The Lump-of-Labor Model

"In France, as in other parts of Western Europe, the reigning explanation for unemployment was what economists call the “lump of labor” theory. The theory holds that a society has only a fixed amount of work that needs to be done, and therefore the only way to reduce unemployment is to share the available work. This was reflected in Mitterrand’s initial program. The government lowered the retirement age to sixty to push older people out of the workforce; this was expected to create openings for youngsters, on the assumption that each employer needed only a certain amount of labor and would replace departing workers one for one. Workers who reached age fifty-five could collect pensions equal to 80 percent of their wages if their employers agreed to replace each retiree with a worker under twenty-five. The regular workweek was cut from forty hours to thirty-nine, and the maximum workweek was reduced as well, in the expectation that employers might cover those hours by adding workers. The possibility that less work for the same pay might deter hiring, or that young workers might lack the skills of the experienced workers they were replacing and therefore have lower productivity, was not widely discussed in the France of 1981."

--Marc Levinson, An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy