Video case study: Adam Smith's relevance today
This is the first of two video case studies arising from the Adam Smith tercentenary in 2023.
Video 1: Productive and Unproductive Labour
Video 2: Re-productive Labour
Citations to Smith
The full text of "An Inquiry into the Nature and Causes of the Wealth of Nations" is available through Project Gutenberg in various formats. Cited sections:
- Book II, Chapter 3 "Of the Accumulation of Capital, or of Productive and Unproductive Labour"
- Book I Chapter 8: "Inequalities arising from the nature of the employments themselves" (bargaining power)
- Book I Chapter 10: "Inequalities arising from the Nature of the Employments themselves" (compensating wage differentials)
- Book I Chapter 8 "Of the Wages of Labour" (necessary wage for social reproduction)
Transcripts and links
Video 1: Productive and Unproductive Labour
So hello, I am Danielle Guizzo from the University of Bristol.
Hi and I'm Andrew Mearman from the University of Leeds.
And welcome to this Economics Network video and we're going to present you with Adam Smith's relevance and his work for the teaching of Economics today. So if you've already watched the video that we discuss reproductive labour you have seen how Adam Smith's work can be applied to care work and in this video we're going to focus on a key concept in his treatment of growth which is productive labour.
Yeah, Smith held that along with the division of labour, the proportion of productive labour relative to the whole were a major driver of the wealth of a nation so it's really core to his thinking.
Productive labour is the labour which creates value as opposed to just redistributing value and this latter for Adam Smith is unproductive labour. So this is it doesn't mean that it's without worth but it's what Adam Smith called as services and professions which were also important for the development of society in a broader sense, including what we would know as Professional Services today such as lawyers and teachers and Andrew I know this is something you've discussed in class, right?
Yeah, we've discussed it in a second year economics course on theories of growth value and distribution. Students find this productive/unproductive distinction intuitively appealing, if a little bit troubling for them in their own career plans. They don't like to think of themselves as unproductive labour. But they can also see its relevance in discussions around industrial structure and the loss of manufacturing and how this might link to productivity growth rates in advanced economies.
And I know that you've done a second exercise as well?
Yeah we asked students to consider whether Smith's concept of productive labour might help some current patterns of wage earners so we looked at the category of key worker which obviously became defined during the COVID pandemic and that label "key work" confers some sort of value on on those people. However, as we can see from the data from the UK Office for National Statistics on key worker wages, these workers are also often amongst the lowest paid.
Task: invite students to consider ONS data on key worker wages and to try to explain them using Smith’s work, as well as compare it with current research on bargaining power of top positions.
Indeed and we can see as well though that some of the categories, for instance telecoms, would appear to fit a picture that productive workers get paid more, security people get paid more,
...and health workers get paid a range of salaries.
Yeah so in the end, students thought that there was more going on rather than just think about one sector category per se. There's more to it.
Yeah so we also for instance drew on Smith's concept of bargaining power and how some key worker wages could be thought of in terms of Smith's general understanding of labour market dynamics which is partly a scarcity view, consistent with his idea of market price.
And I guess too that some of the wage differentials could be explained through Smith's early work on compensating wage differentials.
Absolutely. I think what we also found interesting was that this concept illustrates that after all Adam Smith was a moral, political, and social thinker and a lot of that thinking is reflected in his economics.
Indeed. So overall we found that bringing Adam Smith's concepts really gave us some very useful tools for thinking about current labour markets today and if you've not watched our video about Smith and the concept of reproductive labour, please take a look. We're going to share the link here for you and we'll see you on the next video. Bye-bye!
Video 2: Re-productive Labour
Hello I'm Andrew Mearman from the University of Leeds.
Hello I'm Danielle Guizzo from the University of Bristol.
Welcome to this Economics Network video about Adam Smith's relevance to teaching economics today. If you've already watched the video about productive labour you'll have seen how Smith's work can be applied to understanding current wage differentials. In this video we'll discuss how his work relates to a key concept in understanding the household, as developed by feminist economics, and that's reproductive labour. So as discussed in the previous video, productive labour is that which generates value and therefore contributes to growth, whereas unproductive labour may have worth but doesn't directly produce value. So Danielle, how might this be applied to the concept of reproductive labour?
So reproductive labour was also one of Smith's concepts that he discussed in his work. He defined what productive labour is and how that generates value and that's important for growth in The Wealth of Nations. He contrasted that with unproductive labour. However, he also had this idea of reproductive labour which is the work, or let's say the tasks, and all the labour that it's being done within households that are important for the sustenance of workers. So, for them to be taken care of, well fed, rested so they can engage in the labour market and engage in productive activities.
Is this something that you've explored in class?
It is. So the concept of reproductive labour that Smith already brought up in his works can be related to very recent discussions that we have in economics today with the feminist economists. So feminist economists, they bring discussions related to norms and discrimination in the labour market, the gendered division of labour, the dual labour market models, or even the invisibility of certain functions in the care economy and this relates very directly to what Smith was already discussing with reproductive labour and this is something that we can discuss in class. So I give students a piece of reading about feminist economics and this idea of reproductive labour and care and then we can relate back to Adam Smith's quotes and his discussions.
Task: Invite students to read short blog piece about reproductive labour and contrast with Smith:
- How can such discussions relate to norms, discrimination, and invisibility in the labour market (gender pay gaps, measurement of GDP, wage determination)?
- Relate to dual-labour market models, understanding of discrimination, disappearance of women in economics
So Smith already recognized that; we can see that in the quote on the screen now, can't we?
Exactly. So it is very interesting because not only Smith acknowledged that work and considered it to be very necessary for the support of the economy but he also emphasized the necessary wage for social reproduction. So he emphasized that workers and households and families they require an important and substantial amount to be paid for. So for them to be maintained and for them to have let's say a quality of life so they could be prepared and taken care of so they can enter the labour market.
So Smith's kind-of recognizing that children are, in a way, potential productive labour and therefore the source of future growth. So that's very interesting. Great, so how else have you used this in class?
Then besides discussing the concept of reproductive labour, necessary wage, discrimination, or even human capital formation we can also think about what this represents for reproductive labour today and how we think about household dynamics and gendered labour divisions. So for instance we can see from the slide that even within households and the household decisions and dynamics men and women have, let's say, a different division of labour in terms of reproductive labour tasks: in terms of cooking, transportation, housework and so on. So we can also see the family division but there's a very nice tool that I recommend to use in class with students which is created by the Office for National Statistics in the UK, which is a sort of a calculator where students can enter the time and the tasks that they do in their house and then they can see how much unpaid work they spent every week. So this amount is calculated through a market price replacement: how much it would cost for you to hire a person to do all the things that you do in your own house? This would give you an amount of how much unpaid work you do every week. This generates a very interesting discussion between students because we can see that certain groups of students with different backgrounds, different families, cultures, genders: they have also different divisions of unpaid work.
Task: calculate the value of your unpaid work using the ONS Calculator.
In 2016, the value of the UK’s unpaid household service work was estimated at £1.24 trillion – larger in size than the UK’s non-financial corporation sector; overall unpaid household service work was equivalent to 63.1% of gross domestic product (GDP) (ONS, 2016)
Well that sounds great; let's hope it doesn't cause too many rows in student houses. So I think overall again we've shown that Smith's work on productive labour and unproductive and indeed reproductive labour can give us a really good springboard to thinking about contemporary issues of labour and production including that in the household. So hopefully you'll find that as rich as we have. If you've not watched our video about Smith and the concept of productive labour, please take a look and follow this link.