Labor Intensive

AAA

DEFINITION of 'Labor Intensive'

A process or industry that requires a large amount of labor to produce its goods or services. The degree of labor intensity is typically measured in proportion to the amount of capital required to produce the goods/services; the higher the proportion of labor costs required, the more labor intensive the business.


INVESTOPEDIA EXPLAINS 'Labor Intensive'

Labor intensive industries include restaurants, hotels, agriculture and mining. Advances in technology and worker productivity have moved some industries away from labor-intensive status, but many still remain.

Labor costs are considered variable, while capital costs are considered fixed. This gives labor-intensive industries an advantage in controlling expenses during market downturns by controlling the size of the employee base. Disadvantages include limited economies of scale (you can't pay workers less by hiring more of them), and susceptibility to wage forces within the labor market.

RELATED TERMS
  1. Capital

    1) Financial assets or the financial value of assets, such as ...
  2. Grunt Work

    An expression used to describe thankless and menial work. Grunt ...
  3. Capital Intensive

    A business process or an industry that requires large amounts ...
  4. Variable Cost

    A corporate expense that varies with production output. Variable ...
  5. Fixed Cost

    A cost that does not change with an increase or decrease in the ...
  6. Operating Expense

    A category of expenditure that a business incurs as a result ...
Related Articles
  1. What You Need To Know About The Employment ...
    Economics

    What You Need To Know About The Employment ...

  2. Economic Indicators That Do-It-Yourself ...
    Investing Basics

    Economic Indicators That Do-It-Yourself ...

  3. How Education And Training Affect The ...
    Economics

    How Education And Training Affect The ...

  4. Globalization: Progress Or Profiteering?
    Economics

    Globalization: Progress Or Profiteering?

comments powered by Disqus
Hot Definitions
  1. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
Trading Center