I've written here once or twice before about the "lump of labour fallacy". Supposedly, most economists think it is wrong to assume that there is demand for a fixed amount of labour in an economy. After all, employed people spend their earnings, and that demand creates more jobs for other people. This reasoning leads the majority of economists to favour immigration and increased female participation in the workforce, and to reject measures like shortening the workweek (as France did a few years ago) as being unlikely to lower the unemployment rate.
The lump of labour fallacy keeps coming to mind when I hear about older workers hanging on to their jobs because they can't afford to retire. If "lump of labour" really is a fallacy, this shouldn't make it harder for young people to get a job. After all, the oldies are earning and spending, right? At the very least, however, it seems to me that the greying of the workforce must change the type of jobs the young can get. If the CFO is planning to hang around until he's 70, there's a knock-on effect right through the finance department; down at the bottom there's no immediate need to take on a new graduate trainee. Instead, that guy or gal winds up at Starbucks, making the CFO's skinny latte each morning*.
That's serious enough in itself. This week, however, Avery Shenfeld at CIBC has put out a short piece arguing that the problem is worse than that. As he puts it, "Why can't your precious Tyler and Chloe find an after school job? Because you're in it." Avery didn't get to be head of CIBC's economics department by parroting fallacies. So maybe, like me, he's wondering whether the "lump of labour" really isn't a fallacy at all.
* The CFO knows you must never drink latte or cappuccino later in the day.
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