App. B—Commissioned Background Papers . 103
associated increase in capital charges. lost in such evaluations of the powerful
On the other hand, leverage of reductions
in total unit costs on profit margins, for even a 5 per cent unit costs could increase profit margins by 33-50 per cent.
reduction in total Hence, the relative
magnitudes of wage cost proportions warrants careful consideration in choosing targets among different sectors of operation for robotics applications whose benefits are expected to center on wage savings.
Longer term planning for advancing manufacturing technology has also been affected in many industries by the traditional concern about the burdens of in-
creasing the ratio of total capital charges, which are considered “fixed”, to
labor costs which are considered “variable”-- meaning that the former affected by reductions in output, while the latter decline with them. obvious that labor costs have become less “variable” because of trade
are un- But” it union
cost penalties for lay-offs through “social benefit” requirements.
attention has also been given in recent response to changing levels of capacity variability of total capital charges.
years to adjusting depreciation utilization, thus enhancing the
The possibility should also be considered that capital inputs are becoming progressively more economical than labor inputs as compared with their respective
contributions to output.
In part, this reflects the fact that continuing techno-
logical progress tends to enhance the production contributions of facilities and
wage rates both rise during inflationary periods, former stop rising as soon as they are purchased,
to rise even after workmen are hired,and productivity” can be claimed as a result
might rise even more if “higher labor
costs of using depreciation.
such capital In addition,
goods may even decline steadily under some forms of most increases in capital facilities involve some,
of the economy
Still another factor tending to increase the relative
vacations; and pensions. Altogether, these considerations suggest that, to altering past characterizations of capital and labor costs as “fixed” “variable” in response to output fluctuations, attention should be given
in or to