Definition of Unit Labor Cost

Unit labor cost is a measurement of costs associated with one unit.

Unit labor cost is the calculation of the cost of an item produced. This number helps business owners ensure their company stays efficient and profitable.

Calculation

Calculate unit labor cost by taking all labor inputs of production into consideration and dividing the total of those costs by the number of output. Another way to calculate unit labor cost is by adding all labor costs and dividing the total by the number of employee hours worked.

Productivity

Business owners compare unit labor costs to measure productivity. If the unit labor cost decreased over a period of time, productivity increased.

Considerations

One crucial aspect to unit labor costs is the costs associated with labor, because labor is typically the largest component in production. Labor costs for businesses are hard to control, and any increases affect the unit labor costs immensely.

BLS

The Bureau of Labor Statistics (BLS) produces and publishes an international comparison report on unit labor costs. Businesses use this report to compare comparable manufactured items and measure how efficient their production process is.

References

• Bureau of Labor Statistics: International Labor Comparisons
• Southwestern Learning: Labor Cost per Unit of Output
• EcPulse.com: Non-Farm Productivity and Unit Labor Cost