Specialization of Labor
Some of us are better at math than others...some of us are more creative than others...and some of us enjoy the social aspect of a job, while others prefer to be left alone to work in peace and quiet.
Specialization of labor takes advantage of these differences, creating more value and higher overall output than without specialization. Classical economist Adam Smith--the guy who made the “invisible hand” a thing--saw the specialization of labor as the driving force for economic growth.
Think about it: all of the engineers, designers, and marketers that went into creating the very device you’re on right now. Because they’re able to buy what they need to survive--rather than fending for themselves in the woods--they can focus on specializing their skills, providing value to the economy.
Hm. Maybe that Smith guy was on to something. To really see how much the specialization of labor affects the world, let’s imagine a world without it. First, people would all be fending for themselves: making their own clothes, cutlery, food, video gaming consoles, etc.
The specialization of labor allows us to focus our attention in a particular area. Because other people specialize in other things--taking care of those things for us--we can also specialize for the rest of the market. We all become experts of some sort by doing our jobs, which increases productivity.
This is how specialization of labor gives us “absolute advantage” in the market. Absolute advantage is when one group can create a good or service using fewer resources than another group.
For instance, if Sewing Sally can sew clothes with much less time than you, it benefits both you and Sewing Sally if you just let her make the clothes, and then buy them from her. She’s just plain better at sewing than you, so it’s best for both of you this way.
On a global scale, specialization of labor gives us this absolute advantage. For example, Southeast Asian countries will always be better pineapple and mango producers then North American countries. Global trade, combined with specialization, lets each of us produce what we produce best, which benefits us all.
Second, say goodbye to your smartphone, computer, refrigerator, water heater, air conditioning, cars, airplanes, bikes, and the internet.
Without the specialization of labor, nobody would have had the time to make--let alone imagine--the technology we have today. And yesterday’s technology breeds today’s more advanced technology, which breeds more human capital.
Think about labor in terms of opportunity cost: is your time more valuable doing your job, or forging steel into a fork? This is the stuff of comparative advantage: when a group or person can make a product or service at a lower opportunity cost than another group or person. Even if you figured out how to whip up a crappy fork, how many lost hours is that that you could’ve spent on your job? How much lost money?
We’re not saying you shouldn’t go fork-forging or fishing or whatever thing you might do for fun that you aren’t very good at; but we are saying that the value that specialization of labor creates can be easily seen once you think about it in terms of opportunity cost. A chef can provide a lot of value at a restaurant, and maybe not very much at a tech firm. A tech bro can provide a lot of value at the tech firm, but not very much at the construction site.
What about a lawyer who can type faster than her secretary? Should she just do the typing herself? No--because her time is better spent lawyer-ing than it is typing. Which is why she hired her secretary in the first place...typing is just a bad use of her valuable time.
Even if she’s better at typing than her secretary, the opportunity cost for her secretary typing is much lower than it is for her. Comparative advantage shows us how specialization can help us all add value to the market, even though we each have different skills and skill levels.
The more specialized we all are at what we do, the more others are willing to pay for that specialization, and the more value we’re providing to each other within the economy. While specialization of labor has created a lot of value, not everyone’s a fan. Critics have cited that a too-high-of-a-level of specialization can lead to unhappy workers and burnout.
In fact, the 40-hour workweek became a thing only after factory worker burnout at the Ford factory caused extremely high turnover rates. Still, as the benefits of specialization spread, globalization started to make more and more economic sense. Because the specialization of labor provides so much more value to the economy than if we were all a bunch of hermits...forging our own forks...it’s profitable to make things in one country, and ship them halfway around the world to be sold in another country. Absolute and comparative advantage make global trading like this oh-so worth it.
Today, we can see that in the extreme with giants like Amazon, Walmart, and AliExpress facilitating globalization, spreading the economic fruits of specialization. On the insanely-useful-and-maybe-scary side, we’ve got machines learning algorithms, and artificial intelligence in the works.
On the of-course-that’s-a-thing side, we’ve got heated driveways, Monster energy sliced ham, an $85 rock in a bag, a toothpaste squeezer, and, uh...other things you didn’t need to know existed...