Labour / Capital Intensive

Labour / Capital Intensive

Labour intensive - this is where the proportion of labour used in producing the product is relatively high. Labour will usually be used instead of capital. production in which a large amount of labour is used relative to capital. For example, window-cleaning or brick-laying are labour-intensive jobs. Service industries tend to be far more labour-intensive than either primary or secondary industries.

Capital intensive - this is where techniques are used to produce that use relatively more capital than labour. Many industries are now like this including the car and steel industries. Production in primary and secondary industrial sectors has become increasingly capital-intensive. As more and more capital is used, labor productivity increases, but at the same time employment in these industries falls.

The technique that a company uses depends on several things:

      the size of the company - small companies are often not in a position to afford expensive capital equipment. Even if they could they are often not able to use it enough to justify the cost.

      the cost of the factors of production - even though a machine may be available to do the job, it may not be worthwhile if the amount of labour required costs less. Firms therefore look carefully at the cost of labour and capital before deciding how much to use.

      the product - some products lend themselves better to being produced by capital than others. Mass-produced everyday items are far more likely to be produced in a capital-intensive way, whereas services and products with a more individual slant are more likely to be produced using a large proportion of labour.

Why some business use Labour intensive technique??

1. Labour-intensive processes are those that require a relatively high level of labour compared to capital investment.
2. These processes are more likely to be used to produce individual or personalised products, or to produce on a small scale
3. It requires very less capital investment,
4. Manual labour is given more importance then the machinery.

Why some business use Capital  intensive technique??

1.       Capital-intensive processes are those that require a relatively high level of capital investment compared to the labour cost.

2.       These processes are more likely to be highly automated and to be used to produce on a large scale.

3.       Capital-intensive production is more likely to be associated with flow production (see below) but any kind of production might require expensive equipment.