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Theory of Labour

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  • 1. Theory of Labour
  • 2.  Definition of labour  Division of Labour  Mobility of Labour  Population:  Size & Structure  The Dependency Ratio  The Participation Rate  Optimum Population  Consequences of Ageing Population  Markets for Labour  Supply and Demand for Labour
  • 3.  Definition: all productive human resources, mental and physical, both inherited and acquired;  Differs from other factors: it is provided by human beings;  Cannot be treated as other FP: the need for ethical and moral considerations
  • 4.  Definition: the breaking up of a production process into a series of repetitive tasks, each done by a different worker;  Division of labour:  brings with it Specialization;  Examples of Division of Labour: planting corn: clear the ground, dig a hole, plant the seed, and cover the seed.  Students to do a example of DL and Specialization in a production process of their choice  H/W: explain how Adam Smith describes DL and Specialization
  • 5. • Leads to an increase in output;  Output per head rises;  An increase in real wage for labour, since it now has a higher volume of output;  Lower cost s per unit of output • Makes possible the mass production techniques of large factories, production lines, and high volume output; • Allows for a wider range of goods and services to be produced; • leads to employment generation;
  • 6.  Practice makes perfect: one becomes very adept at performing the same task everyday, thus increasing the speed at performing work;  There is a more efficient use of time: the worker remains in the same position and does not have to spend time moving to different locations in the workplace;  Capital is used more efficiently: specialized machinery can be developed and can be kept in use constantly.
  • 7.  The Extent of the Market:  there is little point is producing vast quantities of goods if they cannot be sold;  The availability of effective transport and distributions systems: if goods cannot be transported and distributed efficiently only small markets can be served;  The lack of an efficient monetary system: in the absence of money trade will depend on barter which would severely limit the size of the market
  • 8.  An organization of production in which individual workers specialize in the production of particular good or service (and satisfy their wants by trading) rather than producing everything they consume (and satisfy their wants by being self sufficient).
  • 9.  Specific Factors:  One of a specialized kind, and cannot be easily used for any purpose other than that for which it was originally created;  Non-specific Factors:  Can be easily transferred from one use to another  Applied to FP, Mobility means the ease with which a factor can be transferred from one form of employment to another (important for an economy to develop);  The more educated the worker, the more mobile is expected to be  There are two types of mobility:  Geographical or lateral: refers to the movement of a factor from one location to another);  Occupational or vertical: refers to the change of use to which a factor is put.
  • 10.  Population is important because it affects the Supply of Labour.  Size and structure of population depends on the following:  The birth rate: the number of live births per 1,000 of the population per year. The birth rate has shown a tendency to decline in recent years: why?  The death rate: the number of deaths per 1,000 of the population per year. Life expectancy has increased and death rate has declined: why?  Net migration: emigration minus immigration  The Natural Rate of increase in population: the birth rate minus the death rate. When birth rate exceeds death rate the population rises and vice versa;  A lower death rate coupled with a lower birth rate leads to an ageing population. When this happens the average age of the population has increased.  Population: geographical, sex, and occupational distribution.
  • 11.  Measures the proportion between the numbers in the working age groups and the numbers in the non-working age group. Dependency Ratio = No. below School leaving age + no. over retirement age ________________________ No. between school leaving age and retirement ages A rising dependency ratio is important because it implies that the working population must produce more output to support the non-working population.
  • 12.  Measures the percentage of the labour force who are economically active – that is, those people who are of working age and who are either employed, selfemployed, serving in the armed forces or seeking employment.  The tendency for women to gain a career and postpone starting a family has enabled the labour force to increase faster than the population as a whole;  Policies aimed at providing equal opportunities for disabled persons have increased the participation rate.
  • 13.  That number of people which, when combined with other resources, gives the maximum output of goods and services per head of population;  The actual level of optimum population depends on the balance between existing resources;  A sparsely populated country may be “overpopulated” if it lacks resources other than labour;  A densely populated country may be “overpopulated” if it has unused land and capital;  Under populated countries have sought to reach their optimum by encouraging mass immigration;  Overpopulated countries can reach their optimum either by a reduction in population, or by an increase in productivity.  It maybe very difficult to decide whether a country is below or above its optimum. As developments in education and technology change, the productivity of labour also changes and this also change the size of an optimum population.  Consider the following diagram:
  • 14.  An ageing population can be caused by a fall in the death rate so that on average, people live longer;  An ageing population can also be caused by a fall in the birth rate  Firms need to change their output:  If the birth rate falls there may be need or smaller houses for retired persons than fir growing families;  If the birth rate has fallen, fewer baby clothes would be required;  Governments need to plan ahead:  a reduction in the death rate means that heavier demands on the health and social security services;  State and private pension schemes will also need to be redesigned;  The dependency ratio will increase the burden on workers and taxpayers;  A reduction in birth rates implies possible shortages of labour in the future as a smaller number of school leavers enter the labour market.