In economics, factors of production are the resources and inputs that are used in the process of production to produce an output, finished goods, or services. The three basic factors of production are given below.
In this section, we shall learn about labour, the major factor of production.
In terms of Economics, the term labour refers to the efforts exerted by humans to produce the final goods and services. So, you must be wondering what is meant by labour as a factor of production? It is simply all types of human efforts, including physical, mental, knowledgeable, and intellectual that is exerted, to get an economic reward. Therefore, it can be defined as the physical or mental effort by a human in the process of production. It comes under the category of primary factors of production.
Now, we shall discuss in detail the features of labour as a factor of production.
Unlike other factors of production, labour pertains to living beings. To explain the true meaning of labour as a factor of production, you must be well aware of all the characteristics of the same. Some important features of labour as a factor of production are discussed below.
1. Perishable in Nature
The term perishable means something that cannot be stored or saved for long, as we know that labour is the flow of service of a labourer. It cannot be stored, which means that if a worker skips one day of his work, he cannot utilize this labour the next day. A day without work cannot be revived. Hence, labour is considered as highly perishable.
2. Labour stands for Human Efforts
Unlike other factors of production, labour is directly related to human efforts, including both physical and mental efforts by a person. When a person works for hours intending to produce the final product or goods or services, he also needs to rest. Hence, it proves that labour is human effort. Some significant factors of labour are as follows.
Fair/good treatment of workers.
Providing a suitable and comfortable environment for workers.
Workers must not be forced to work extra time at low prices.
As a worker, the person must be honest and hardworking.
3. Labour cannot be separated from a Labourer
To use labour, the physical presence of a labourer is essential. Labour is simply the services provided by a person. So, the person selling the services must be present at the site of production during the time of production. For example, a welder or a builder can not work from home. To carry out the process of construction, he must be physically as well as mentally present at the site. Therefore, one can say that labour-power exists only as long as the labourer exists.
4. Labour is heterogeneous in Nature
This statement means that every labor is unique in his own way. Each individual possesses different qualities and abilities that he or she can use at the workplace. Everybody may have different qualities, hence, must never be the prey to any comparison. The quality of work may differ depending upon the following factors.
Work environment provided to the person.
Skills that an individual possesses.
Perks or incentives offered to the person.
Inherent qualities of individuals.
5. Low Bargaining Power
Labour doesn’t have a standard price. Many times, due to lack of employment, illiteracy, and other factors labourers are forced to work at relatively lower prices for the sake of their livelihood. Their skills and work cannot be stored for later utilization. People usually take advantage of a labourer’s unfortunate situation and poor living conditions and make them work on lower wages. When compared with the services of an employee, a labourer has very low bargaining power. The need for money to live compels them to accept the low wages that they are offered.
6. Not Easily Mobile in Nature
Now you must be wondering, why cannot a labour move to the site of production for work? A labourer in need of money and search for work can surely relocate to the site of production. However, many factors including, the family’s responsibility, travelling expense, the unsafe environment makes the situations difficult for him. Whereas, if we talk about other factors of production, such as goods and raw materials, these can easily be transported from one place to another. Therefore, in comparison labour is less mobile than other factors of production.
7. Inelastic Supply
Let us understand this with an example. Suppose, during the construction of a cinema hall in a metropolitan city, there is a shortage of skilled labourers. So, in such a case, his work might get delayed, but the skilled labourers cannot be generated suddenly. Even the movement of labour from another place for the construction of that particular cinema hall will take considerable time, efforts, and relatively higher expenses. Thus, it is correct to say that supply of labour in a market is inelastic as it cannot be increased suddenly with the increase in demand.
8. Efficiency can be Increased
If any person is given adequate education, his efficiency to work or to provide labour can be raised. Proper guidance, learning opportunities, and experiences play a vital role in the process of increasing the efficiency of a labourer.
9. Decision Power
Unlike capital, land, other primary and secondary factors of production, labour can make rational decisions regarding his or her job. Hence, labour possesses decision making power.
Q1. What is meant by factors of Production?
Answer: Factors of production are majorly considered as the building blocks of an economy. The inputs needed to produce goods and services fall under the concept of factors of production. The four major factors of production are:
Q2. Why is labour called an active factor of Production?
Answer: As discussed above, labour is the living factor of production. It is the only factor that can work and start the production of goods and services itself. Labour uses land and capital for production. However, neither land nor the capital can itself begin production of goods to produce the final product. Therefore, labour works as an active factor of production used for producing the final product.
Q3. Why is the efficiency rate of labour being relatively lower in a populated country like India?
Answer: Many factors have lowered the efficiency of labour in India. Despite being a populated country, the efficiency of labour stays low due to the below-mentioned factors.
Hot climatic conditions.
Low wages are offered to the labourers.
Inadequate availability of machinery required for production.
Lack of availability of raw material.
Lack of available resources required for production.
Lack of education and training.
Low literacy rate.