Factors of Production under Capitalism Illustrations by Tony Biddle

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Key Topics Covered Land, labor, and capital Work and production Different kinds of work Work and employment Paid and unpaid work Working with tools Technology and tools Defining capital

Factors of Production Land - the natural resources that are used for production Labor - the human capital that transforms raw materials into goods or services (Work) Capital - the technology and investment needed for production to begin Entrepreneurship - the action undertaken by an individual or individuals to initiate the process of producing goods or services

Labor: What is Work? A form of labor. Any productive human activity. The only thing that adds value to the materials we harvest from nature. Comes in many forms, many social arrangements. Work can also be a source of meaning, gratification, and social connection.

Job Well Done “Far and away the best prize that life offers is the chance to work hard at work worth doing.” Teddy Roosevelt

Employment and work are NOT the same thing

Work and Employment Employment is just one form of work. Work performed for someone else, under their direction, in return for payment. A defining feature of capitalism: Employment (or “wage labor”) constitutes most of the work performed in the formal economy. Most people are wage laborers: They must find and keep employment in order to support themselves.

Forms of Work Under Capitalism Employment is not the only kind of work under capitalism. Though it is the most important. Other forms of work co-exist: Managerial work of company executives. Work of self-employed small business owners and farmers (also can be seen as entrepreneurship). Unpaid (“reproductive”) work performed in our families & communities. The vast majority of work in capitalism is paid wage labor or unpaid reproductive work (needed to sustain the labor force).

Wage Labor: An Inclusive Definition A misleading ideology suggests that people are not “workers” unless they work in manual labor sectors (factory, blue-collar, etc.) Workers with higher education, who work in offices, who earn salaries, still fit the definition of a worker: Performing work for someone else, under their direction, in return for payment They are still fully dependent on their employer, and still face an inherent tussle with them over the terms & conditions of work

Spot the Worker

They’re all workers! White-collar or blue-collar. Goods industry or service industry. High-skilled or less skilled. Salaried or hourly. Private sector or public sector. All these people work for someone else, in return for payment. All depend on their employer. All can be disposed of when they are no longer needed.

“Outsourcing” Wage Labor Some employers have tried to convert paid workers into “contractors,” who are workers that are hired to perform work for certain period of time (usually unstable) Example: Uber Does this mean they aren’t “workers” anymore? They are still workers: They still depend on the employer for work. They still perform that work under the employer’s direction. They still perform the work for payment. The only difference: They are now paid worse, with no benefits, and are more insecure. More broadly, most self-employment is also financially difficult and insecure.

Work and “Value” Two sources of value in the economy: Natural resources: Things that can be harvested directly from the environment. Value-added through work (productive human activity). Work is the only thing that adds value to the things we find in nature.

Capital: Working With Tools Nobody works only with their bare hands. Humans learned very early that working with tools makes us more productive. Tools allow us to: Produce more output. Produce higher quality output (goods and services that we couldn’t produce without the right tools). Humans “learn by doing”: The more we work, the more we find better ways to work (including new tools). Improvements in technology

Where Do Tools Come From? Like any other product, tools are produced by work. “Intermediate good”: Something that is produced to then produce something else (rather than consumed). Think of working with tools as a two-stage, “indirect” way of working: First we work to produce the tool. Then we use the tool to perform our end task. But remember: Humans did all the work. The tools themselves are not productive. And merely owning a tool is not a productive act.

Technology and Tools “Technology” is the application of scientific knowledge that develops machinery and equipment (tools) to improve production Technology is not necessarily the “tools” themselves. With new technology, our work can become more and more productive. The tools themselves are not productive, but workers use them to create productivity. Even the most automated assembly line depends fully on work for anything to happen: Work to produce the assembly line. Work to maintain it in good working order. Work to operate it (at least “press go”).

Demystifying “Capital” “Capital” is a vague term that can have multiple meanings and definitions Physical capital: real, tangible products used to produce other products. Financial capital: Money used for investment Fixed capital: Long-lasting structural components to production Structures: buildings, offices, stores. Machinery and equipment: computers, assembly lines, hand tools, transportation equipment. Infrastructure: roads, bridges, utilities. Working capital: the value of raw materials, inventories, and other items used up in production.

Homework Assignment Consider a profession that you would like to have one day. What are some of your daily tasks for that profession? What types of tools would you need to properly conduct the daily work you must do for that profession? Write one detailed paragraph. Consider a job that either your parent or guardian currently has. Have a conversation with your parents and ask them the following questions. What are some of your daily tasks for that profession? What types of tools would you need to properly conduct the daily work you must do for that profession? Write a detailed paragraph.