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Equipment More Cost Effective Investment Than Workers

The recession has changed the way companies are doing business. As small businesses fold and bigger businesses downsize, the need to cut costs wherever possible is strong. For some companies the best way to reduce expenses is by reducing the number of live bodies performing job duties.

This move to replace laborers with machines is likely to the fact that equipment prices have dropped almost 2.5 percent during the recovery period while labor costs increased by almost 7 percent. Not only is it more cost effective to invest in equipment or software, the actual cost of production is lower as well. Unlike the original purchase price of a piece of equipment, employee require long term investments. This may include wages, health benefits, insurance costs and ongoing training.

Workers’ compensation insurance premiums are calculated by the number of employees and the the type of work they perform. A company employing three office workers will pay lower premiums than a contracting company with fifty construction workers. If a business can purchase and use equipment or computer software to perform the same tasks, it becomes less cost effective to hire workers to do the same job.

Of course this strategy does not bode well for job seekers, however in the long term technological advances may lead to better jobs. Employees must be willing to invest in themselves and receive the training and education needed to compete in a constantly evolving world of technology.

In the meantime economists believe businesses might be more inclined to invest in employees if the same tax incentives for equipment investments were made available for hiring.

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