Citizens are equipped with tools, which help them perform their tasks. As trees are chopped down, crops are harvested etc. these tools wear out an need to be replaced. Citizens without tools will still be able to work, but their productivity is significantly reduced.[1]
Iron tools are crafted by the blacksmith from iron ore and logs. With the addition of coal the blacksmith can produce steel tools, which are more durable therefore don't wear out as fast. Coal can only be obtained through mining, so steel tools are usually reserved for a later part of your city's development.
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