Specialisation and the Division of Labour: More Output from the Same Resources
Definition
Specialisation: when a worker, firm, region or country concentrates on producing a narrow range of tasks or goods.
Division of labour: the breaking down of a production process into separate tasks, with each worker specialising in one task.
- Specialisation and the division of labour go together: splitting production into separate tasks lets each worker concentrate on the job they do best.
- It happens at every level: workers within a firm, firms within an industry, and countries within the world economy.
- Adam Smith showed that dividing labour this way can sharply raise productivity, the output per worker in a period.
Note
- Productivity is output per unit of input, usually per worker per hour.
- Dividing labour raises productivity, which lowers unit costs and raises total output.
Why Specialisation Raises Productivity
- Skill and practice
- Workers get faster and better at a task they repeat.
- Less time switching
- No time is lost moving between different jobs.
- Use of machinery
- Narrow tasks are easier to mechanise, raising output further.
Example
- In Adam Smith's pin factory, one worker performing every task alone might make fewer than 20 pins a day.
- Splitting the work across 10 specialised workers raised output to around 48,000 pins a day, about 4,800 each, a dramatic productivity gain from the same 10 people.
- The same idea underlies the modern assembly line, from car plants to fast-food kitchens.
Specialisation Also Brings Costs and Risks
- Repetitive tasks can cause boredom and lower motivation, which may reduce quality.
- Highly specialised workers face structural unemployment if demand for their skill disappears.
- Over-dependence on narrow tasks makes firms and economies vulnerable to disruption.
Evaluation: Do the Gains Outweigh the Costs?
- For firms, the productivity and cost gains are usually large, which is why the division of labour is so widespread.
- But the gains depend on motivation, since a bored workforce can offset them with lower quality.
- The risks rise the more narrowly workers specialise, so there is a balance to strike.
- On balance, specialisation is powerful but works best alongside training and some job variety.
Exchange: Why Specialisation Needs Money
- Once workers specialise, they no longer produce everything they need, so they must exchange their output with others.
- Barter requires a double coincidence of wants, which makes exchange slow and costly.
- Money acts as a medium of exchange, so trade becomes quick and efficient and specialisation can spread.
Note
- Specialisation makes an efficient means of exchange necessary, which is why money replaces barter.
- Without a common medium of exchange, swapping specialised output would be slow and costly.
Weigh Both Sides for Each Group
Exam technique
- Define productivity precisely and link specialisation to lower unit costs.
- Balance the gains against demotivation and structural unemployment.
- Consider the effect on workers, firms and the economy separately.
Common Mistake
- Do not treat specialisation as having only benefits.
- It also brings boredom, a risk of structural unemployment and over-dependence.
- Do not confuse productivity with production.
- Productivity is output per worker, while production is total output.
Self review
- Define specialisation and the division of labour.
- What is productivity?
- Give two reasons the division of labour raises productivity.
- Give two drawbacks of specialisation.
- Why does specialisation require money as a medium of exchange?
