## Definition The **fallacy of make-work** (also: the *lump of labour fallacy*, or *saved-jobs fallacy*) is the belief that employment is a fixed quantity such that creating or preserving jobs in one place produces a net gain in welfare — regardless of whether those jobs produce value. Hazlitt argues that this confuses the *means* of economic life (employment) with its *end* (production and consumption), and that policies designed to maximise job-count rather than output systematically reduce the wealth of a society. ## Two Forms of the Fallacy ### 1. Resisting Labour-Saving Technology The intuitive fear is that machines destroy jobs. Hazlitt's counter, illustrated historically: - The U.S. automobile industry employed 140,000 workers in 1910; 380,000 in 1930; 830,000 in 2018 — all while becoming vastly more mechanised. - Machinery does not create unemployment in aggregate; it displaces workers from lower-productivity tasks and releases them (and capital) for higher-productivity tasks. - The three channels of job creation from mechanisation: (a) workers needed to build and maintain machines; (b) profits reinvested or spent in other sectors; (c) lower product prices leave consumers with more purchasing power for other goods and services. The *transition* is genuinely costly for displaced workers who lack transferable skills. Hazlitt acknowledges this while insisting it is a distributional problem, not a net-output problem. ### 2. Subsidising Failing Industries to Preserve Employment Governments frequently prop up uncompetitive industries with tariffs, subsidies, or price supports, justifying the cost by counting the visible jobs saved. Hazlitt's analysis: - The subsidy must be financed by taxes. The tax revenue was previously available to consumers and competing firms. - Consumers who pay the tax have less to spend on goods from productive industries — jobs are destroyed there, invisibly. - Capital and labour locked in the failing industry are unavailable for industries with genuine competitive advantage. - The net effect is lower total output: resources are directed toward activities where they produce less value, and away from activities where they produce more. Example from Hazlitt: government support for the Spanish automotive sector (he uses a contemporary analogue). The saved factory jobs are front-page news; the uncreated jobs in more productive sectors are never reported. ## The Correct Objective Hazlitt argues the goal of economic policy should be *maximum production*, not maximum employment. Full employment is easy to achieve: primitive economies have no unemployment because everyone must work constantly just to subsist. The achievement of advanced economies is that they can produce more output with less labour — freeing time, reducing toil, and raising living standards. From the book: > "All economic progress consists in getting more production with the same labor." ## Epistemic Caveat Hazlitt writes from an Austrian/classical-liberal perspective. Keynesian economics emphasises that in conditions of insufficient aggregate demand, idle labour is genuinely wasted and policies that put it to work — even imperfectly — can raise net output. The make-work fallacy is clearest when the economy is near full employment; it is most contested in deep recessions. The long-run analysis (technology and trade raise total output even when they destroy specific jobs) is broadly accepted across schools. ## Related - [[The One Lesson (Seen and Unseen)]] - [[The Broken Window Fallacy]] - [[Opportunity Cost]] - [[Effects of Price Controls]] ## Sources - [[Economics in One Lesson (Hazlitt 1946)]]