Division of labour, labour mobility and productivity

Last time

Before we start: last time, in Households, you learned these points. Here they are again on one card. Keep them in mind, because today builds on them.

One worker, one task

In a car factory, no one builds a whole car. One worker fits doors, another fits wheels, another paints. Splitting production into tasks like this is called the division of labour, and it is one of the main reasons modern economies are so productive.

Division of labour

Division of labour means splitting the production of a product into separate tasks, with each worker specialising in one task. Specialisation also happens between firms, regions and countries. A region may specialise in textiles, a country in rice. It works because a worker who repeats one task becomes quick and skilled at it.

Advantages of division of labour

Productivity rises: more output per worker, because workers become skilled and do not waste time switching tasks. Machines can be used for each task, and training is quicker, because each worker learns only one job. So average costs fall, and the firm can charge lower prices and be more competitive.

Disadvantages of division of labour

Repeating one task is boring, so motivation and quality may fall, and absence may rise. Each stage depends on the others. If one stage stops, the whole line stops. And workers with one narrow skill may find it hard to get another job if theirs disappears.

Mobility of labour

Occupational mobility is the ease with which a worker can change from one job to another, such as a farm worker becoming a builder. Geographical mobility is the ease with which a worker can move from one area to another to work, such as from a village to Lahore. High mobility helps the economy, because workers move from declining industries to growing ones.

What limits mobility

Occupational: lack of skills or qualifications for the new job, and the cost and time of retraining. Geographical: high housing costs in the new area, family ties, children's schools, and lack of information about jobs. A rise in a worker's income can increase both: they can afford to retrain, and to move house.

Demand for factors

Firms do not want workers or machines for their own sake. They want them to make products. So demand for factors is a derived demand. Demand for a factor rises when demand for the product rises, when the factor becomes more productive, or when it becomes cheaper. It also depends on the price of other factors. If machines become cheaper, firms may use more machines and fewer workers.

Labour- and capital-intensive

Labour-intensive production uses a high proportion of labour compared with capital, such as hand-made carpets, hairdressing or tea picking. Capital-intensive production uses a high proportion of capital, such as car making, oil refining and chemical plants. Firms choose the method that gives the lowest average cost for the quality they need.

Why choose labour-intensive?

Labour may be cheap and plentiful, as in many developing economies, while capital is expensive. The product may need a personal service or hand skill that machines cannot provide, such as tailoring or tourism. The firm may produce on a small scale, where expensive machines would not be fully used.

Production and productivity

Production is the total output of goods and services. Productivity is output per worker, or per hour, a measure of efficiency. Ten workers make 200 shirts a day: productivity is 20 shirts per worker. After training, they make 240: productivity is 24, a rise of 20 per cent. Production can rise just by hiring more workers. Productivity rises only if each worker produces more.

Raising productivity

Causes: education and training, better machines and technology, division of labour, better management and motivation. Effects for firms: lower average cost, higher profit and more competitive prices. Effects for workers and the economy: higher wages, and faster economic growth. But training has a cost, and trained workers may leave.

Mistakes that lose marks

Mistake one: confusing production with productivity. Productivity is output per worker. Mistake two: giving only advantages of division of labour when a question asks you to discuss it. Mistake three: mixing up occupational and geographical mobility. The fix: define the term first, then explain, then give both sides.

The full-marks tip

The full-marks tip: define productivity as output per worker, and show the calculation when numbers are given. For mobility, say which kind, then the barrier or the help.

On one card

So, on one card: labour and productivity. Keep it for revision.