1.2.2 Productivity & Labour Division

Productivity Definition - Syllabus 1.2.2 (a)

Productivity = Efficiency, the rate at which goods are produced and the amount produced in relation to the work, time, as well as money needed to produce them.
Productivity is the output per unit input (inputs can be all production factors).
- Compared on annual basis.
- Most commonly output/worker.
- Calculated as:
  - Productivity = Total output / Total input

Factors Affecting Productivity - Syllabus 1.2.2 (b)

Land:
- Fertilizer → ↑ nutrients for plants → ↑ growth speed → ↑ crop yield → ↑ productivity
  - Fertilizer = Chemicals given to plants to enhance their health and appearance.
- Pesticides → ↓ Pest interferences to plant growth → ↑ crop yield → ↑ productivity
  - Pesticides = Chemicals used to kill pests
- Fertilizers and pesticides produce negative externalities to the environment → strict controls
- Drainage → Improved water flow off land → ↓ flood risk → ↑ crop yield/safety → ↑ productivity
- Irrigation → Improved water flow from natural sources like rivers/lakes/streams to land → dry areas can be supplied with water → allows continued growth even when conditions are poor (e.g. drought, rainfall shortages) → ↓ dehydration → ↑ crop yield → ↑ productivity
  - Irrigation = Supply of water to land/crops to help growth, typically through using channels.
- Reclamation → ↑ fertile land → ↑ crop yield → ↑ productivity
  - Reclamation = Creating new land from oceans, seas, riverbeds, or lakebeds (e.g. water can be drained from wetlands to reclaim land) or returning land to fertile/usable conditions.
- GM crops → ↓ crop infection → ↑ crop yield and ↑ customer appeal → ↑ productivity
  - Genetically modified (GM) crops = Crops with DNA/genes transferred from another organism to them so they have new/different characteristics.
    - Adding genes from organisms that have never been eaten as food → new proteins introduced to food chains → potential allergies and/or negative health effects.
Labour:
- Education/training → ↑ skilled workers → Workers better understand their job roles and can produce more high-quality outputs → ↑ human capital → ↑ productivity
- ↑ Motivation → ↑ productivity
  - Piece rates = Progress-based rather than time-based salaries paid to workers for each item they produce rather than the time taken to make it. They motivate workers to produce more.
  - Job rotation = Practice of regularly changing the person who does a particular job. Employees change tasks from time to time and are trained to do different jobs.
    - Job rotations → ↑ job variety → ↓ boredom → ↑ motivation → ↑ productivity
- Improved working practices → Better labour organization and management → ↑ productivity
  - Working practice = Methods/systems of work employees must adopt when taking on a job.
  - Best practice = Working standards and/or ethical guidelines to achieve the best productivity.
    - E.g: Changing factory layout to reduce time required for employees to move around and get to different stations → ↓ time wasted → ↑ productivity
- Immigration → ↑ skilled workers (immigrants) attracted from overseas to local country → ↑ skilled workers contributing to economy → ↑ human capital → ↑ productivity
  - Immigration = Coming to a country permanently after leaving the previous country.
- Emigration → ↑ skilled workers (emigrants) leaving → “brain drain” → ↓ skilled workers contributing to economy → ↓ human capital → ↓ productivity
  - Emigration = Action of leaving the country and going to live permanently in a foreign country.
  - People first emigrate out of their country (leave) then immigrate to a new country (coming).
Capital:
- ↑ Quantity of capital → more machinery/capital → ↑ efficiency and ↑ productivity
- New technology advancements → ↑ lean production (i.e. ↓ production factor inputs needed for the same or higher output) → ↑ output per unit input → ↑ productivity
  - Sometimes new technology → machines replace labour to reduce production costs of wages/salaries and increase productivity → unemployment

Division of Labour Definition - Syllabus 1.2.2 (c)

Division of labour = Breakdown of production process into small parts with each worker allocated a specific task. It allows people to concentrate on the task/skill they’re best at to increase productivity.
Specialization = Production of a limited range of goods by individuals, firms, regions, or countries where individuals/firms/countries focus on production of particular tasks/products/industries.
- Employees become experts in their specific job through repetitively completing the same task.
- Firms become experts in their fields.
- Countries concentrate on specific industries (e.g. tourism/finance)
Technology allows businesses to specialize → ↑ productivity
Specialization increases productivity because having individuals do all production processes is less productive than having individuals specializing in labour division:
- People try to perform wide ranges of tasks → hard to develop skills to be excellent at each task → ↓ productivity

Labour Division’s Impacts on Workers & Firms - Syllabus 1.2.2 (d)

Labour division’s impacts on workers:

Disadvantages of labour division to workers	Advantages of labour division to workers
Tasks performed repetitively → Increased risk of health complications such as joint wear.	Workers become skilled experts and improve at their task due to experience/specialization.
Work becomes boring/repetitive (especially if little skill is involved) → ↑ Job dissatisfaction and ↓ motivation → Companies may have to use job rotations and piece rates to mitigate monotony.	Workers’ expertise → ↑ chance of:1. Getting paid and/or having ↑ salaries/wages.2. Accessing ↑ quality working conditions.3. Being respected.
↑ Supply of low-skilled specialist workers → Easily replaced → ↑ Unemployment risk.	Workers’ expertise through specialization → Easier to be employed and more job choices, can also learn new skills to improve existing skill sets.
↑ Risk of specialist tasks becoming automated (performed by machines) → ↑ Unemployment risk.	Workers’ expertise through specialization → ↑ Job satisfaction if they’re highly skilled in a specialist task they’re interested in.

Labour division’s impacts on firms:

Disadvantages of labour division to firms	Advantages of labour division to firms
Specialization → workers do same task repetitively → boredom/monotony → dissatisfied, demotivated workforce → ↓ productivity	Specialists can better fit into a structured system of production (e.g. a production line) → easier organization of production
Excess interdependence between production stages → Too many risks of hindered production (if 1 production stage breaks down → all other production stage(s) dependent on it stop → production is infeasible and disrupted)	Specialization → employees become specialists/experts → they make ↓ mistakes and produce ↑ quality outputs with ↑ accuracy, consistency, and efficiency → ↑ productivity + improved reputation for individuals/firms. (Firms with reputation of high-quality production can charge high prices to maximize profit).
Specialization → inflexible workforce (if specialist worker absent → nobody else has same skills to do that job → disrupted production)	↓ production time (specialists can stay at same workstation, repeat their task, and have no need to waste time by moving from 1 task or workstation to another, resetting machinery, etc.)
	Workers specialize → greater use of specialist tools, machinery, and equipment → ↑ productivity
	↑ Output produced with same (or less) input → ↓ input required per output → ↓ unit cost:Specialization in mass markets → ↓ cost → competitive advantage for low-cost producers as they can ↓ price to ↑ demand (their goods are cheaper than other substitute goods in the market) to get ↑ sales and ↑ profits.

Production line = Line of machinery and/or workers in a factory that products move along whilst they’re being built or produced.
Market = Arrangement between producers and consumers to facilitate the transaction of goods/services (exchange of goods/services for money).
Mass market = Market for goods that are produced in large quantities.
Productivity VS Efficiency:
- Productivity is about getting more done (e.g. finishing more homework)
- Efficiency is about doing things faster but not necessarily completing more (e.g. finishing homework faster).