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103 / 136

App. B—Commissioned Background Papers . 103

13

also taken

of the

sight must

not be

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

iS

resistances

to

reductions

in

employment

and

wage

rates,

and

because

of

increasing

cost penalties for lay-offs through “social benefit” requirements.

Increasing

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

rates

in

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

equipment

far

more

than

those

of

labor.

Moreover,

although

capital

goods

prices

and the

wage rates both rise during inflationary periods, former stop rising as soon as they are purchased,

the prices

to be

paid for

while wage

rates

continue

to rise even after workmen are hired,and productivity” can be claimed as a result

might rise even more if “higher labor

of

the

additional

equipment.

Indeed,

the

costs of using depreciation.

such capital In addition,

goods may even decline steadily under some forms of most increases in capital facilities involve some,

and

often

substantial,

replacements

of

labor

inputs,

thus

helping

to

offset

part

of the economy

capital costs.

Still another factor tending to increase the relative

of

capital

inputs

is

the

seemingly

irreversible

trend

towards

increasing

payments

to

labor

for

non-working

time,

including:lay-offs;

sickness;

holidays;

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

addition

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