Division of Labor

Perhaps Adam Smith's most famous dictum is that “the division of labour is limited by the extent of the market.” By allowing individuals to specialize in the production of some goods and trade them for different goods (including arts and sciences) produced by other individuals, the division of labor was, in Smith's eyes, the ultimate source of wealth and economic development. The bigger the market, the more numerous and varied the number of tasks and opportunities become.

For Smith, the benefits of the division of labor derive from three sources: (1) increased dexterity of a worker, (2) time saved from switching between tasks, and (3) increased likelihood of new inventions. The first two effects are today referred to as increasing returns. Unlike David Ricardo, Smith considered the inherent advantages of specialization as inferior to those acquired by learning and experience. The last benefit of the division of labor stresses the idea that individuals are more likely to come up with new ways to facilitate their work when they concentrate on certain tasks. Furthermore, Smith observes that some improvements have been developed by producers of machinery, while others were created by individuals who specialize into combining ideas from distant fields. In short, the division of labor yields not only static benefits through better organization of production but also new innovations and improvements developed through time.

The division of labor has always had critics. In the early days of industrialization, it was feared that it would result in ever duller and more mechanistic work. Another recurring concern has been regional or social inequality. Yet the division of labor is also an argument on behalf of globalization since the expanding market allows for more division of labor and its attending benefits.

While the division of labor can be studied in various contexts such as households, three levels, following Allen Scott, are generally considered especially relevant for geographers. The first is the individual level, where individuals specialize in different tasks within a firm (the technical division of labor), in the process yielding a greater output for a firm, such as Smith's classic example of a pin factory. The second division operates at the firm level, where firms in a market specialize in producing different goods and services (the social division of labor). Last, due to natural or other advantages, it is sometimes beneficial for regions (or firms in some geographical areas) to specialize in producing some goods and trading them with other firms and individuals located elsewhere (the spatial division of labor).

The geographical division of labor has two main dimensions. The first deals with how the divisions are achieved through space and how they are affected by geographical factors. Second, the division of labor being “limited by the extent [Page 781]of the market,” it is interesting to study the spatial borders of the market and their evolution over time, as well as trade and other linkages between locations.

As Richard Baldwin and Philippe Martin have noted, there have been two major phases in this respect in the past two centuries. During the so-called first unbundling (1820–1914), the development of transportation technologies allowed the spatial separation of the production and consumption of many goods. As a result, the division of labor became less dependent on the size of the local demand. The second unbundling (1960 to the present), however, was characterized by the separation of different stages of production. In addition to transportation technologies, advanced communication technologies were helpful in coordinating the production of goods when different inputs and some supporting services became increasingly geographically dispersed. These impacts of new technologies, themselves products of the division, underline the dynamic character of the division of labor.

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