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This fallacy is typically invoked against attempts to alleviate unemployment by restricting working hours. In such thinking it is assumed that there is a fixed amount of work to be done and so by reducing the amount that those are already employed are allowed to work then the remaining amount will have to passed off to the unemployed. This policy was adopted by the governments of Herbert Hoover in the United States and Lionel Jospin in France. It remains the law in France, although reform proposals have been floated by Raffarin.
In reality, there are usually substantial administration costs associated with employing more workers, such as recruitment, training and management that would increase average cost per unit of output that would reduce production, and ultimately lower employment.
This fallacy also occurs with variables other than labor. As an example, some critics have suggested that certain arguments justifying American military action in Iraq during the insurgency of 2003- 2004 commit this fallacy [1]. An example of such an argument is implied by the statement: It is better for America to fight the terrorists on the streets of Baghdad than in the streets of New York. According to these critics, this statement implicitly assumes that the number of terrorists will remain constant and will eventually diminish as terrorists are killed off by military action in Iraq.
In 2000, Tom Walker published a critique and historical review of the "lump-of-labour fallacy" claim that showed that the claim itself is incoherent, inconsistent and ultimately spurious. The assertion that policies to reduce working time are based on a belief in a "fixed amount of work" is a straw manA straw man or man of straw is, in its literal sense, a dummy in the shape of a man created by stuffing straw into clothes or some other container. Straw men have been used as scarecrows, combat-training targets, or effigies to be burned. This led to a lo argument. Walker identified in the literature at least three conflicting "explanations" of how advocates of reduced working time supposedly commit the fallacy and noted that the only thing the various explanations have in common is their failure to identify an authoritative source for the fallacy claim.
Walker then traced the origin of the phrase and its application to working time policies to two different late 19th century authors, one of whom, D.F. Schloss, in 1892 disavowed any connection between his fallacy of "the Theory of the Lump of Labour" and the issue of the length of the working day. The other, John Rae, was an advocate of the eight-hour day who just didn't think that job creation was one of its benefits. Rae's 1894 argument about advocates basing their expectations of job creation on a fixed amount of work was carefully refuted by Charles Beardsley in 1895.
The establishment of the lump-of-labour fallacy claim as a mainstay of economics teaching would appear to have had nothing to do with its status as a bona fide economic principle and very much to do with its wide dissemination as a talking point of employers' organizations who opposed the eight-hour day in the early 20th century. Principal among these was the National Association of Manufacturers in the U.S., under the leadership of David M. Parry.
The view that the "substantial administrative costs" of employing more workers underlies the alleged fallacy's fallaciousness is a latter-day graft onto the claim, following Walter Oi's analysis of quasi-fixed costs in the early 1960s. As with John Rae's original complaint, the more recent argument only applies ceteris paribusCeteris paribus is a Latin phrase, literally translated as "other things the same," and usually rendered in English as "all other things being equal. A prediction, or a statement about causal or logical connections between two states of affairs, is qualif, which is ironic because the shorter work time advocate's alleged assumption of a fixed amount of work only comes into play in a situation where the economist has already specified a fixed amount of everything else but administrative costs.