unit labour costs

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Are the costs incurred by hiring workers per unit of output. They are a measure of labour productivity. Employing organizations typically seek to reduce unit labour costs but it is important to realize that this can be done in a variety of ways. Holding down wages to a minimum level is one approach but high-paying firms often have low unit labour costs because they attract good workers who are productive and rely on technology and effective work design to ensure that output is high and good wages can be afforded. The classic example of this latter strategy was Henry Ford's ‘five-dollar day’, paid to workers at his first factory at Dearborn, Michigan. Although a very high wage for the period, the system of production used by Ford ensured that productivity was also high and unit labour costs were low. [See cost minimization, Fordism, and scientific management.]

Subjects: Human Resource Management.

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