Wednesday, July 29, 2009

Too Many Baristas, Zero Marginal Product of Labor

I walked into my coffee shop today to be met by 4 smiling baristas. Now my coffee shop isn’t a constant flow of customers and two baristas could easily handle the job. Although things went a little bit quicker as one barista got my coffee while another rang me up, while a third kept at the espresso machine. My coffee shop would have sold the same number of coffees and bagels today if they had only 3 or even 2 baristas.

On Saturday my neighbors got their lawn mowed by some guys from a landscaping service. Their lawn like mine is pretty small. Now I’m wondering why they had two guys with two different lawn mowers mowing the front yard at the same time. Maybe with this configuration they could mow the lawn slightly faster, but I doubt it was that much faster.

Economists call the extra production from an additional worker the marginal product of labor. In the case of the baristas I would say the marginal product of the 4th barista was zero, and the third barista was close to zero. The landscapers seemed like the second guy mowing wasn’t cutting time that much, so I would guess it was close to zero too.

In developing countries families often work small plots of land. Like my coffee shop or the neighbor’s lawn mowing service the last family member working on the farm has a marginal product close to zero (i.e. they don’t really add much). One explanation from my coffee shop is that the 4th barista was actually a trainee, so it could be that families are training their children to work on a farm. More common is that there aren’t really alternative forms of employment in developing countries.

It still doesn’t quite explain the staffing at the coffee shop or landscapers.

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