Labor Specialization and Division of Labor
When Adam Smith (1723–1790) wrote his classic book The Wealth of Nations in 1776, the
academic study of economics started. Many writers had written about economics in previous
centuries, but Smith was the first to do so in a comprehensive manner. Smith discusses the
division of labour in the first chapter, which indicates that a good or service is separated into a
number of jobs that are performed by various employees rather than all of the activities being
handled by the same individual.
Smith tallied how many steps were involved in creating a pin, including drawing out a piece of
wire, cutting it to the proper length, straightening it, placing a head on one end and a point on
the other, and packing pins for sale, to mention a few. Smith identified 18 separate acts that
were often performed by various people—all for a pin, believe it or not!
Tasks are also divided in modern enterprises.
Even a seemingly simple business like a restaurant divides the task of serving meals into a
variety of jobs such as top chef, sous chef, less-skilled kitchen help, servers to wait tables, a
greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—
not to mention the economic connections a restaurant has with food, furniture, kitchen
equipment, and the building where it is located. A big industrial plant, such as the shoe factory
depicted in Figure 3, or a hospital might contain hundreds of job types.