The lump of labor fallacy
By Scott Sumner
Andy Puzder was one of the few Trump appointees that I sort of liked (I say “sort of”, because even he had ethical issues.) He was pro-immigration and anti-minimum wage. But in the end even many conservatives opposed him so he withdrew his name from consideration for Labor Secretary.
Reihan Salam was one of the conservative opponents of Andy Puzder:
Puzder has also been an influential critic of minimum-wage hikes and overtime regulations, warning that such measures would force employers to replace low-wage workers with machines. He seems animated by the Luddite conviction that productivity-boosting automation is necessarily a bad thing, despite the fact that rising productivity levels are essential to wage growth.
This has things exactly backwards. People who subscribe to the lump of labor fallacy (there are a fixed number of jobs) are exactly the people who favor these four bad public policies:
1. Restrictions on automation
2. Higher minimum wage rates
4. Lower levels of immigration
People suffering from this fallacy think there are a fixed number of jobs, which allows the government to arbitrarily raise the minimum wage without hurting employment. This view also suggests that there is only so much to be produced, and if more is produced overseas, or by immigrants, or by robots, then less will be produced by American born workers.
In the past, commenters have objected when I claim that deporting illegals would devastate the California fruit and vegetable industry. They insist that someone will do the work, that high quality farmland won’t lie fallow. That’s missing the point:
Some farm jobs, like tomato picking, could be automated fairly easily in the 1960s. And ending the bracero scheme seems to have accelerated mechanisation in the tomato fields of California. Much the same happened with cotton and sugar beet. Other crops, like lettuces and asparagus, still required human pickers. Production of some such crops simply declined.
. . . In California, America’s most important farming state, politicians have ensured that workers will receive at least $15 an hour by 2023. And Manuel Cunha, a citrus grower who is president of the Nisei Farmers’ League, complains about other costly reforms, such as mandatory overtime pay for people who work more than eight hours a day.
In response, he says, farmers are moving from crops that require careful handling, like apricots–“just look at an apricot and it will turn brown”–to crops that can be harvested by machine. Almond trees are spreading across California. In spring the fields are white with their blossom. In September great machines shake the nuts to the ground and sweep them up.
There’s simply no way that California fruit and vegetable producers could pay enough money to attract America workers. They’d go out of business, and their output would be replaced by imports. Instead they’d switch to crops that do not require significant farm labor. Thus deporting illegals will not create new jobs for American workers.
A dramatically higher minimum wage will make America more like southern Europe. Today, Hispanic Americans are employed at a fairly high rate. Do we want to make our labor market more like France, where large numbers of Arab immigrants are unemployed, and often resentful of the country they live in?
The same article also reported:
Michael Clemens and Hannah Postel of the Centre for Global Development, and Ethan Lewis of Dartmouth College, have used archived records of American agricultural jobs and wages to test whether Kennedy was right. Did ending the bracero scheme in 1964 in fact lead to higher wages and more work for Americans in the fields?
The answer is a firm no. In states where farmers had relied heavily on foreign labour–a group that includes California and Texas–American natives found a few more farm jobs in the mid 1960s. But the rise was small and temporary; within a few years the long decline in agricultural jobs had resumed. And the trend was almost identical in states where there had been no braceros. Similarly, farm wages rose in states where there had been lots of migrant workers, states where there had been few migrant workers and states where there had been almost none (see chart). Ending the bracero scheme seems to have affected American workers not a bit.