Definition: In specialization, a worker is skilled in one skill rather than having mediocre knowledge of many fields. This specialization helps them perform efficiently and increase productivity.
Adams Smith proposed the principle of division of labor in his popular masterpiece titled “An Inquiry into the Nature and Causes of the Wealth of Nations.”
He showed that specialization, also called Division of Labor, makes more economic sense than one man being a jack of many activities. Industries have embraced the concept of mass-produced goods (economies of scale) and thrived through specialization.
Division of labor shines where businesses have complex processes and demand output. Smith’s illustration was a pin manufacturing factory. He discussed the advantages of using machines against manual effort.
These days, specialists are excelling in their careers in the corporate world and contributing to business success immensely.
The Theory of Specialization
In specialization theory, every worker focuses on one rather than all aspects of an endeavor. This theory became popular after Adam Smith’s inquiry into the nature and causes of the wealth of nations.
If a worker is involved with many tasks, they will move from one aspect to another, called task switching.
According to Smith, time is lost when a worker shifts between activities. This becomes prevalent if the tasks’ location is different and involves different tools.
Task switching wastes time, unlike specialization, where the maximum focus is on a task.
As people specialize, they become experts in their branch, delivering more work. In linen and wool manufacturing, the woolen coat is a combined effort of different workers, such as:
- Shepherd
- Sorter of the wool
- Wool-comber
- Dye
- Scribbler
- Spinner
- Weaver
- Fuller
- Dresser
- Etc.
This applies to every industry; different skills and labor is required in coordination to achieve an output. It implies that specialization naturally exists in society. The following examples show the increase in production due to specialization:
- Increase in skill (perfection) for every worker. This is due to specialization in one simple operation.
- Timesaving passes one activity to another. Ensuring workers can complete all activities in one place to save shifting time.
- The invention of machines allows a worker to work for many workers.
The Theory of Exchange
Specialization does not support the concept of doing everything on its own. Instead, they should exchange, also called “trade,” based on specialization. Trade is the means of meeting other needs a worker cannot produce.
A worker can exchange a value with another value. For example, each worker trades their skill for some sort of value. This is made possible by capital stock.
Stock must be stored for exchanges within society to meet the necessities and conveniences of life. Other men’s labor or society can offer products the worker cannot make; they only need to exchange their products.
Businesses seek coastlands for easy water carriage when planning trade. Therefore, development stems from coastlands and extends inland. Industrialization naturally originates from the coastal region due to the ease of water carriage. The coast opens the market to the whole world.
Those in a landlocked region must develop industries near wealthy and populous neighboring cities to aid trade. The extent and easiness of inland navigation are principal causes of improvement in a nation. It boosts communication and human interaction, thus leading to faster development.
Types of Specialization
Specialization can be of two types:
- Microeconomic Specialization
- Macroeconomic Specialization
#1. Microeconomic Specialization
This specialization concerns the specialization of workers within a particular field. Each employee has a unique set of skills, knowledge, and abilities. For example, a carpenter is an expert in carpentry works, and a painter is skilled in painting.
#2. Macroeconomic Specialization
Macroeconomic specialization is concerned with the economy on a larger scale. It includes geographic specialization. For example, Taiwan is famous for chip manufacturing. It has the necessary infrastructure, technology, and skilled workers.
Advantages of Specialization
- It translates to greater economic and business productivity
- It saves time that increases efficiency
- As mass production thrived, costs dropped, and goods became cheaper, and these helped improve lives
Limitations of Specialization
- In small markets, specialization is not helpful. For example, people will want to do everything in a dispersed settlement as other services are far away. Here, it is wise to dedicate a worker to more than one trade. A farmer can be a butcher, baker, or brewer. A carpenter deals in woodwork: joiner, cabinet maker, carver, cart maker, etc.
- It applies to endeavors closely linked with time sessions. For example, the Division of Labor in agriculture will be ineffective as each activity occurs at different times of the year, e.g., weaver, plowman, the harrower, sower of the seed, and reaper of the corn. This is why improvements in agriculture lag with manufacturing. Rich nations are not more productive than developing countries in agriculture but manufacturing. That is why Poland’s corn is cheaper than French corn, although France is a more developed country.
- Without exchange by barter, treaty, or truck, there cannot be the power to contract division of labor.
Conclusion
Specialization is a gift for humanity as professionals, experts, global leaders, and companies have emerged by tailoring to areas of strength, carving a niche, and continually improving their offerings. As a result, nations leverage comparative advantages rather than being Jack of all trades and masters of none.