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LABOR
You Don’t Have a Clue about the Labor Market
3 things you probably get wrong
Most people think they know what they are talking about, but they don’t. Unfortunately, even most politicians and powerful people that can affect things don’t really know how the labor market works.
Wanna know how Italy set its minimum wage level? Some politician said that 9€/hour “seemed right.” Did he provide any numerical reasoning? Any empirical data on how that number would affect the market? Nah, but it seemed right.
To make some things clear, here are three of the most common misconceptions about the labor market:
There is a fixed number of jobs
No, there isn’t. This idea, known as the “lump of labor fallacy,” assumes that there is a fixed amount of work to be done in the economy, so creating new jobs inevitably means taking jobs away from others. This, however, does not consider the fact that factors like changes in wages, productivity, costs and technology all influence the demand for labor.
For example, if working hours are reduced by government legislation, firms may need to hire more workers to maintain their output, potentially leading to job creation rather than job displacement. If wages or production costs are too high…
