Labour Intensive Industry versus Capital Intensive Industry
There is a problem of choosing between labour intensive industries or Labour intensive methods and Capital Intensive industries or Capital Intensive Methods. In under developed countries, due to chronic unemployment or cheap labour to capital is preferred.
The most efficient use of resources in less developed countries will tend to favour labour intensive methods. For innovations, it would also follow the Capital Saving and Labour – using innovations, it would be preferred. It would be profitable to adopt capital-intensive techniques to increase productivity.
If the export industries are capital-intensive such as mining and mineral refining, then, even though there is surplus labour, extensive investment has to be done in order to earn necessary Foreign Exchange.
For example, In India, Labour force is available in plenty. This is the reason most of the building industry is Labour Intensive including both skilled and unskilled labour.
Only certain prestigious projects are handled by Reputed Building agencies like L&T, Raheja Builders etc who employ only skilled labour force handled by all professionals like Architects, Engineers, project Managers, etc and they handle construction using precast building elements and heavy equipment and machines.
They work on ‘TURN KEY’ basis like designing and execution on a time bound programmes. In construction of International Airports, the private agencies invest the capital, design, build and operate for certain number of years to recover their investment and profits (BOT). Sometimes we send skilled technical professionals, skilled labour to other countries to help in their construction activity. Sometimes we import Technical Knowhow for production of advanced building materials for domestic consumption.
Very nice post. I think both the method like Labour intensive methods and Capital Intensive Methods are adaptable indifferent situations.It will be favorable in some case of in some case it will not.