21.10.16

Older Workers and the Lump of Labour Fallacy

For years, whenever I have talked about the need for policies to support older workers, I have been tossed the question: “Doesn’t supporting older people in work do younger people out of a job?”  At a time when the unemployment of younger people has been high on the policy agenda, this has seemed a relevant question to any thinking person in the street, not to mention the journalist or interviewer keen to provoke a decent discussion out of a self-evidently worthy cause.

My riposte to what I have sometimes arrogantly described as an “economically illiterate question”, has generally gone along the lines of: “Well, economies don’t really work like that.  The hidden hand of the price mechanism and the market directs people to do the work that is needed, thus providing them with an income and, in the process, generates more demand, increasing market activity and in due course fuels opportunities for workers doing different jobs, including younger people.”

In other words, what goes around, comes around and if I manage to stay in a job or get a new one at 60 or 70 plus, this can only benefit the life chances of our neighbour’s children.  The idea that there is a fixed quantum of jobs (or a ‘lump of labour’) available to be done in any society is therefore fallacious.  Labour economists talk easily of the ‘lump of labour fallacy’, and soothe the stirring of uneasy consciences as youth unemployment rises through the roof.

There is good evidence to show that the notion of a fixed lump of labour is indeed fallacious (see Mark Keese’s presentation for example) but there has been too little drawing back to pose the question: “Could there not in some circumstances be at least some lumpiness in the labour market?”

In other words, might we, without jettisoning economic theory completely, accept that the sharp elbows of older and capable older returners could be doing the young a disservice?

For example, does an older person doing a lower status, less well paid role or working part time to help eke out his or her pension, in some unknowing way add to the inequity of a society in which the young struggle quite unlike oldies of the “gilded generation”?

Lord David Willetts this week developed some of his well known arguments about intergenerational unfairness, citing the example of the bus pass, which provides subsidised transport to the older person in a low paid job and tilting the playing field unfavourably for the younger person who might be interested in a similar role.

This is a tricky question.  We can all probably think of examples where it might be true that a particular job being done by an older person could be done by someone younger, though equally we can cite cases where it is nonsense to suggest that an older person could be doing a younger citizen out of work.

On the whole, ‘fallacy’ seems an apt description of the idea that we should step down from our jobs on reaching ‘retirement age’, simply to make way for the younger person needing a chance.

But the issues are more complicated than that, as we discovered in a seminar held this week at the London School of Economics.  Given the limitations of space, I can offer little better than commend our speakers’ visual presentations to you, but there is surely room for more discussion.

My fallible synthesis of an impossibly broad range of issues would go something like this:

On the whole, in aggregate, economists are right to talk of a ‘lump of labour fallacy’ and older workers or jobseekers should not be guilt-tripped into giving up their jobs to make way for the young.

On the other hand, public policies should be designed to create a more level playing field between younger workers and older workers.  Better encouragement is needed for older workers to move into different roles, change careers, re-train and combine work or volunteering with other things in life, including caring for grandchildren, and sick or less able relatives.

If all this seems obvious and straightforward - well maybe it is.  But if we invoke a mantra, in the guise of a theory, wrapped up in an over-simplification, which the much vaunted ‘lump of labour fallacy’, has somehow become, somehow we can deny manifest unfairness in our existing arrangements.

If older workers were doing their grand-children out of jobs by simply being workers, this surely would add pangs of guilt to the many barriers we know the older, unemployed person already has to face in the labour market.

On the other hand, we do both them and their grandchildren a disservice if we imagine that the pool of starter jobs demanding few skills is so deep we can never scrape the bottom.  Policies which reflect changing generational challenges as well as needs, interests and capabilities must be part of any sensible, pragmatic, humane approach to working and ageing throughout the life course.

The Colloquium on Older Workers and the Lump of Labour Fallacy was held on 18 October 2016 at the London School of Economics.  Speakers were Lord Willetts, Executive Chairman of the Resolution Foundation and Visiting Professor at Kings College London and Cabinet Minister in the Coalition Government to 2015; Mark Keese, Head of the Employment Analysis and Policy Division in the Directorate for Employment, Labour and Social Affairs at the OECD; Robert Anderson, Head of the Living Conditions and Quality of Life Research Unit, the European Foundation for the Improvement of Living and Working Conditions; and Jacques Wels, who is based in the Centre METICES at the Université libre de Bruxelles, and at the University of Cambridge.  Sarah Vickerstaff, Professor of Work and Employment at the University of Kent’s School of Social Policy, Sociology and Social Research was our discussant.

See Resources for copies of the presentations.

Contact: Chris.Ball@shaw-trust.org.uk T

Twitter: @taen_uk  @Shaw-trust  @crystal_balls