Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Labor Intensive

What it is:

Labor intensive is used to describe any production process that requires higher labor input than capital input in terms of cost.

How it works (Example):

The production of goods and services requires labor and capital in varying amounts, depending on the product. If the labor cost outweighs the capital cost, it indicates that the production process is labor intensive. For example, mining is considered labor intensive because a majority of production costs are related to paying workers.

Other industries considered labor intensive include hospitality (hotels and restaurants) and construction.

Why it Matters:

Production costs for labor intensive goods and services are variable since businesses can add or subtract workers depending on business conditions. This allows producers to retain some control over production costs. During economic downturns, this can be an advantage over capital intensive producers, which normally have higher fixed costs.

Related Terms View All
  • Yupcap
    Let's say Jane Doe has a master's degree and is an editorial assistant in San Francisco....
  • Real-Time Quote
    A stock quote is an estimate of price or a price at which one party is willing to buy or...
  • Vittorio Mincato
    Born in 1936, Mincato is an accountant on paper. His first any only employer was Italian...
  • Baby Bills
    With its Windows and Office products, Microsoft has dominated the market for computer...
  • Salary Freeze
    For example, Company XYZ makes widgets. Company ABC recently launched the new iWidget,...