THE THEORY AND MEASUREMENT OF LABOUR HOARDING
| Published date | 01 February 1978 |
| Date | 01 February 1978 |
| Author | Derek Leslie,Clive Laing |
| DOI | http://doi.org/10.1111/j.1467-9485.1978.tb01184.x |
Scottish Journal
of
Political Economy,
Vol.
25,
No.
1,
February 1978
THE THEORY AND MEASUREMENT
OF
LABOUR HOARDING
DEREK
LESLIE
AND
CLIVE
LAING*
University
of
Manchwter
Kuh (1965) has observed that, “Cyclical variations in manufacturing labour
productivity are not mirages attributable to weight shifts but are genuine
dynamic phenomena embedded in the labour market structure”. The
embedded dynamic phenomenon that Kuh has in mind is the following,
“The basic reason is that a significant component of the labour force acts
as a buffer stock. Suppose a steep increase in output occurs where equilibrium
input-output relations had previously existed. A relatively large increase in
output can occur with a comparatively small increment in the labour force
as the ‘buffer stock’ of labour is drawn down, but as time progresses, the
buffer stock will be gradually rebuilt until an equilibrium stock of labour is
again restored. An entrepreneur clearly has the choice of stockpiling inventory
and/or labour since qualified labour on hand provides lead time over unhired
labour in a labour market just as finished inventory has a lead over ‘on-tap’
labour.”
What Kuh
is,
of course, suggesting as an explanation of the procyclical
nature of labour productivity (measured either as output per man or output
per manhour) is a labour hoarding phenomenon. Whilst in theory it is
possible to give a plausible justification for labour hoarding, in practice the
measurement of actual quantities of hoarded labour at any one time and in
any particular industry proves to be a much more elusive exercise. The aim
of the present paper is to help systematise our thinking of the causes of
labour hoarding and, as a secondary aim, to discuss the very real problems of
obtaining a satisfactory measure of hoarded labour.
Perhaps the best known work in this area, in an attempt
to
rehabilitate
the Phillips curve and also to offer an alternative explanation
of
the post ’67
“boom” in unemployment, is associated with Taylor (1972, 1974). He
attempts, in a fairly
ad
hoc
way, to give a theoretical justification for labour
hoarding, but more importantly, an empirical measure of labour hoarding
from 1952 for the broad industry categories denoted by the SIC (sixteen
categories in all). The first section
of
this paper examines critically both
Taylor’s theory and method
of
estimating his labour hoarding series. Now,
whilst we are somewhat harsh on Taylor and believe that his theory and
*
We acknowledge financial support from the SSRC. We thank
Dr
J.
Taylor of Lancaster
University for providing us with up-dated labour hoarding estimates
for
the
U.K.
We also
acknowledge helpful advice from an anonymous referee.
All
errors, etc., remain our own.
Received in final form:
20
October 1977.
-
41
42
D.
LESLIE
AND
C.
LAING
measure of labour hoarding are unsatisfactory, we must state at the outset
our sympathy for what Taylor is trying to do. His major aim, in view of its
importance, is to find a measure of labour hoarding, and obviously no matter
what measure is chosen it is bound to have at least some limitations.
Theoreticians should remember that empirical economics is by far the more
difficult! In criticising Taylor we do not suggest or present an alternative
measure ourselves and for this reason we ourselves may be criticised for
engaging in an essentially negative and destructive exercise. Nevertheless,
in view
of
the widespread use made of Taylor’s data, we believe it to be
a
useful exercise.
The second part of the paper, divided into four sections,
is
a general survey
of the theory of labour hoarding. The first three sections consider labour
hoarding under conditions of certainty, i.e., the firm knows
a
priori
the values
of all relevant parameters in its decision making process. Labour hoarding
is usually justified as a disequilibrium adjustment phenomenon where the
firm is moving from one known level of output to another and is therefore
considered to be
transitory
in the sense that if the new level of output is
sustained for a long period any hoarded labour that is observed will eventually
disappear. This case we examine in the third section of the paper and we
show how this problem can be treated, at a formal level at least, analogously
with “costs of adjustment” models associated with the neoclassical resurgence
of capital theory. (See in particular Jorgenson
(1963),
Brechling (1975) and
Gould
(1968).)
In the first two sections, labour hoarding is a feature of the
steady state and thus labour hoarding in these cases is not transitory in
nature. In these first two explanations, unlike the third, we need not neces-
sarily invoke increasing marginal costs of adjustment as
a
necessary con-
dition for the observance of labour hoarding. The final section of the paper
considers labour hoarding under conditions of uncertainty.
I
TAYLOR’S MEASURE
AND
THEORY
OF
LABOUR HOARDING
The Taylor method of measuring the amount of hoarded labour is fairly
straightforward and is to ascribe as labour hoarding all short-run variations
in labour productivity.
A
time series of labour productivity (output per man)
is drawn which typically shows a secular upward trend but also strong cyclical
variations. Maximum obtainable productivity is derived by interpolating
peaks in the productivity series, in the usual Wharton School way, and the
percentage
of
hoarded labour is then defined as
where
Q/L
is actual labour productivity and
(Q/J~)~
is the inaximum obtain-
able productivity. The question arises what is the relationship between this
measure and actual labour hoarding? It is our view that the relationship is at
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