Specialization only makes sense, though, if workers can use the pay they receive for doing their jobs to purchase the other goods and services that they need. The division and specialization of labor has been a force against the problem of scarcity. The ultimate result of workers who can focus on their preferences and talents, learn to do their specialized jobs better, and work in larger organizations is that society as a whole can produce and consume far more than if each person tried to produce all of their own goods and services. However, if a factory produces 50,000 cars each year, then it can set up an assembly line with huge machines and workers performing specialized tasks, and the average cost of production per car will be lower. For example, if a factory produces only 100 cars per year, each car will be quite expensive to make on average. Third, specialization allows businesses to take advantage of economies of scale, which means that for many goods, as the level of production increases, the average cost of producing each individual unit declines. In many cases, a business that focuses on one or a few products (sometimes called its " core competency") is more successful than firms that try to make a wide range of products. In fact, specialized workers often know their jobs well enough to suggest innovative ways to do their work faster and better.Ī similar pattern often operates within businesses. This pattern holds true for many workers, including assembly line laborers who build cars, stylists who cut hair, and doctors who perform heart surgery. Second, workers who specialize in certain tasks often learn to produce more quickly and with higher quality. Whatever the reason, if people specialize in the production of what they do best, they will be more productive than if they produce a combination of things, some of which they are good at and some of which they are not. If you live in or near a big city, it is easier to attract enough customers to operate a successful dry cleaning business or movie theater than if you live in a sparsely populated rural area. For some goods, specialization will be affected by geography-it is easier to be a wheat farmer in North Dakota than in Florida, but easier to run a tourist hotel in Florida than in North Dakota. Only those with medical degrees qualify to become doctors, for instance. The particular advantages may be based on educational choices, which are in turn shaped by interests and talents. People have different skills, talents, and interests, so they will be better at some jobs than at others. How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves? Smith offered three reasons.įirst, specialization in a particular small job allows workers to focus on the parts of the production process where they have an advantage. In his observations of pin factories, Smith observed that one worker alone might make twenty pins in a day, but that a small business of ten workers (some of whom would need to do two or three of the eighteen tasks involved with pin-making), could make 48,000 pins in a day. When the tasks involved with producing a good or service are divided and subdivided, workers and businesses can produce a greater quantity of output. Why the Division of Labor Increases Production A complex business, like a large manufacturing factory such as the shoe factory shown in Figure 3, or a hospital, can have hundreds of job classifications. Even a relatively simple business like a restaurant divides up the task of serving meals into a range of jobs like top chef, sous chefs, less-skilled kitchen help, servers to wait on the tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills-not to mention the economic connections a restaurant has with suppliers of food, furniture, kitchen equipment, and the building where it is located. (Credit: Nina Hale/Flickr Creative Commons) Workers on an assembly line are an example of the divisions of labor.
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