In the decade ahead I can predict that we will provide over twice the productivity improvement that we provided in the 90's.Bill Gates, speaking in Las Vegas in 2001 Production & Efficiency

Lesson ObjectivesBy the end of this lesson you will:

Be familiar with the ideas of specialisation and the division of labour

Be able to state the main advantages and disadvantages of organisation production via the division of labour

Recognise that the role of the market and trade and how this is connected to specialisation

Be able to state the differences between production and productivity

The Paper Chain Production CompanyYou are applying for a holiday job working for a company that manufactures paper chains for use as decorations in large halls. In order to get the job you must pass a trial demonstrating your ability to work at the required work rate.

The rules for making the paper chainsThe paper chains must be made to a regulation standard

Each link in the chain must be 15cm x 5cm.

The links must be cut out using scissors.

Each link must be coloured in using one of the crayons supplied by the Paper Chain Production Company.

The links in the chain must be glued together using the glue provided by the Paper Chain Production Company.

A link cannot be joined to another link of the same colour (I.e. Red-Blue-Red is ok but red-Red-Blue is not).

The Paper Chain Production CompanyYou will be working individually to produce as many links in a chain as you can during the trial period.

The trial period lasts for 10 minutes precisely.

After the 10 minute trial your chain will be checked to ensure the links are of the required standard.

The worker with the highest productivity will be employed by the Paper Chain Production Company.

The Paper Chain Production CompanyIn reality one person does not do all of the jobs in the production process.

Instead the production is split into the following 4 tasks:Measuring outColouring inCutting outGluing and join the links together

The Paper Chain Production Company would now like to test your ability to work as part of a production line.

You will now have a further 10 minutes to complete this trial.

The results of the trial?How many completed links were you able to produce working individually?

How many were you able to produce working as part of a production line?

Why do you think it was more efficient to specialise and divide up the tasks?

Robinson Crusoe

The islanders from Lost

SubsistenceIf you were to be marooned on a desert island you would be forced to live a Robinson Crusoe like existence. You would have to do everything for yourself. If you wanted food you would have to produce it yourself. Economists refer to this as SUBSISTENCE.

Subsistence is defined as groups within societies attempting, through their own labour, to produce enough food and basic produce to survive

There are still societies living today who live in such a way (e.g. farmers in the Third World).

What have the following got in common?The New York Stock Exchange

What have the following got in common?A fruit & vegetables stall in Morocco

What have the following got in common?Ebay UK

What have the following got in common?A cattle auction in Australia

Surpluses and TradeSubsistence economies that become more successful are able to produce more goods than they need for their immediate survival. This leads to stocks and SURPLUSES.

These surpluses could be TRADED with other groups producing surpluses.

This led to the first TRADE. Early trade was by BARTER until the emergence of forms of MONEY (about 3000 yrs ago).

This combination of surpluses, money and growing trade led to the development of MARKETS (a place where a buyer and seller comes together).

Barter and MoneyBarter:swapping one good for another

Moneyanything which is widely accepted as payment for goods received, services performed or repayment of past debt. In modern economy, it ranges from notes and coins to money in bank accounts and deposits in building society accounts

SpecialisationThe development of trade and markets removed the reliance on subsistence economies. People could now SPECIALISE.

SPECIALISATION can be defined as:the production of a limited range of goods by an individual or firm or country in co-operation with others so that together a complete range of goods is produced.

Benefits of Specialisation BENEFITS OF SPECIALISATION

Adam Smith- the father of economics

Division of LabourSpecialisation by individuals is called the DIVISION OF LABOUR.

It was described by the great Economist, Adam Smith, in his famous book An Enquiry into the Nature and Causes of the Wealth of Nations (1776). Smith identified the practice amongst pin workers.(for further info see Economics, 3rd edition Anderton (2000), p10)

Advantages of the Division of LabourPractice makes perfect- people who do one relatively simple job become very efficient at doing that job

No time is wasted in moving from one job to another

A saving of equipment. Workers who specialise do not require a full set of tools but just the specific tools for their task

Advantages of the Division of LabourTraining take less time as it is far quicker to train a person to do just one job

There is a saving of skill as specialisation creates many different occupations, each with specific skills required.

It is possible for a greater degree of mechanisation. Breaking down a complex process into simple tasks has allowed many of these tasks to be done by machines.

Problems of the Division of Labour & Over-specialisation Monotony and lack of job satisfaction- If jobs are divided up too much then they can become tedious and monotonous (e.g. working in McDonalds) This can lead to workers becoming alienated from their work, poorer workmanship, mistakes and lower productivity.

Loss of flexibility- over specialisation can make it difficult for workers to switch to performing other tasks. This can lead to difficulties, e.g. if sickness makes it necessary to cover for a colleague.

Problems of the Division of Labour & Over-specialisationThe size of the market can limit the division of labour too. E.g. a village shop owner may want to specialise in health food but has to sell other products as well.

Over specialisation can lead to problems if the skills become no longer wanted (e.g. the mining industries in the North of England).

Another problem with specialisation is that a breakdown in part of the chain can lead to major problems in the system.

Moves away from specialisationModern technology and the extensive use of the division of labour has led to enormous increases in the output of goods and services possible.

However the loss of job satisfaction has led to many firms considering various projects aimed at achieving job enrichment by enlarging the role and responsibilities of the workers.

Moves away from specialisationFor example Volvo, the Swedish car manufacturer, moved away from specialisation and found that by allowing workers to undertake a number of different tasks they could:Increase the workers enjoyment of their jobsIdentify their individual strengthsIncrease their ability to make suggestions for improving production methods and the productEnable workers to cover for sick colleaguesIncrease labour flexibility

Production & ProductivityProduction:the process of transforming the economic resources.

Productivity:output per factor

Labour Productivity:output per worker/hour

Productive capacity:The maximum possible output that can be produced with exiting resources and technology

Factors that determine productivitySpecialisation allows enables workers to gain skills in a narrow range of tasks. This enables individual workers to be far more productive than if they were jack of all trades.

The division of labour makes it cost-effective to provide workers with specialist tools.

Time is saved when a worker is not constantly changing tasks and moving from place to place

Workers can specialise in those tasks to which they are best suited.

A more educated and better trained labour force will increase productivity

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