The Adverse Effects of the Division of Labour

It is generally assumed that the division of labour is an all round good thing that will improve efficiency in a given task. The division of labour must necessarily go hand in hand with things like mass production and the growth of huge companies. A key factor to remember about the division of labour is that you need each role a person is doing to occupy all of their time. If on average a company needs five hours of legal work done per week it would be very unwise to employ a full time lawyer to either sit around for seven eighths of the time or to fulfil both legal non legal tasks. Both options will mean you are paying vastly over the odds for the required legal work, or at least vastly more than you should for the non legal work done in the latter case. Companies in this situation will outsource their work which is the most efficient option for them. However if the company in question with a need of five hours of legal work should grow significantly, for the sake of argument lets say ten times bigger, then it would have sufficient demand of legal work to effectively employ their own in-house lawyer which will be cheaper and more effective than outsourcing. This lengthy example is simply to show that the benefits of the division of labour can only really be taken advantage of alongside a scaling up of the business.

One of the noticeable side effects of this requirement to grow to become more efficient through the division of labour is a polarization in the types of company that exist in the present day. There are the various giants in their respective fields that are either nation wide or multinationals and then there are those local sole proprietors and family run businesses. It is often overlooked that to organise and divide labour requires a fair amount of effort, at the large company end of the spectrum these efforts are somewhat negligible even if they are nominally greater than those for the smaller companies. At the sole proprietor / family businesses end of the spectrum however the effort to train and manage additional employees is substantial as a fraction of the total required work. Also it is always much more of a jump up in terms of relative size to take on extra staff at the small end of the spectrum compared to the big end of the spectrum and so you cannot incrementally take advantage of economies of scale. As the returns from the division of labour are less efficient for small companies, and as they require proportionally more input to incur, there is a disincentive to grow. The small businesses often provide more returns on the input the smaller they are, up to a point, and growing past that point is a lot of hard work with relatively low odds of success (As a side note specific the the UK, the VAT threshold is also a cripplingly restrictive on small businesses breaking through into being nationwide). The amalgamation of labour has its own associated efficiencies in terms of operating and running a business. When you can amalgamate all your labour into one worker you are the most efficient a company can be in terms of delegation and management along with any personnel duties. Much like many laws in chemistry and physics, at different magnitudes or under different conditions certain laws will start to dominate where once they were negligible. While the division of labour is the dominant force for efficiency in large companies, the very small ones are predominated by the efficiencies of the amalgamation of labour.

There is nothing wrong with the small business however, they provide valuable services, employment and are often important within the smaller communities. What they do not tend to offer is progression, it takes a company with much capital behind it to invest into doing something new or devising improvements to current practices and then to usefully put that into effect. Small companies keep things ticking over within society but large companies help to move us forwards. Certainly we want both within society, the problem is that there is very little migration from the small to the large. Social mobility is talked about much but the mobility of business is not something so commonly regarded as an issue. My concern for the lack of commercial mobility (specifically in more established sectors, for example something like electronics in its emergence is less susceptible to these effects) is that innovation is more likely in the newer budding companies and industries. When vast companies have infrastructure to do things a certain way it can be expensive to make improvements to the infrastructure. Even practices within various industries are die hard, many record labels for example being very slow and unwilling to embrace the internet and take advantage of their capital and market share to get ahead in the new environment, instead choosing to fight the internet and keep things as they were before, which is like fighting the tide and only serves to slow progress. In many cases due to the efficiency differences just from the size difference between companies the large old company with its outdated practices and infrastructure will still be able to be more competitive than the new innovative company with its better methods. It is not until the old methods are so outdated that the forces of capitalism will give the innovative companies a competitive edge and allow them to grow. As such progress within society is retarded. The large companies have the capacity to invest and implement innovation however they are under no real pressure to do so as a result of the impotence of smaller companies that are both more likely and more able to take new approaches. Smaller companies therefore stagnate progress within society not just because they do not grow themselves very often but also, and perhaps more importantly, because they fail to pressurise those companies more able to innovate, improve and implement into doing so.

The second problem with the division of labour is that by offering an efficiency incentive to the larger companies it naturally encourages the forming of monopolies and companies with dangerous levels of market share. The bigger the company gets the more efficient it can potentially be and therefore has a higher chance of surpassing competition. I have discussed the problems of monopolies in reasonable detail in other essays and so I shall just offer a quick outline here. Essentially monopolies are devoid of competition which is the driving force of capitalism. Competition between companies is what forces improvements and keeps prices low. A monopoly can stagnate in terms of making any improvements while still making a killing on profits. The consumer is at the mercy of the monopoly while a company with good and varied competition is at the mercy of the consumer and can only win by serving them best. A competitive industry may still stagnate in terms of progress and developments however it will still tend toward offering the consumer the best possible costs and services. When a monopoly starts to take advantage of its consumers it will serve to widen the wealth gap within society which in turn has a wide range of detrimental effects on society from increased crime to decreased individual happiness. These are statistical trends rather than proven facts however the logic that is used to support these trends makes good and clear sense and is akin to evolution in its plausibility as an unproven theory. Monopolies are not limited to their industry in regards to their detrimental effect on society. A monopoly on the supply of diamonds doesn't just mean you will be paying more for diamonds.

It is also not just pure monopolies that are guilty of failing to best serve consumers but rather it is a scale that starts to take more effect as companies grow in market share. A good example of this are the various super market chains in the UK which may appear to offer sufficient competition and a wide range of choice to consumers but in reality are a little more pernicious. Certainly they are not monopolies however they do not directly compete with each other as one might imagine. Firstly they each tend to cater for a specific demographic and secondly they are fairly well spread so as to have somewhat of a local monopoly. If you were able to isolate the various demographics and assign them as separate markets then each of the major supermarket chains would suddenly look a lot more like a monopoly, which is only compounded in effect with the location spreading of outlets. It is not really the other supermarkets that each of the major chains must compete with but it is the local markets, butchers, bakers and greengrocers that infringe on their location and demographic pseudo monopolies. This however has proven to be an easy fight for the super markets to dominate with their economies of scale and the effect is fairly pronounced and observable in the decline of the independent food retailers over the last fifty or so years. In essence then the supermarkets needs only serve the consumer sufficiently well to surpass the local markets, greengrocers, bakers and butchers and do not overly have to worry about serving the consumer better than the other supermarkets. The range in pricing across stores in the UK is not a reflection of cost incurred to the supermarket to supply the food in that area so much as it is a reflection of what a supermarket can get away with charging to people in those areas. Overall the effect is a cyclical positive feedback one where companies tend towards polar extremes, the monopoly like companies or the sole proprietor. This secures the position of the monopoly like company who find themselves in a position where they are competing with small companies that are easy to keep down, like a war where one side has tanks and the other bows and spears.

The final drawback of the division of labour is the dissociation of context. Each additional person in the chain of a process incurs either an information loss or a large efficiency cost. For most companies it is impossible for every person to know all the relevant information. The solution is usually rigid protocol and systems that ensure sufficient information is transferred efficiently at each step. This commercial need to know approach to working will provide a sufficient level of service and won't tend to do much wrong however it misses most of the opportunities it might have to excel in some manner or attain extra unexpected efficiencies as they arise. I have worked for large organized companies where things felt devoid of human emotion or input. Consumers got what they expected and nothing more and staff tended to be disenfranchised and unmotivated. I have worked for a rapidly growing disorganized company where information was frequently lost or unused and the result was an awful service provided with many losses of efficiency within the company. Now I am effectively self employed, I know each of my clients personally and am able to offer a service that is more efficient upon my work load while simultaneously being a better service for them. It is also more rewarding when you do a good job as you get to witness the appreciation for your efforts (I am a dog walker rather than the prostitute this could also depict, although for the record I have nothing against prostitution and feel it should be legalized so as to allow for more personal security and freedom for both kinds of party involved). I also prefer to use small businesses where possible as I know where and to whom my money is going. When you spend money with a big firm you have no idea where that money ends up, how much is useless advertising or investments far away from your local area or morally grey profiteering schemes. I shop at my local games store instead of online despite the cost difference because the local games shop also provides a valuable service to the area. We are all a little overly occupied by profits and returns when thinking about economics and forget some of the more important things in life. Small businesses help bind a community together and increase the quality of life for all within. They can offer certain services you simply cannot receive from large companies due to the amount of specific personal information required to perform them and they can be a blessing for those that cannot stomach the familiar feel of working for any large company.

In society we need big businesses and we need small businesses so as to exploit both the economies of scale and also those of amalgamation. We want personalized human interaction but we also want cheap products. The polar extremes of business size generally serve very different roles within society yet unfortunately exist on the same playing field which is far from level. Not all small businesses need to grow in order that large companies feel the pressure to be innovative however it would be beneficial if they were not so hindered in growth by the larger companies. Much of this is a cultural attitude towards money and not just a result of economics but then it is all part of the same complex mosaic where everything is intertwined. A good example of the dissociation of context is that of investments which are usually provided by large companies where fairly minimal human and personal information is known. For starters, unless you have some some material backing or appropriate reputation you will likely not be entertained as a wise investment opportunity. If those able to offer loans and capital investments were more personally involved with people and not statistics there is more chance to spot genuine people with an innovative idea even without renown or capital. This is all very idealistic but shows the potential kind of social efficiency

that can be gained from having a more amalgamated, personal or local working relationship while simultaneously showing a way in which more pressure could be placed on larger companies to be more innovative without tinkering with free trade.

Giving a subsidy or incentive towards small businesses so as to offset the advantages of the larger companies and allowing them to grow more easily is dangerous and almost certainly not the solution. More likely the only solution is a much narrower wealth gap in which the returns from small businesses are sufficiently liveable that growth is far easier complete with better protection against monopoly like companies so that large businesses are too busy competing with each other to quash the little ones. These are long term solutions that can only happen slowly and must be approached from many different fronts. It is not just small business that needs protection from monopolies and pseudo monopolies but all of society. This is a tricky beast to tame as you want minimum disruption to the economies of scale afforded by the larger company. My gut solution is to impose an arbitrary cap on market share which if exceed by a company would then require that company to nationalise a portion, effectively issuing shares which would be state owned, at a rate linked to the market share it exceeds the cap by. There are however many further problems with this as it fails to account for proximal or demographic monopolies very effectively, not to mention the dangers of gross inefficiency so frequently seen in nationalised institutions. The idea is more to encourage companies to invest in improvements towards increasing profit margins rather than market share as the latter is often significantly more worthwhile in the present climate and leads towards monopoly rather than progress. The solution to taming the monopoly is going to be a complex one and not just a silver bullet alteration as each industry is entirely different and needs to be handled accordingly.

It seems as if the solution to every social problem is either a changing of the wealth gap (narrowing in the case of capitalism based societies), eduction or a change to economic policies. The problems caused by economies of scale require two of these solutions and certainly would benefit from all three making it one of the more awkward ones. Fortunately all of its solutions are ones you would wish to implement regardless of the existence of economies of scale as other areas of society and social forces would greatly benefit from the changes. All change has good and bad implications, I measure the value of change in society not on the level of exploitation of the good bits but by the handling of the bad bits. Much as our production of good and gadgets is mighty impressive but overall it leaves a bad taste as it brings to mind how we have squandered so many resources, engendered an attitude of consumption and material wealth and widened the wealth gap further all at the same time. The division of labour is a powerful tool that has given us much. I do not advocate the limitation of its application, only the appreciation for what is being lost as well as what is gained and having a mind towards finding solutions.