Specialisation happens at all levels:

1.The specialization of tasks within extended families in many of the world’s poorest countries

2.Within businesses and organizations

3.In a country – Bangladesh is a major producer and exporter of textiles; Norway is a leading oil exporter. 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

What are the possible gains from specialization?

By concentrating on what people and businesses do best rather than relying on self sufficiency:

1. Higher output: Total production of goods and services is raised and quality can be improved
2. Variety; Consumers have access to a greater variety of higher quality products
3. A bigger market: Specialisation and global trade increase the size of the market offering opportunities for economies of scale
4. Competition and lower prices: Increased competition acts as an incentive to minimise costs, keep prices down and therefore maintains low inflation

The Division of Labour

The division of labour occurs where production is broken down into many separate tasks. Division of labour raises output per person as people become proficient through constant repetition of a task – “learning by doing”. This gain in productivity helps to lower cost per unit and ought to lead to lower prices for consumers.

What are the Main Limitations of the Division of Labour?

1. Unrewarding, repetitive work that requires little skill lowers motivation and hits productivity. Workers begin to take less pride in their work and quality suffers. We often see dissatisfied workers becoming less punctual at work and the rate of absenteeism increases.
2. Many people may choose to move to less boring jobs creating a problem of high worker turnover for businesses. The employee turnover rate for the UK is around 12% per year, nearly one worker in seven changes jobs every twelve months. The highest labour turnover is found in retailing, hotels, catering and leisure, call centres and among other lower-paid private sector services groups
3. Some workers receive little training and may not be able to find alternative jobs if they find themselves out of work - they may then suffer structural unemployment.
4. Another disadvantage is that mass-produced standardized goods lack variety for consumers

Real-world examples of industries that make extensive use of division of labour:

• Vehicle assembly
• Construction industry
• Smartphone assembly

Advantages from specialisation (division) of labour:

• Higher productivity and efficiency – e.g. rising output per person hour
• Lower unit costs leading to higher profits
• Encourages investment in specific capital – economies of scale

Disadvantages from specialisation (division) of labour:

• Risk of worker alienation
• Risk of disruptions to production process
• Risk of structural unemployment due to occupational immobility

Advantages for a country specializing in goods and services to trade

• Allows a country to make full use of their economic resources
• Increases the scale of production – leads to lower costs and prices
• Surplus can be exported, an injection into the circular flow of income

Disadvantages for a country specializing in goods and services to trade

• World prices for a product might fall leading to declining revenues
• Risk of over-specializing and structural unemployment
• Might lead to over-extraction of a country’s natural resources