David -
The trend of technological change has been to save labor and land and increase the use of capital and minerals/energy (except during the oil crises). This is measured by looking at the shares of the different inputs in total costs holding prices constant (using an econometric model for example). The assumption is that workers go on strike, quit unexpectedly, get ill etc, be lazy, demand a share of profits etc. and so try to reduce their use as much as possible. Even though ceteris paribus more labor per unit of capital will increase the marginal product of capital (hence produce in low wage countries).
While there is some degree of truth in your argument, I would tend to expect that the direction is typically reversed. It seems more likely that a choice of production process will choose labor first, if it is available, rather than proceeding directly to the capital equipment necessary to raise the productivity of labor. This is due to the fact that capital is not homogeneous, and the most efficient capital equipment is typically specific to producing a specific product. This means that possible miscalculations or future downturns will result in the holding of non-productive capital equipment, not subject to easy conversion, and will represent a form of fixed cost. Labor, on the other hand, is more likely to be a variable cost, and can adjusted over a wide range to match business conditions.
Regards, Don |
