Productivity and demand for labor

The term ‘productivity’ usually refers to labor productivity defined as the amount of output produced in the firm, industry or economy per employee hour. There are other productivity measures however such as capital productivity and total factor productivity. 

An increase in labor productivity means that firms are able to produce each physical unit of output with less labor input. The discussion of the long-run demand for labor provides insight into two of the most important causes of increase in labor productivity. The first is the process of capital/labor substitution that has taken place as wages have risen relative to the costs of capital. The price of capital equipment rose significantly - we acknowledge that the same argument could be beneficial to the blue collar employees’ argument that the prices are rising and to counter that with the cost of living allowance which is reasonable.

We are also in agreement with the concept of holding down production costs as much as possible by substituting from labor to capital in production. What we do not agree to is the ratio of substitution between capital to labor - on that end we need to have the control of that ratio.

For example if the diesel prices skyrocket due to the impending conflict with Iran, then transit agencies will be scrambling for contingency plans.  Experts predict oil can rise up to $200.00 a barrel or as much as $8/Gallon of gas once military action commences. We can imagine the wall street commodity speculators are licking their lips in anticipation. But what will happen if, or when, we escalate to military confrontation with Iran? With Gasoline surging to possibly $8 per gallon, commuters will be driving less... if at all. Car pools will certainly multiply and Mass Transit will be quickly overburdened. We do not want that to be used as precursor for layoffs due to rising price of diesel - we will not agree to that. We will not agree either to the rising price of diesel to be used as a barrier to our demand for a fair contract.