Labour & Capital-intensive Production (Cambridge (CIE) IGCSE Economics)

The firm can adjust the number of workers hired as demand for its goods/services fluctuate

Depending on the industry, workers can build meaningful connections with customers which helps to create customer loyalty e.g. restaurant waiters versus iPad ordering

Workers can generate new ideas and offer suggestions on how processes can be improved

There may be periods where worker productivity is low

The firm may find it difficult to recruit workers when needed and letting go of staff when they are not required is unpopular

The more skilled the labour required, the higher the wage bill for the firm will be

Each worker requires both wage and non-wage benefits, which can prove expensive for the firm

Workers can get ill and then are unavailable for work

Production can continue 24/7 with only short breaks so as to allow for machinery maintenance

Machinery cuts down on human error and product quality remains consistent

Absenteeism or a shortage of skilled workers are non issues with capital-intensive production

The firm can reduce average costs as it benefits from technical economies of scale 

The cost of purchasing and installing new machinery can be very high (but is often financed with a bank loan and paid off over a period of years)

Most machinery cannot improve processes, although artificial intelligence innovation is changing this

Switching capital for labour negatively impacts both the workers who lose their job and also the morale of the workers left behind

Once the machinery is installed, it can be difficult for the firm to respond to changing customer tastes/fashions which require product changes