I also noted that all of the increase in employment since the eve of the Covid-19 pandemic has involved foreign-born workers. So did this rise in immigrant employment come at the expense of native-born workers?
When looking at numbers here, it’s important to take into account the effects of an aging population, which has caused a long-term downward trend in labor force participation. So I asked Arindrajit Dube of the University of Massachusetts at Amherst, one of America’s top labor economists — and someone who knows his way around Bureau of Labor Statistics data much better than I do — to calculate employment rates among prime-age native-born Americans. Here’s what he found:
Bureau of Labor Statistics via Arindrajit Dube
Even though immigrants as a group are responsible for all recent employment growth, they haven’t been taking jobs from the native-born, who are more likely to be employed in their prime working years than they were before the pandemic.
By the way, I mentioned earlier that Trump’s protectionism involves the same kind of lump-sum thinking that pervades his views on immigration. Trump and those around him, like Peter Navarro, his top trade adviser — currently facing prison time for contempt of Congress — are obsessed with trade deficits. If you read what they’ve had to say on the subject, it’s clear that they imagine that there’s a fixed amount of demand in the world and that any business that goes to foreigners is business lost to America. It’s lump-sum all the way.
Now, of course I don’t think that this evidence — or, for that matter, any evidence on any subject — will change Trump’s thinking on this or anything else. But there are some people who imagine that they’re being sophisticated and forward-thinking when they’re actually recapitulating old fallacies. No, A.I. and automation, for all the changes they may bring, won’t ultimately take away jobs, and neither will immigrants. Don’t join the lumpencommentariat.
Quick Hits
When I used hot dogs and buns to explain the lump of labor fallacy.
A great old essay by Robert Solow, who recently died.
Don’t blame the robots.
How refugees helped revive my original hometown. (My childhood neighborhood is largely Bosnian these days.)
Facing the Music
YouTube
Nothing to do with the topic, unless the island is facing a wave of immigrants. But those high notes!
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