Overtime, rooted in the LOL fallacy

If you can stomach a brazenly left-biased economics news article from the Washington Post, check out this coverage of the overtime trial balloon that the White House is floating:

White House officials declined to describe the proposal in detail, suggesting only that they were contemplating a change in the salary threshold that determines whether an employee receives overtime pay for working more than 40 hours a week.

These authors tend to describe liberal points as things “economists” say, but that counter arguments are things “critics” say.  Nice skew!  Examples: “[E]conomists say federal rules … have failed to keep pace with the growing cost of goods and services” and “Economists argue that the declining value of the minimum wage has also contributed to lagging wages.” Um, no they don’t.  Liberal economists might make those arguments, but the majority don’t say such things.

Fact is that this overtime effort is deeply flawed according to mainstream economics. It is based in a theory of human labor as a muscle commodity, which was relevant in, economists say, 1861.  This notion that raising the overtime threshold will create jobs is so wrong that it has a nickname among economists.  It’s called the “Lump of Labor Fallacy” and even has a Wikipedia entry. Look it up! and for that matter, LOL also has a 2003 essay in the New York Times dedicated to trashing partisans who advocated restricting work hours as a policy to boost employment:

Economists call it the ”lump of labor fallacy.” It’s the idea that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs. (A famous example: those dire warnings in the 1950’s that automation would lead to mass unemployment.) As the derisive name suggests, it’s an idea economists view with contempt, yet the fallacy makes a comeback whenever the economy is sluggish.

Say who?  Yeah, um, that was Paul Krugman.



One response to “Overtime, rooted in the LOL fallacy

  1. originalsandwichman

    It “…even has a Wikipedia entry…” Gosh, a Wikipedia entry! That must be way more authoritative than a peer-reviewed economics journal article — you think?

    “Why economists dislike a lump of labor.” Tom Walker, Review of Social Economy, 2007, vol. 65, issue 3, pages 279-291

    Abstract: The lump-of-labor fallacy has been called one of the “best known fallacies in economics.” It is widely cited in disparagement of policies for reducing the standard hours of work, yet the authenticity of the fallacy claim is questionable, and explanations of it are inconsistent and contradictory. This article discusses recent occurrences of the fallacy claim and investigates anomalies in the claim and its history. S.J. Chapman’s coherent and formerly highly regarded theory of the hours of labor is reviewed, and it is shown how that theory could lend credence to the job-creating potentiality of shorter working time policies. It concludes that substituting a dubious fallacy claim for an authentic economic theory may have obstructed fruitful dialogue about working time and the appropriate policies for regulating it.

    By the way, that Krugman article you cite isn’t primarily about “trashing partisans who advocated restricting work hours.” It was mainly a swipe at people finding excuses for the Bush administration’s dismal job creation record. Read the article! And see also my detailed reply to Krugman’s lump of labor fallacy claim: http://ecologicalheadstand.blogspot.ca/2011/05/open-letter-to-paul-krugman.html

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