How many people do you have working for you? Unless you own a business, it seems like a strange question. But even if you have nobody on your payroll, the reality is that you command the labor of more people than you can possibly imagine. Almost all of the goods and services you use on a daily basis are the product of the labor and cooperation of countless people.
At this moment, there are thousands of people in your city ready and willing to prepare meals for you, tend to your medical needs, cut your hair, defend you in court, mow your lawn, clean your house, and even do your grocery shopping.
These are a mere fraction of the services that others regularly provide for us. When you begin to think about how many people’s labor went into growing the food you eat, manufacturing the car you drive, and designing the device on which you’re reading this — and the amount of labor that went into helping all of those people — the number of people who have worked for you (or would like to) starts to reach into the millions.
In The Wealth of Nations, Adam Smith defined wealth as the quantity of others’ labor you can afford to buy with the income you earn from supplying labor of your own.
Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man’s own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase.“]
How did it become possible for even people of relatively modest means to employ the labor of countless other individuals? Adam Smith attributed this type of widespread prosperity to the division of labor and specialization. By breaking down the production of goods and services into smaller components, and specializing in one part of the process and then trading with each other, we can create far more together than we could working in isolation. The more people we are able to freely exchange with, the more opportunities we have to extend this process of wealth creation.
The division of labor makes us wealthier in a number of ways. When you specialize in one particular job, you gain experience and proficiency at it. You become accustomed to the work, exploring all of its nuances and learning unique ways to deal with any challenges that present themselves. This also puts you in a better position to discover innovative ways to save time and effort while completing your job. In addition, when we are focused on doing one specific job, we waste less time making the physical and mental transitions from one task to the next. As a result of this process, we become more productive overall. Instead of wasting time doing everything pretty badly, we all do one thing pretty well, and then we effectively trade a tiny bit of our labor for the tiny bits of thousands (or millions) of other people’s labor that went into making everything we see around us. Not only are there more goods and services for us to consume, there are also many more people cooperating to produce them.
We rely on the labor of strangers to provide us with the goods and services we want in exchange for some of the income we earn providing specialized labor of our own. Even our most basic needs are met in this way. Few people living in developed countries possess the skills necessary to grow or hunt their own food, to make their own clothing, or to construct shelter. Those who do possess these skills have either specialized in them to earn a living, or they engage in these activities as a hobby. Our survival no longer depends on knowing how to do all of these basic things.
Of course, there are plenty of tasks that we perform on our own, such as the work we do in our households and at our jobs. But even then, our tasks are continually made more pleasant and less time consuming because of tools and innovations produced by the ingenuity and labor of others. Think of all the sprays, mops, vacuums, and brushes that today seem indispensable to doing simple household chores.
“The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.””]
Smith goes on to say, “The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.”
The division of labor not only allows us to command the labor of a larger number of people, it also reduces the amount of time and effort we spend supplying labor of our own. Robert Whaples compiled the results of several studies providing historical estimates of how many hours an average American spends working, relative to other activities. From 1830 to 1890, the average workweek for manufacturing workers fell from 69 hours to 60 hours. By 1929, the average manufacturing worker spent only 50 hours per week working, nearly an entire day less than a century before. Manufacturing workers were supplying 38.5 hours of labor per week on average by 1955. Similar decreases in hours worked are seen across other industries.
What are we doing with all this additional time? In 1880, Americans could expect to spend about 80 percent of their waking hours working, in both the market and at home, and only 20 percent engaging in leisure activities. By 1995, Americans were using only 41 percent of waking hours to work, and 59 percent in leisure.
Our ability to command an ever-increasing amount of labor and to consume an increasing diversity of goods and services — while simultaneously spending more time engaged in leisure activities — can be attributed to this collaborative process of specialization and the division of labor. In this way, even the poorest people in our society are wealthier than members of the nobility were in Smith’s day. If we truly care about improving the lives of the least well-off among us, we should focus on expanding the size and scope of our trade network. When we consider protectionist trade policies that reduce the number of people with whom we can exchange, we limit this process and with it our ability to grow wealthier and more prosperous.