This video is the beginning of a lesson called Work as a Commodity. This lesson is the third and final lesson in this module on what makes employee's work. Money of course. Take a look at this bustling market in Malaysia. What's it full of? It's full of commodities, like a phone. Like an apple or like this cool gecko made out of a soda can that I found in South Africa. What is a commodity? Well, a commodity is an article of commerce for an object of trade. With the rise of industrial capitalism, work becomes a commodity. Now, I don't want to get too much into the history of it, but I do want to note that there is nothing natural about labor being seen as a commodity. It's mostly a modern invention. Why? Well, under capitalism, everything else is traded, so why not labor? Also, to get the benefits of specialization and division of labor, that we associate with industrial capitalism, we need to bring together workers who specialize in specific tasks. Now, note that when labor becomes a commodity, then hammering a nail, driving a truck, or programming a piece of computer software, are all seen as sources of economic value that can be made equivalent by exchanging them in labor markets, be an appropriate set of relative prices. So labor becomes seen simply as a generic input into a production function. You might remember a simple production function like this one from an economics course. Where output Y is a function of two inputs, L and K for labor and capitol. Put all of this together, and labor is seen as a commodity. An article of commerce traded in the marketplace. But labor is a special commodity. It's a special commodity because it has productive value. Now all commodities have value, otherwise there's no point in trading them. But not all commodities have productive values. In fact, Marx thought sees labor as the source of all value. This was called the labor theory of value, but that's a tangent we don't need to explore. Now, a second reason why labor is a special commodity, is because it involves people. However, this is typically overlooked when economists, business leaders, and policy makers see labor as just a commodity. Instead, it's seen as a generic productive input, that makes things of value. In other words, oftentimes in economics and in business, labor isn't that special. L in this production function, isn't that special. It's simply seen as a factor of production just like capital or like other inputs. From this perspective, organization should optimize by buying the correct amount depending on its productivity and price. And from this perspective, labor is treated as a cost on a balance sheet just like every other cost. Now as a manager, my recommendation is to not fall into this trap. Yes, labor has elements of a commodity, but you are buying productive power that resides in human beings. Now, seeing as labor is a commodity raises some other issues. One big issue is that labor then is governed by the laws of supply and demand. And we'll cover that in the next video. A less explored issue is how to think of what's actually being bought and sold when labor is a commodity. Is labor commoditized as labor effort or as materialized effort resident in products and good delivered? So let's take a look at this basic contrast. When, we see labor as a commodity, such that it's labor effort, which is being bought and sold. Well then employers are buying, and employees are selling, control over effort and time. By contrast when we see the commodity as the result of this effort, not as the effort itself, then we see employers buying and employees selling goods and services which embody productive effort but not the effort or the time involved in the production of those goods and services per se. So this involves interesting contrasts. For example, when labor is seen as commoditized labor effect. Then you'd have piece rates are compensation based on tasks. In the other view, you have piece rates based more on output. This also helps us understand worker grievances. When workers see themselves as selling labor effort, then you get conflict over time and control. When labor sees itself as selling materialized effort, you get conflict over wages and performance, not as much over time and control. And if this starts to sound a little philosophical, we just need to note that essentially a labor effort view reflects hourly workers, and materialized effort reflects salaried workers. So hourly workers, selling essentially their hourly time, whereas salaried workers are trying to deliver products, goods and services, not just based on time. So in conclusion yes, labor is a commodity. It's governed at least partially by the laws of supply and demand, which we'll talk more about in the next video. But I wanna end by emphasizing that labor is a special commodity. As a manager, don't lose sight of this. Moreover, you'll be a better manager if you pay attention to what each worker thinks he or she is selling. Maybe they're selling control over their time and effort, but within what boundaries? Or maybe other workers think that they're selling results. This matters for their attitudes towards their work. And therefore how to best manage them.