Labor Intensive Meaning Industry Examples How It Works

Labor Intensive Meaning

Understanding Labor Intensive

Labor Intensive means the production activity that requires a large amount of labor to manufacture the product or services and therefore has a higher proportion of labor input than capital input.

Technological advancement has led to lower labor employment in certain industries because the marginal product per unit of labor has increased. It has made industries less labor-intensive. However, certain industries can never be completely mechanized due to the nature of the product of such industries.

Most developing economies are labor-intensive as it costs less as compared to the cost of machines. It enables such economies to undertake production, which drives their growth. From a strategic point of view, even developed economies sometimes believe inOutsourcing refers to contracting out specific business processes to a third-party or specialized service provider, i.e., an individual or company.read more outsourcingOutsourcingOutsourcing refers to contracting out specific business processes to a third-party or specialized service provider, i.e., an individual or company.read more to developing economies to benefit from lower production costProduction CostProduction Cost is the total capital amount that a Company spends in producing finished goods or offering specific services. You can calculate it by adding Direct Material cost, Direct Labor Cost, & Manufacturing Overhead Cost. read more. Although there are several complications of human rights violations when it comes to outsourcing, as in the case of Nike, that is not always the case.

Industries such as the carpet weaving industry are renowned for the product being unique and the weaving being intricate. The unique selling point fetches them at a much higher price than mass-produced items.

Examples of Labor Intensive Industries

Let’s discuss the nature of labor-intensive industries with examples.

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#1 – Customized Products

Products within the fashion industry are customized, and every product design is unique. Fashion Designing is, therefore, a labor-intensive industry and requires highly skilled labor. Mass-produced clothing, however, can be producedCapital intensive refers to those industries or companies that require significant upfront capital investments in machinery, plant & equipment to produce goods or services in high volumes and maintain higher levels of profit margins and return on investments. Examples include oil & gas, automobiles, real estate, metals & mining.read more capital intensivelyCapital IntensivelyCapital intensive refers to those industries or companies that require significant upfront capital investments in machinery, plant & equipment to produce goods or services in high volumes and maintain higher levels of profit margins and return on investments. Examples include oil & gas, automobiles, real estate, metals & mining.read more where every item is the same and can, therefore, be produced mechanized.

#2 – Services

Producing professionals such as doctors, accountants, or lawyers are in the form of services and are, therefore, labor-intensive as this skill can’t be mechanized. Currently, many repetitive processes are being automated even in the services industry; however, without human interaction, these services can’t be completely executed.

#3 – Research & Development

Scientific discoveries and innovations cannot completely avoid human involvement. Even with a lot of research being conducted in the field of Artificial Intelligence, human involvement is still required to understand the present times and the present state of technology and bridge the gap between the two.

#4 – Real Estate Development

Machines act as tools and reduce the amount of labor required; however, they can’t eliminate labor use. Most construction work is labor-intensive, whether in developed or developing economies. The cost of newer technologies such as 3D printing in such an industry is so high that not all economies can afford it. And even with the mechanization of most equipment, such as cranes and forklifts, human involvement is indispensable.

#5 – Agriculture

The labor intensity in the agricultural sector is a barometer of the level of development in an economy. Most underdeveloped and developing economies have high labor intensity. As the economies become increasingly mechanized or industrialized, there is a structural shift in the quantum of labor involved in agriculture, reducing the labor intensity in this sector.

Limitations

There are several limitations of the labor-intensive are as follows:

Lower Output: Due to the limitations of the speed of a human being as compared to a machine, the level of output is lower than that of the mechanized industry. Therefore the supply lags the demand, and the consumers switch to substitutes.Lower Turnover: As labor-intensive work requires a lot of hard work, the prices set for such products are quite high and therefore are not affordable to all consumers. Consequently, this results in lower turnover. Examples could be designer clothing.Unsatisfied Demand: As the product is unique, reproducing identical goods is not always possible, the consumers need to settle for slightly differentiated products, and that may not always lead to some level of satisfaction and may even lead to a loss of certain demand, where the consumer is not in favor of compromise.Quality Standards: Human error cannot be eliminated; therefore, the quality of produce suffers. Mechanized products are standardized, and consequently, the quality standards are maintained.