SKILL CATEGORIES AND THE ALLOCATION OF LABOUR1
| Published date | 01 October 1963 |
| Date | 01 October 1963 |
| Author | M. D. Steuer,M. D. Godfrey |
| DOI | http://doi.org/10.1111/j.1467-8543.1963.tb00991.x |
SKILL CATEGORIES AND THE ALLOCATION
OF
LABOUR1
M.
D.
STEUER"
and
M.
D.
GODFREY""
I
FEW
economic theories hold that firms
try
to maximize output, but
most theories hold that firms do deploy in the output maximizing way
the factors which they purchase or hire. This seems reasonable. Indeed,
why should a firm do otherwise?
If
it acquires materials, power, capital
equipment or labour, we normally assume that the firm utilizes those
factors in such a way as to get the largest output it can from them. This
does not imply that aggregate output is maximized. There may be
imperfections in the factor markets. An extra unit
of
fuel may
add
more to total output in the hands
of
one firm than in another. But if
the firms have full information, the normal anticipation is that each
firm does the best it can with the factors
it
does acquire. The purpose
of
this paper is to suggest that this anticipation is wrong in the case
of
labour. This result establishes a presumption in favour
of
policies
designed
to
correct
the misallocation. The object of policy should be to
simultaneously narrow wage differentials from the demand side and
increase them from the supply side. We shall endeavour to show why
this is necessary and how
it
might be achieved.
Within a firm, a work force
of
given size may be used in alternative
ways. The firm has an allocation problem. For the sake of exposition,
we may divide the jobs within a firm into three categories with increas-
ing skill content; jobs of the labourer type, the operative type and the
craftsman type. Ideally, how many men should be put into each
category? A possible answer is that these proportions are determined
by technical considerations. In the short run, with given capital
equipment, an extra man in one category adds nothing to output unless
accompanied by appropriate additions to the other categories. Probably
there are production processes which are like this, or approximate this
condition. But for most production processes it is more likely the case
that, over a wide range of mixes, an extra man in any category will add
something to the firm's output. With a given work force, there will be
*
Lecturer in Economics at the London School
of
Economics and Political Science.
**
Research Associate at Princeton University.
1
The authors are indebted
to
the members
of
the Wednesday Seminar at the London
School
of
Economics, particularly Professor
R.
G.
Lipsey, Professor
T.
Ma'umdar, Mr.
F.
Breckling,
Dr.
B.
A.
Corry, Mr.
J.
R.
Gould and Mr. Miles Kennedy, dor criticisms
of
this paper and suggested amendments. Many
of
these require that we postpone
publication
of
the empirical material pending further analysis.
228
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