lump of labour
Lump of Labor
lump of labourthe proposition that there is only so much work to be done in the economy, so if fewer people are needed to produce any given output UNEMPLOYMENT must rise. It follows that labour-saving technological change will inevitably lead to higher unemployment. The proposition is fallacious for the following reasons:
- it assumes that the economy is already producing all the products society could possibly want, making no allowance for the fact that labour displaced in one area of the economy can now be redeployed to produce more goods and services elsewhere in the economy;
- technological advance creates its own demand - it leads to higher PRODUCTIVITY and the payment of higher wages, thereby increasing purchasing power in the economy, which in turn generates more output and employment.