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In this article we will discuss about:- 1. Meaning of Labour 2. Types of Labour 3. Characteristics 4. Labour- The Most Important Factor of Production 5. Entrepreneur—Special Type of Labour 6. Supply of Labour in an Economy 7. Division.
Notes on Labour:
Labour is the human resource of production. It indicates the aggregate of all human physical and mental efforts used in creation of goods and services with a motive to earn money. Any effort or exertion undertaken for the sake of pleasure or social service is not considered as labour. According to MARSHALL, “Any exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work is called labour”. The work done by machines or animals is not ‘labour’.
If a student plays a game (cricket or hockey) vigorously, with great exertion of body and mind for pleasure only or a mother looks after her child out of affection or a man works in a garden for pleasure/hobby; then these exertions are not considered by economists as ‘labour’ because they have not done their physical and mental work with an objective of earning money.
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But, when a cricket coach or a football coach teaches the players to improve their game or a nurse attends to a child in hospital, or a man works in a garden, in order to get monetary remuneration, economists call such efforts or exertions ‘physical’ or ‘mental’ as ‘labour’. But if the work has, at any time, been done for the sake of pleasure, recreation or for satisfying any kind of religious, patriotic or social feelings, then it will not be treated as ‘labour’.
Both physical and mental efforts are required to complete a work. However, in some kinds of work, more physical labour is involved as compared to mental exertion. Whereas in some other type, there is more mental exertion is required than physical labour. As such, one cannot clearly classify any work as of purely physical labour or mental labour.
“By labour is meant the economic work of man, whether with the hand or the head.”- PROF. MARSHALL
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“Labour consists of all human efforts of body or mind, undertaken in expectation of a reward”-THOMAS
Types of Labour:
This classification of labour is based on the proportionate degree of muscular and mental energy involved in doing a particular type of work.
Wage Labour:
Workers who are hired on a fixed wage rate, e.g., workers in a factory.
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Non-Wage Labour:
Workers who do not earn any fixed wages, e.g., self-employed workers like doctors, lawyers, etc.
Characteristics of Labour:
Labour is an active factor of production which makes it distinctly different from other factor of production. Besides, labour is not only a ‘means of production’ but also an ‘end of production’. The following are some of the important characteristics of labour, which make it different from other factors of production.
1. The labourer (worker) and his labour are inseparable:
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The efforts of a worker cannot be separated from him. A labourer’s work has to be delivered in person. But this is not the case with other factors of production. For example, a farmer has to be present in the field to plough the field, but the owner of the field does not need to be present at the time of the cultivation unless and until he himself is the farmer. Hence, it can be said that a labourer has to carry his labour-power with him.
2. The labourer sells his services (labour) only:
A labourer (worker) sells his services only and not himself. When a worker sells his services (labour), he himself remains quite independent and retains his identity. A labourer may or may not agree to do a work. The ‘labour’ factor comes into consideration when he agrees to offer his services on certain terms and conditions.
3. Labour is an active factor of production:
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Land and capital are inactive factors of production because they cannot produce anything on their own, but labour is an active factor. This is because the labourer is a living entity. A labourer (worker) can think, act and move in different ways and manner and thus, can function according to his need or circumstances. A worker can perform his services without co-operation from land and capital, but land and capital cannot be put to any use for productive purpose unless and until efforts from labourer are made available.
4. Labour is perishable:
If a labourer does not work for a day, his one day’s work will be lost forever. As such a labourer (worker) agrees to work even at a lower wage, when he feels that his labour is likely to be wasted. Because of this peculiarity, a labourer does not have the same bargaining power similar to his employer.
5. Labour has a typical nature of supply:
Individual labour supply is not similar to the supply of any other factor. As price of any factor rises the supply of it also rises, but that is not the case with labour. As wage rate rises, a labourer becomes willing to supply more labour, thus labour supply also rises. But as wage rate increases further the labourer may wish to enjoy more leisure than to work for longer hours, as his living standard has improved. Hence, the supply of labour falls.
6. Supply of labour changes slowly:
The supply of labour cannot be increased or decreased quickly, as the supply of labour is related with the population of the country. If at any time, the demand for unskilled workers increases, it cannot be supplemented quickly “by just making orders or indents” as it can be possibly done in case of other commodities.
For more supply of labour, we have to wait for the growth of population, which may take a long period of about 15-20 years. Similarly, if the demand for engineers or doctors increases, then also it will take many years to arrange the required number of such professionals for which there will be a need of establishing more educational institutions (Engineering and Medical Colleges).
7. Labour is less mobile:
Labour is less mobile in comparison to other factors of production except land. This is because of labourer’s sentimental attachment to his home and surroundings. The problems of language, differences in living habits and social customs, etc., are some other important factors affecting mobility of labour. But now, due to availability of modern means of transport and better employment opportunities, mobility of labour, certainly, has increased.
8. Labourers differ in efficiency:
The manufactured goods, commodities, tools and machines are mostly symmetrical and can be interchanged conveniently. For example- if a particular type of tool is broken, or requires replacement due to wear and tear, it can be easily replaced by another one of a similar type and the work can be managed in the same manner, but this is not possible in case of labour, because the efficiency of each individual worker is different.
Therefore, if a trained and an experienced worker falls sick or resigns, it is very difficult to get a worker of the same skill and the same efficiency. This is the main reason as to why different categories of workers get different wages.
9. Quality of workers can be improved:
The quality of labour can be improved to a great extent by proper education and practical training, which need the establishment of schools, colleges, technical training institutions, workshops, etc. These again require huge amount of capital investment. It has been observed that countries with better training facilities for their human resource can produce efficient and competent labour force.
10. Labour refers to human efforts only:
Labour means only human exertion and not the exertion of cattle or machine. Labour always involves the mental and physical pain and sacrifice.
11. Labour has low bargaining power:
Usually labour has no reserve and is compelled to accept low wages. But the development of the trade unions has considerably improved the bargaining power of the labour in recent times.
Labour- The Most Important Factor of Production:
If we examine the contribution of various factors of production (land, labour, capital and entrepreneur or organizer), we find that labour is the most important factor of production. A nation having plenty of rich land but no labour force, cannot attain any economic development or prosperity. Agriculture, industries, mining, transport system, trade activities, etc., all require sufficient and efficient workers for proper functioning.
The following facts establish the importance of labour:
1. In Active and Living Factor of Production- The land and capital do not play any active role in production.
2. Natural Resources and Capital have no Identity without Labour- Land and capital would lay waste in absence of labour.
3. Nations Economic Growth is influenced by Labour – Hardworking, dedicated and intelligent labour can progress the country to the path of development.
4. Main Source of Consumption and Promotes Production – Consumption by labour triggers production and investment. Lord Keynes believed that increase in consumption encourages investment.
Entrepreneur—Special Type of Labour:
Even though the organizer and entrepreneur have been regarded as separate factors of production, yet in fact these are special types of workers, who have some special abilities and special functions to perform. An organizer, for example, has ability to organize an industry and that capability is acquired after having special kind of training.
Otherwise, an entrepreneur is also like an ordinary labour. The only difference between him and an ordinary worker is that the former has to do a lot of mental work and has to implement his decisions regarding planning, co-operation, execution and motivation to achieve desired production targets whereas the latter has to only carry out mental or physical work entrusted to him by the former (employer or entrepreneur).
Due to his special abilities and experience, the entrepreneur is able to take decisions. He also possesses ability to direct his workers in respect of plans made by him so that the production units may earn maximum profits and may develop and keep the goodwill. The ordinary worker, however, only performs the duties as planned and assigned by the entrepreneur.
Thus, in fact the organizers or entrepreneurs are also labourers having some special capabilities.
Supply of Labour in an Economy:
By supply of labour, we mean the amount of labour that is available for work in the country. The supply of labour is usually measured in units of man-days.
There are various factors that affect the supply of labour.
The important among them are as follows:
1. Population:
The larger the population, the larger will be the number of persons who are available for work. Hence, the larger will be the supply of labour.
2. Out-Migration and In-Migration:
If some people leave the country, the total number of population goes down, and if some people enter the country from outside, the population goes up. For this reason, the supply of labour is seen to be large in those countries where there have been large drives of in-migration in the past and very little out-migration.
3. Age Structure:
The supply of labour depends, not so much on the total population, as on the age structure of the population. How much of the population are in the working age group (say, between 15 and 59 years), is the more important question.
4. Number of Able-Bodied Persons:
The state of health of the population is an important determinant of labour supply. If the state of public health is poor, the number of able- bodied persons will be low, even for a high population.
5. Labour Force Participation:
By the labour force participation rate, we mean the percentage of the people of the country who wish to work. Hence, if the labour force participation rate goes up, the supply of labour goes up, even if the population remains the same.
6. Wage Rate:
The higher is the wage rate, the larger becomes the supply of labour. This is because a rise in the wage rate makes work economically more attractive. Hence, the willingness to work increases with a rise in wage rate. Sometimes there are exceptions to this general rule.
7. Government Regulations:
Government regulations often affect labour supply by controlling the length of the working day.
8. Efficiency of Workers:
If each worker becomes more efficient, then each of them is now capable of doing more work within a specified time than before. In this case, although the daily supply of labour in terms of man-hours remains the same, there are good grounds for saying that the effective labour supply in the country has increased.
Division (Specialization) of Labour:
The assignment of different parts of a manufacturing process or task to different people in order to improve efficiency is known as division of labour.
Adam Smith in his book The Wealth of Nations was the first to put forward the idea of division of labour. He suggested a division of manufacturing process into uncomplicated and simple operations which are performed by different units.
With the invention of machines and the large-scale production of goods, the specialization or the division of labour has become necessary and important. Earlier, when the production was on a small-scale and there were no machines, the people were doing most of the jobs themselves to fulfill their needs. For example- the farmer besides cultivating his fields, used to grow vegetables and fruits, tamed cows and buffaloes for milk and butter and also worked as a carpenter for building and repairing his articles of work and household furniture.
Now a days, with the help of machines and the universal use of ‘money’ and ‘currency’ the commodities are being produced on large-scale. As such one worker is usually required to produce only one item of the whole unit or complete the operation in a chain of operations for which he has capability and aptitude. Other items or operations are produced/completed by parallel units in the same or other plants on the circuit of chains.
The division of labour has become all the more important and essential now because of increasing complexity of working processes. To accomplish the work successfully, the complicated work is divided into smaller simple segments and accordingly the labour is engaged to perform the task related to each segment. Thus, a worker is required to perform only one specific type of work and its regular repetition improves his skill and efficiency.
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