Factors of Production: Labour

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In today’s class, we will be talking about Factors of Production: LABOUR. Enjoy the class!

Factors of Production: Labour

Factors of Production: Labour classnotes.ng

Labour is perishable. This simply means that it has to storage capacity, i.e. Labour cannot be stored. If a worker does not turn up to work for one shift his labour of that shift is lost completely. It cannot be stored and utilized the next day. That labour is lost permanently. A labourer cannot store his labour to use at another time. So we say labour as a factor of production is highly perishable.

1. Labour is Inseparable from the Laborer:

This means the physical presence of the labourer is compulsory. To sell his services the labourer has to be physically present at the place of production of goods or services. We cannot separate him and his labour-power. So, we cannot expect a welder to do his work from home, he has to present at the site of the work.

2. Human Effort:

Labour is a unique factor of production in comparison with others. It is directly related to human effort, unlike the others. So, there are certain special factors we must take into consideration when it comes to labour. Fair treatment of workers, rest times, suitable work environment, idle time, etc are just some such factors.

3. Labour is Heterogeneous:

We cannot expect labour to be uniform. Every labourer is unique and so his labour-power will also differ from the others. The quality and the efficiency of the labour will depend on the skills, work environment, incentives and other inherent qualities of the labourer.

4. Labour has Poor Bargaining Power

Labour as a factor of production has a very week bargaining power with the buyer of the services. It cannot be stored, isn’t very mobile and has no standard or reserve price. So generally labourers are forced to work for whatever wages the employer offers. In comparison to the employer, the labourers have very little bargaining power.

There is also the problem that labourers do not have any other reserves to fall back on. They are usually poor and ignorant. And this labour work is their only source of income. So, they accept whatever wages the employer offers.

5. Not Easily Mobile:

Labour as a factor of production is mobile, i.e. The labourers can relocate to the site of work. But there are many barriers to the movement of labour from one place to another. So, we can say labour is not as mobile as some other factors of production like Capital.

6. Supply of Labour is relatively Inelastic:

At any given point in time, the supply of labour in the market is inelastic. It cannot be increased instantly to keep up with the demand. So, say there is a shortage of skilled labour in India, skilled labourers cannot be generated in a day, a week or even a year.

We may be able to import some labour for a short period. But generally, the supply of labour is very inelastic, since we cannot increase or decrease it instantaneously.


In our next class, we will be talking about Factors of Production: Entrepreneur. We hope you enjoyed the class.

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