[sheefrex]

That train of thought is known as the lump of labour fallacy.

What you propose would reduce output; if it was optimal for firms to hire the unemployed, in place of those already employed, then they would do so - unless they are prevented from doing so by labour legislation, which doesn't seem to be the case the U.S.

That the unemployed are not hired might make sense when there are costs to hiring and training a new worker, which don't exist for a worker already in place. On an aggregate level, this policy would increase the cost of labour, and consequently reduce its demand, so less overall would be employed (though the rate of employment would probably stay about constant because you reduced the denominator by reducing the labour force).

Probably a better explanation here: http://www.economist.com/economics-a-to-z/l#node-21529454

[readme]

That's a great point, but it's only a definition. Being a definition in an economics text (in this case, just a website) doesn't make it automatically correct. It needs to be proven by research.

[eli_gottlieb]

"In theory, theory and practice are identical. In practice, they're not."

A fair portion of the Western world's underemployment and unemployment problem derives directly from the overemployment of those who have the jobs. As people keep putting it, "Whatever happened to the 40-hour workweek?"

For example, among those sedentary professionals who can keep working for decades upon decades, most in the United States are classified as Fair Labor Standards Act exempt, and are therefore often made to work overtime. Health insurance is a fixed cost that needs to be driven down both through socializing medicine and, preferably, through requiring per-hour National Insurance taxes, but only the latter action would actually change the fact that firms find it cheaper to hire two professionals working 60 hours/week each than to hire three professionals for normal 40-hour workweeks.

And, here's the trick, neither of those two professionals actually receives overtime pay. The company is literally getting a 1/3 boost to their productivity-per-employee solely by using a legal loophole to not pay for all hours worked. This is not the lump-of-labor fallacy, it's straightforward exploitation.

To paraphrase many Hacker News-targeted blogposts, "Fuck companies, pay workers."

[raintrees]

Thanks, I like the quote re: theory and practice and will swipe it for my own re-use...

Attribution?

[dragonwriter]

> What you propose would reduce output; if it was optimal for firms to hire the unemployed, in place of those already employed, then they would do so - unless they are prevented from doing so by labour legislation, which doesn't seem to be the case the U.S.

Payroll taxes definitely do work in that way (not as an outright barrier, but by acting as a market distortion which encourages investing in expanding production through expanding capital rather than doing so by expanding employment rolls when, before considering payroll tax costs, it would be equally or more efficient to expand production by expanding employment.)