Lump of Labor Fallacy and Immigration

The lump of labor fallacy is the idea that there is a fixed amount of work to be done and so population growth (or larger workforce participation by women, immigrants, or the elderly) reduces jobs and increases unemployment for working-age men.  That was approximately true during Malthusian times when almost everyone was a farmer.  There was only a limited amount of work that could possibly be done on a farm to produce food.  But the economy today is completely different.  Moneybox reports:

Workforce participation among older Americans has gone up since the 1990s due to diminished wealth and perhaps some demographical factors, and some people see it as something that "squeezes" younger workers out of jobs. But Suzy Khimm writes that a study from the Center for Retirement Research shows the opposite and "the evidence suggests that greater employment of older persons leads to better outcomes for the young in the form of reduced unemployment, increased employment and a higher wage."

This is is important because it intersects with two other issues that are a much bigger deal in terms of scale—formal legal curbs on international immigration and informal curbs on domestic migration via anti-density policies. Part of why people misunderstand the policy issues in those areas is that they have this same suspicion that more workers competing for a fixed pool of jobs will hurt the incumbents. But while there are certainly specific scenarios you can devise in which that's the case, the general case is the opposite. If more people come somewhere wanting to work—or more of the people who are already there decide they want to work—that has a positive impact on the other people around.

To see why, start with a time when things were different. During the Black Death, wages rose as population fell because the key input to the medieval economy was arable land. When the population is dense, all the returns go to the entrenched landowners and normal people need to live on a subsistence diet of grain. But eliminate a huge share of the population and suddenly there's plenty of land available for grazing animals and everyone gets to eat meat and cheese and butter along with their bread. Hooray!

But a modern, advanced economy is mostly made up of people. People are the key customers for the services that the majority of us produce for a living. And we produce things in teams that are composed of diverse clusters of labor. Slate has writers and copy editors and developers and art people and sales people, and we can only scale so far in any given direction without scaling across the board. A scarcity of qualified developers or skilled ad sales reps could stop us from being able to hire more writers. An ambitious sous chef might get hired as a head chef at a new restaurant but only if there are waiters and busboys to hire to staff the rest of the place. More workers means more dry cleaning gets done, and more people in town means more customers who prefer your particular approach to styling hair. Doctors are more productive when there's an ample supply of good nurses and health care technicians, and the arrival of more doctors means a greater demand for the skills of everyone else in the health care value chain. You lose out as a worker when more people with your exact skill profile show up. (Higher flows of Latin American immigration, for example, appear to depress the wages of a metro area's existing stock of Latin American immigrants.) But you win when people with different skill profiles arrive in the workforce.

And since people who are different from you outnumber the people who are the same, more people means more opportunities.