EQUITY , LABOUR INTENSIVE VERSUS CAPITAL INTENSIVE PROJECTS

BUILDING ECONOMICS: EQUITY, LABOUR INTENSIVE VERSUS CAPITAL INTENSIVE PROJECTS

1. TOPICS COVERED :
EQUITY,LABOUR
INTENSIVEVERSUS,CAPIT
ALINTENSIVE PROJECTS
BUILDING
ECONOMICS

2. ▪EquityorEconomic equalityis the concept or idea of fairness ineconomics, particularly in
regard totaxationor welfare economics.
▪More specifically, it may refer toequal life chancesregardless of identity, to provide all
citizens with a basic and equal minimum of income, goods, and services or to increase funds
and commitment for redistribution.
▪Equity is based on the idea ofmoral equality.
▪Equity looks at the distribution of capital, goods, and access to services throughout an
economy and is often measured using tools such as theGini index.
▪Equity may be distinguished fromeconomic efficiencyin overall evaluation of social welfare.
▪Although 'equity' has broader uses, it may be posed as a counterpart toeconomic
inequalityin yielding a "good"distributionof wealth. It has been studied inexperimental
economicsasinequity aversion.

3. ▪There can be no universal definition of equity:
▪What some will consider fair reward for work done, others may consider unfair
▪Refers to a “good” distribution of welfare across society The significance of equity:
▪The concept of fairness will be part of the economic policy making process
▪Many economic policies will aim to improve equity
▪Types of Equity
▪Equity applies in the construction of tax systems:
▪Horizontal Equity-people with a similar ability to pay taxes should pay the same or similar
amounts
▪Vertical Equity-people with a greater ability to pay taxes should pay more Truly equitable
tax systems will deliver horizontal and vertical equity.
▪E.g. income tax has both horizontal and vertical equity.

4. ▪Eqalityis viewed as there being a parity of
means where resources are allocated in equal
proportions to individuals (people are quite
literally equal by their material means and
opportunities).
▪Equityon the other hand is a more normative
concept that concerns the ‘justness’ or ‘fairness’
of resource allocation. While they may intuitively
seem synonymous, they’re not really.
▪For example, the allocation of most parking
spots closest to a store for disabled parking isn’t
an ‘equal’ outcome because it gives a
disproportionate amount of space to what is
likely a small demographic and also, quite
obviously there is no equal access to the spot
because online the disabled can park there.

5. ▪Why Is Equity Important?
▪Different societies have different perceptions of what is equitable, and these social
and cultural norms shape the policies they will adopt to promote equity.
▪``Although there is a consensus that extreme inequality of income, wealth, or
opportunity is unfair and that efforts should be made to raise the incomes of the
poorest members of society, there is little agreement on the desirability of greater
income equality for its own sake or on what constitutes a fair distribution of
income.

8. ▪Capital intensive refers to the production that requires higher capital investment such as
financial resources, sophisticated machinery, more automated machines, the latest
equipment, etc.
▪Capital intensive industries pose higher barriers to entry as they require more investment in
equipment and machinery to produce goods and services.
▪An industry, firm, or business is considered to be capital intensive taking into consideration
the amount of capital that is required in comparison to the amount of labour required.
▪Good examples of capital intensive industries include the oil refining industry,
telecommunications industry, airline industry, and public transport authorities that maintain
the roads, railways, trains, trams, etc.

9. ▪Labour intensive refers to the production that requires a higher labour input to carry out
production activities in comparison to the amount of capital required.
▪Examples of labour intensive industries include agriculture, restaurants, hotel industry,
mining and other industries that require much manpower to produce goods and services.
▪Labour intensive industries depend mostly on the workers and employees of their firms, and
require higher investment and time to train and coach workers to produce goods and services
according to specified standards.
▪Labour intensive production also requires more time to complete one unit of production as
production, generally, occurs on a small scale.

10. ▪Capital intensive and labour intensive refer to types of
production methods followed in the production of goods and
services.
▪Capital intensive production requires more equipment and
machinery to produce goods; therefore, require a larger financial
investment.
▪Labour intensive refers to production that requires a higher
labour input to carry out production activities in comparison to
the amount of capital required.

11. ▪Labour intensive means use of manpower in production with little of technology.
▪while capital intensive means use of technology with little manpower in production.
▪Labour Technology Labour intensive Project Technology Labour Capital intensive Project
▪Labour-intensive Industry or project is where a larger portion of total costs is due to
labour as compared with the portion for costs incurred in purchase, maintenance, and
depreciation of capital equipment.
▪Agriculture, construction, and coal-mining industries are examples of labour intensive
industries
▪Capital-intensive Industry is one which requires large sums of investment in purchase,
maintenance, and amortization of capital equipment, such as automotive, petroleum, and
steel industry.
▪Purchase Maintenance depreciation Capital investment

12. ▪Capital intensive industries need a high volume of production, a high margin of profit, and
low interest rates to be able to provide adequate returns on investment.
▪It is important to distinguish between capital-intensive and labour-intensive methods of
production.
▪Capital intensive High volume of production Low interest rate High margin of profit
▪‘Capital’ refers to equipment, machinery, vehicles, etc that a business uses to make its
product or service.
▪Capital-intensive processes require a relatively high level of capital investment compared
to the labour cost.
▪These processes are more likely to be highly automated and to be used to produce on a
large scale

13. ▪Advantages of labour-intensive production
▪1. Staff(labour), unlike machinery can be used flexibly to meet changing levels of
consumer demand, e.g. temporary workers.
2. Can provide a ‘personal touch’ and be more in-tune with customer needs and wants.
3. Can provide tailor made products / services for different customer needs and wants.
Machinery is not flexible enough to provide custom made products / services for
individual customers.
▪Disadvantages of labour intensive production
1. Relatively expensive in the long-term when compared to machinery –higher per unit
costs due to lower levels of productivity.
2. Relatively inefficient and inconsistent levels of effort.
3. Labour relation problems, e.g. may go on strike.
4. There could be a shortage of skilled labour, unlike machinery.

14. ▪Advantages of capital intensive production
▪1. Reduces human error –more accurate production.
2. Greater speed (efficiency) and uniform effort / output.
3. Technical economies of scale –increased efficiency which could reduce average
cost.
4. No problems with labour shortages / planning labour.
▪Disadvantages of capital intensive production
▪1. Initial high costs of investment and possible training costs.
2. Lack of flexibility in responding to a change in demand. In contrast, labour can
be used flexibly, e.g. using temporary workers.
3. Machinery lacks initiative, e.g: it is unlikely to be innovative, provide ideas on
how to improve production or take on extra responsibilities

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