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Pin factory productivity

Adam Smith illustrated how the division of labour could improve productivity in the famous small pin factory example he used in his tome ‘Wealth of Nations’, 1776, viz:

  • 10 workers, each specialising in a different aspect of the work , could produce over 48,000 pins a day

  • However, if each of these ten workers had made the entire pin on his own, they might not have made even one pin a day, and certainly not more than 20

Hence, one must never focus on the task alone when seeking to improve – always look at the process as a whole

Bertrand Russell, the famous mathematician, wrote the following many years later in response:

                                            In praise of idleness

  • Suppose that, at a given moment, a certain number of people are engaged in the manufacture of pins – they make as many pins as the world needs, working eight hours a day
  • Someone then makes an invention by which the same number of men can make twice as many pins as before
  • But the world does not need twice as many pins – pins are already so cheap that hardly any more will be bought at a lower price
  • In a sensible world, everybody concerned in the manufacture of the pins would take to working four hours instead of eight each day, and everything else would go on as before
  • But in the actual world this would be thought demoralising
  • The men still work eight hours, there are thus too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work
  • There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked
  • In this way it is ensured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness
  • Can anything more insane be imagined?

Conclusions:

  • When qualified workers are in short supply, or increasingly expensive to employ, it makes sense to seek to automate their work

  • At present, and despite low unemployment, UK firms can exploit cheap foreign workers, either immigrants or via outsourcing to the Far East for cheap labour and land or India for English speaking call-centres

  • Come Brexit, however, the former cheap labour source may well dry up whilst, already, the weaknesses of the latter outsourcing route have curtailed much demand

  • So the inevitable pressures on UK management will be to invest in new and better processes and technology

  • Thus a significant uptick in UK productivity growth can be expected in the next year or so

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