In 1776 the “father of economics” Adam Smith published his landmark book Wealth of Nations. The key theory to come out of this book is the Division of Labour. As the Harvard Business Review states, this “would be one of the central drivers of economic progress for centuries to come”. Division of labour is the separation of a work process into a number of tasks to be performed by a person or group of people. This theory has given rise to the specialised worker. The concept fits well with the current federal Governments agenda of raising productivity.
Firstly you may ask, what is productivity? Productivity is the measure of national productivity. At a national level it captures the economy’s ability to harness its physical and human capital resources to generate output and income. In April last year the House of Representatives House Standing Committee of Economics report; Inquiry into raising the productivity growth in the Australian economy outlines that productivity growth has declined by about 0.4% annually since 2003-04. This is significant given that the division of labour is such a widely accepted practice.Access to a larger workforce through greater workforce participation is an area that can increase productivity. Currently, there are around 588,000 unemployed Australians with 6.3M classed as not in the workforce. The challenge is encouraging this cohort into the workforce through the necessary incentives and appropriate training.
Workforce participation and education level are closely linked. The Australian Chamber of Commerce and Industry (ACCI) note that an additional year of schooling can increase workforce participation by around 0.5% for men and 4% for females. Furthermore, I have recently outlined the proven link between the level of educational attainment and whole of life earnings. Even a certificate I or II can raise the level of life time earnings. Investing in training and educations pays dividends in many ways. This is the case for the individual when investing in their personal educational betterment and similarly for the government when providing subsidised training places. Given that the “average production worker” annual tax contribution is $7,428 (Department of Parliamentary Services) the combined lift in workforce participation of men and women of 4.5% would significantly increase the level of taxation income. This increased level of federal income would certainly offset investment in programs such as social inclusion to move the marginalised and disadvantaged into training and employment, not to mention the increase in economic productivity.
When considering the theory of the division of labour in this context of increased education; as labour becomes more knowledge based and communications technology advances, the division of labour accelerates. This gives way to hyper-specialisation, under this concept jobs can be redefined and lower skilled tasks off loaded. Consequently, lower level skilled positions may be further subject to declining wage levels, while higher skilled workers will continue to enjoy wages growth.
To effectively achieve divisions of labour the worker needs to be highly skilled in the task at hand. This comes through on-the-job training, increased competence through repetition and job related and general training. Again, the level of educational attainment is critical in a number of areas; directly linked to not only whole of life earnings and proved in recent columns but also thelevel of economic output an economy can achieve. Economic output is also directly related to the standard of living enjoyed by a nation. Australia enjoys a relatively high standard of living; further education and training will contribute to ensure this remains the case.
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