Comment: The great immigration menace - another ‘lump of labour’ fallacy tale

Office workers in Brisbane. Source: AAP

Immigrants do not threaten our jobs — on the contrary, they create new possibilities and demand in our economy.

The ongoing wrangle about immigrants ‘taking jobs from Australian workers’ is a good example of poor public policy debate oblivious to basic proper economic thinking. Or worse, a public debate hijacked by vested interests using fear to benefit from a misinformed public opinion. 

For instance, the Australian Council of Trade Unions urges reducing the number of working visas (in particular 457 visas) to “allow more opportunity for young Australians to enter the workforce”. The same lobby group has also criticised the recently signed China-Australia Free Trade Agreement on the same false grounds. 

Immigrants do not threaten our jobs — on the contrary, they create new possibilities and demand in our economy. 

The misconception that the more workers there are, the less work there is for everyone, has fuelled protectionist —even xenophobic — stances for as far back as the nineteenth century. It relies on the zero-sum assumption that there is a fixed amount of work to be done, and therefore someone’s job gain necessarily means someone else’s job loss. 

In economics, the discredited myth of a fixed amount of work is dubbed the ‘lump of labour’ fallacy, and ignores the intricate dynamics of growth and job creation. 

The same nonsensical rationale has been used on all sorts of wrong predictions — for instance, about a future where technology would do all the required work and therefore not much work would be left for humans to do. Even Keynes posited this fallacy stating in 1930 that “three-hour shifts or a fifteen-hour week” in a highly technological future would be the norm. 

Yet the reality is just the opposite, with technology opening up opportunities for around-the-clock business while increasing productivity levels. 

There are many other examples where the much-vaunted ‘lump of labour’ belief has been proven incorrect. For instance, the French government introduced the 35-hour working week in 2000 in a botched attempt to reduce unemployment. As we saw, the opposite occurred as the measure increased labour costs. 

Another example is the support for early retirement to tackle youth unemployment. Such a policy has been vehemently rejected by the OECD, which presents solid data countering the fanciful notion that fewer workers means more jobs for the unemployed. 

Indeed, the share of youth in the working-age population in developed countries has consistently decreased in the last 40 years, without alleviating the youth unemployment plight. 

The persistence of the ‘lump of labour’ fallacy is that, although flawed, it is opportunistically brandished in populist discourse. In Australia, much of the argument has been used against immigration — despite data supporting that immigrants net contribute to Australia’s economy

Australia should not be lured into the seductive and inconsistent ‘lump of labour’ argument when discussing our immigration policy. With the Productivity Commission set to produce a review on migrant intake into Australia, the debate should focus on how to improve — and indeed deepen — our commitment to immigration, which has served us so well. 

Contrary to the ‘lump of labour’ fallacy, each immigrant contributing to the economy does not translate into an Australian out of the labour market. Data shows that the periods with the highest intake of migrants are usually coupled with the lowest rates of unemployment. In fact, the uninterrupted economic growth of the last 24 years largely relies on the hardworking ethos of a vibrant and diverse pool of immigrants. 

To the benefit of Australia — and Australians — we should remain open to a productive and economically rewarding skilled pool of migrants. 

Dr Patrick Carvalho is a Research Fellow at the Centre for Independent Studies.

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