In microeconomics, division of labor is an approach applied in most organizations whereby complex and sophisticated activities are divided down into simpler tasks and assigning the same tasks to people who are specialized in those particular divisions (Boyes & Melvin, 2012). From the past record in history, there exist a relationship between division of labor with growth output of trade, increase in capitalism and growth of industrialization processes. In addition, division of labor enhances specialization hence increased and production.
The division to specialty experts occurs both horizontally and vertically. This division brings a question on how the transactions taking place under the division of labor are coordinated to be in harmony with one another. At many times it is difficult because the different departments are managed by different directors who sometimes have contradicting ideas and strategies in running businesses of a company. Moreover, it has been seen in many organizations that, some institutions collapse due such leadership that take a different course.
There are a number of strategies of achieving coordination of different divisions. For instance in a factory, the production processes are divided into various simpler operations. In these operations, there are workers who have been assigned to take care of them. The management then supervises the divisions in order to coordinate the whole system. In overseeing the operations, it can give instructions which are followed by both divisions. Such mode of operation is known as the industrial division of labor (Boyes & Melvin, 2012).
More often than not, division of labor is only known to exist within one organization or company. That is not the case because it can exist between different companies, factories or organizations. It also exists between different workers for example between a doctor and a farmer. At the first glimpse, it is observed that the division of labor in that case differs sharply from the initial one. The different activities are not dependent to each other hence not controlled by one central governing unit. It is the mechanism of the market that controls the activities of such independent units. This type of division of labor that is coordinated by the exchange processes is referred to as, the social division of labor.
There exists a pertinent relationship between the two divisions of labor in the contemporary system of the economy. The industrial division of labor for instance within the internal organizational structure of a company or a factory, and the social division of labor among the independent units. It is the social division of labor which differentiates the economic system from the social system. The industrial division of labor cuts across the whole economy unlike the social division of labor (Boyes & Melvin, 2012). The characteristic of socialism is one of its serious weaknesses. Many enterprises have grown to the extent that they have become extremely vast that the directors of such organizations are no longer able to control and coordinate the transactions appropriately. Amazingly, there is no concern to limit the growth of such enterprises within the manageable sizes. Imagine a case where the entire state has been converted to one gigantic single enterprise (Boyes & Melvin, 2012). All things were to be in a mess because there are no management strategies that can be employed in overseeing and coordinating all the operations that exist in such enterprise. Due to lack of coordination then the company can experience a lot challenges in coordinating their activities. Afterwards, the opposing operations can pose future uncertainties to the company. Such giant organizations with many divisions which are not managed well by a single central authority have collapsed. Therefore, it is significant that the size limitation policy of enterprises be formulated and implemented to control the sizes for easy management.
The social division of labor incorporates most of the significant economic system features. It does not acknowledge the independence of the producer but also it embraces all the freedom and rights which are associated such independence. Such liberties include; the ownership of production, inheritance rights, liberty in giving contracts, and having the liberty to select occupation (Boyes & Melvin, 2012).
The social division of labor makes assumption that exchange, that is, the exchange between money and goods is dominant in the economy. In this case of a system whose origin is the social division of labor money is the material used for exchange in the economy. At the time of the invention of money, many exchanges that existed there before were tremendously minimized to a two party exchange. Before money was invented, exchange of goods for goods were hectic in a situation where one person is in need of a different thing a part from the one the other party has. This meant that, the other could go to a different person where his good is needed and exchange it with the one that was required by the first person. The process could proceed if the need for the second person was also different. This caused lot of problems that were later cut down by the introduction of money into the market. References
Boyes, W. J., & Melvin, M. (2012). Microeconomics. Mason, OH: South-Western Cengage Learning.