specialisation & the division of labour
TRANSCRIPT
What is Specialisa/on?
• Specialisa/on is when we concentrate on a product or task • Specialisa3on happens at all levels of economic ac3vity:
1. Specializa3on of tasks within extended families in many of the world’s poorest countries
2. Within businesses and organiza3ons e.g. in mass-‐manufacturing of vehicles or in the building industry
3. In a country – Bangladesh is a major producer and exporter of tex3les; the USA is a leading shale oil and gas supplier. And Ghana is one of the biggest producers of cocoa in the world.
4. In a region of a country – for many years the West Midlands has been a centre for motor car assembly, there has been huge investment in recent years in the Mini plant at Oxford. Specialisa3on in locali3es / regions can lead to the benefits of agglomera/on
The Division of Labour
• The division of labour occurs where produc3on is broken down into many separate tasks.
• Division of labour can raise output per person as people become proficient through constant repe33on of a task
• This is called “learning by doing”. • This gain in produc3vity helps to
lower the supply cost per unit • Reduced supply costs in theory
lead to lower prices for consumers of goods and services causing gains in economic welfare
Specialisa3on of task in the produc3on process……………
Can lead to higher output per person / per hour worked
Some of the Key Advantages from Specialisa/on
Higher labour produc3vity and business profits • Learning by doing increases output per hour worked • Higher produc3vity lowers the unit cost of supply • Increased produc3vity leads to higher profits for businesses
Specialisa3on creates surplus output that can then be traded interna3onally • The theory of compara3ve advantage is key to this • Businesses / countries specialize in areas of rela3ve advantage
Lower prices, higher real incomes an GDP growth • Lower prices gives consumers greater real purchasing power • Higher produc3vity allows businesses to pay increases wages • Successful specializa3on is one of the key causes of growth
Disadvantages of Specialisa/on and Division of Labour
1. Unrewarding, repe33ve work that requires li^le skill can lower mo/va/on and eventually causes lower produc/vity.
2. Workers may take less pride in their work and quality suffers. 3. Dissa3sfied workers become less punctual at work and the rate
of absenteeism increases. 4. Many people may choose to move to less boring jobs crea3ng a
problem of high worker turnover for businesses. The highest labour turnover is in retailing, hotels, catering and leisure, call centres and other lower-‐paid private sector services groups.
5. Some workers receive li^le training and may not be able to find alterna3ve jobs if they find themselves out of work -‐ they may then suffer structural unemployment / occupa/onal immobility
6. Mass-‐produced standardized goods lack variety for consumers.
Short Run and Long Run in Economics
Short Run • At least one factor input is fixed
Long Run • All factors of produc3on are variable
Factors of Produc/on (Factor Inputs)
Factors of produc3on are the inputs available to supply goods and services in an economy.
Land Labour
Enterprise Capital
Natural resources available for produc3on
The human input into the produc3on process
Goods used in the supply of other products e.g. tech
Entrepreneurs organise factors of produc3on and take risks
Capital and Consumer Goods
• Capital goods – Goods that are used to make consumer goods and services – Capital inputs include fixed plant and machinery, hardware, socware, new factories and other buildings
• Consumer goods and services – Goods and services which sa3sfy our needs and wants directly – There is a sub-‐division between: – i) Consumer durables: Products that provide a steady flow of sa3sfac3on / u3lity over their working life (e.g. a washing machine or using a smartphone).
– ii) Consumer non-‐durables: Products that are used up in the act of consump3on e.g. drinking a coffee or turning on the hea3ng)
– iii) Consumer services: E.g. a hair cut or 3cket to a show
The Difference between Produc/on & Produc/vity
Exam reports confirm that it is important for students to make clear the dis3nc3on between produc/on and produc/vity
• Produc/on • Produc3on is a measure of the value of the output of goods
and services e.g. measured by na3onal GDP or an index of produc3on in specific industry such as car manufacturing
• Produc/vity • A measure of the efficiency of factors of produc3on • Measured by output per person employed
• Or by output per person hour • An increase in produc3on DOES NOT automa3cally mean an
increase in produc3vity – it depends on how many factor inputs have been employed to supply the extra output
Produc/vity
Produc3vity measures the efficiency of the produc3on process
• In the long run, produc3vity is a major determinant of economic growth and of infla3on.
• A fall in labour produc3vity leads to a rise in firms’ (unit) costs of produc3on (assuming that the level of wages remains the same)
• Higher produc3vity allows businesses to pay higher wages and achieve increased profits at the same 3me.
Factor Inputs (land,
labour and capital)
Factor Produc/vity (efficiency)
Output of goods and services
Degree of compe33on in a market / industry
Advances in produc3on technology
Investment in appren3ceships / training to boost labour skills
Quality of the management in a
business
Some Factors Affec/ng Labour Produc/vity
Many demand and supply-‐side factors affect labour produc3vity
Specialisa3on (division of labour) within a businesses
Higher business investment in new
capital inputs
Having a high quality na3onal infrastructure
including transport
Level of demand for a product in a market – using up spare capacity