Division of Labor

What is Division of Labor?

The division of labor is the division of a process into different work steps that are carried out by different people, groups or companies. The concept of division of labor is based on what Adam Smith said. By specializing and developing skills in a certain area, the productivity of the actors involved increases. Different forms of the division of labor are the personal, international or regional division of labor.

In the following lesson you will learn everything you need to know about the principle of division of labor, its manifestations and advantages. There are also some exercises that you can work on after the explanations in the lesson.

  • Synonyms: cooperation
  • English: division of work | division of labor / labor

Why is the division of labor important?

The actors involved in the economic cycle want to use the available resources effectively. Increasing productivity is the constant goal of people, companies or even states. With the principle of division of labor, it is possible to increase effectiveness and to concentrate on certain areas of responsibility. By dividing the tasks, these can be done both at lower cost and in higher quality.

Principle of division of labor

According to foodezine.com, the division of labor is the organizational breakdown of a task into various sub-areas, which are then assigned to different performers.

Various economic entities come into consideration for the executors:

  • People
  • company
  • Regions
  • States

Division of labor

According to Adam Smith, an increased productivity of work is based on the division of labor.

The increased productivity is due in particular to the following three areas:

  • saved time
  • Specialization and skill improvement
  • Technical innovations

Types of division of labor

There are different types of division of labor.

Division of Labor

The following types of division of labor are common and are represented in economics:

  • Personnel division of labor: Specialization in various professions such as medicine, craftsman or computer scientist
  • Internal division of labor: different departments in a company take on different tasks ( production, purchasing, sales, etc.)
  • Inter-company division of labor: Different companies carry out individual tasks
  • Regional division of labor: specialization depending on the region
  • International division of labor: Different countries specialize in different activities

Advantages and disadvantages of the division of labor


  • Higher productivity
  • Better utilization of manpower
  • Higher quality


  • Economic risks for the entire economy
  • It is not easy to change jobs
  • Dependence on other actors

Limits to the division of labor

The limits of the principle of division of labor result from the expansion of the market and the limited resources of the companies. Due to the company’s capital resources, a division of labor is only possible and promising to a limited extent.