Final answer:
Smith's theory of the division and specialization of labor suggests that a skilled engineering worker employed in non-engineering roles would lead to sub-optimal economic output, as their specialized skills would not be utilized effectively.
Step-by-step explanation:
According to Smith's theory of the division and specialization of labor, Smith observed that when tasks are divided among workers, allowing them to specialize in certain components, the overall production increases significantly. This is demonstrated through his example of a pin factory, where specialized workers produced vastly more than if each worker attempted to create the entire product alone. Therefore, if a skilled engineering worker is employed in functions outside of their specialized engineering role, the impact on economic output would likely be sub-optimal, as their specialized skills are not being utilized effectively in a role that does not match their training and expertise.
Reflecting on the theory proposed by Sir W. Arthur Lewis, transition of labor from agricultural to manufacturing can lead to economic development due to the higher marginal product of low-skilled workers in manufacturing; however, this does not directly address the issue of misallocation of highly skilled workers such as engineers.