What is Division of Labor?

Division of labor concerns dividing the production of a good or service into a number of tasks that different workers perform, instead of all the tasks being done by the same person.

Who Introduced the Concept of Division of Labor? 

Adam Smith (1723–1790) published his famous book The Wealth of Nations in 1776 introduced the concept of division of labor.

How Does Division of Labor Increase Economic Output?

Division of labor increases efficiency and output through:

• Specialization
• Competency
• Economies of Scale

How Does Specialization Relate to Economic Output?

Specialization means developing a higher level of skill or proficiency through the repetition of finite tasks. It allows them to do what they do best while others do what they do best.

How Does Competency Relate to Economic Output?

As employees become more competent (they work more quickly and at higher quality). In the same way, businesses increase efficiency through focusing on their core competencies.

How Does Economies of Scale Relate to Economic Output?

Economies of scale means that with higher levels of production the average cost of producing each individual unit declines. Higher competency allows for the higher level of production and ultimate cost savings.