It Didn't Have to Be This Way by Harry Veryser

Author:Harry Veryser
Language: eng
Format: epub
Publisher: Regnery Gateway
Published: 2023-12-12T00:00:00+00:00

Four Influences on the Division of Labor

Four types of change affect the division of labor in any economy, be it local, state, national, or international. Those four influences are: seasonal, frictional, structural, and cyclical. All these types of change occur simultaneously, interacting with one another.

Seasonal change: Seasonal changes are the simplest and therefore the easiest to understand. Natural seasons affect the economy because of changes in weather. The winter months spur increases in snowmobiling, skiing, and trips to warmer climes. Summer brings boating, light clothing, and beach-house rentals. Since the seasons follow a natural rhythm, manufacturers, travel agencies, and retailers can all plan to have the necessary goods and services available for purchase at the appropriate times. In addition, the financial community can make credit available before the season and expect repayment at the end of the season.

A second type of seasonal change follows society’s conventions. These so-called conventional changes include all the shopping spikes that occur at Christmas, Valentine’s Day, Mother’s Day, and the like. These predictable selling seasons shape the plans of retailers, manufacturers, and many other businesses. Florists, for example, count on huge sales on February 14 and Mother’s Day. If sales fall far below expectations at those times, it will be an unprofitable year. Similarly, retailers look to the Christmas shopping season as their make-or-break period. The day after Thanksgiving has come to be known as “Black Friday” at least in part because that busiest day of the shopping year marks the switch from red ink to black ink in a retailer’s books.

The state of hiring follows seasonal changes. Teachers, resort workers, ski instructors, farm laborers—these and many other workers often prepare to take two separate jobs, one for the season and one for the offseason. Because the seasons (natural and conventional) are predictable, the division of labor will react accordingly.

Frictional change: Economists use the term frictional unemployment to refer to the period after a person leaves one job but before he or she can find another. For instance, someone may be so dissatisfied with pay or working conditions that he quits before lining up another job. But the concept of frictional change can be extended beyond unemployment to other aspects of the economy, such as investment and capital allocation. Sometimes the financial rewards available in one line of work or industry are not enough to justify keeping resources in it. Investors may determine that the risk of a specific investment may be too high to justify the potential return; they pull their investment out without knowing where they will invest their capital next. Or they could pull back from the stock market altogether because of uncertain economic conditions that they fear will lead to a bear market. In either case, they hold out until a good opportunity comes along.

Whereas seasonal changes are highly predictable, frictional changes are much harder to read. One can try-to guess how frictional changes are playing out by watching certain economic indicators such as interest rates on Treasury bills or business closures.

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