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The US per unit labor cost has gone up 20%, how is that possible given the economic crisis since late 2007? (Webinar Attendee Question)

This question was asked by an attendee during the Proformative webinar “The Big Bang, Technology and the Global Economy" held on February 22, 2013.  Please join the discussion and add your insights below.

A video of the webinar can be viewed here:https://www.proformative.com/resources/webinar-video-big-bang-technology-global-economy 

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

This situation always occurs. Labor is a relatively constant expense in the short-run. The simple math is as follows - if labor costs are $100 and revenues are $1,000, the cost of labor is 10%. Now if the economy plunges and revenues fall to $500, the labor costs go to 20%. You can modify the equation with unit costs and margins, but the math will be similar.

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