The cost of labor is one big deciding factor in all concerns that use manual labor extensively. Other than the manufacturing sector, the construction sector is also very labor intensive. Projects have failed to make expected progress due to shortage of manpower. For this simple reason, contractors are always eager to employ. However, during my years as a sub contractor, I have seen contractors misusing the manpower that he has in hand.
Refusal to Use machinery
Many contractors relied on manual labor to do things that can be done with machinery. They would rather have 8 guys manually digging a 4 feet deep trench rather than getting the services of an excavator. They reasoned that if an excavator is used, then the 8 laborers will be just standing by with nothing to do for the whole day and he does not like paying their wages for doing nothing. Do you think it was a wise decision? Lets hear their argument.
Cost of manual labor versus cost of machinery rental
The normal rate to pay a laborer to work from 8 to 5 average about 65 bucks per day. Multiply that by 8 and it would mean that he is paying 520 bucks to get the job done, provided that they can finish digging the trench in one day. Renting an excavator will only cost around 300 for a day. If the guy finishes early, you could possibly hassle him for a discount.
So where does that put the contractor? Was he foolish not to save the 220 bucks and rent the excavator instead. No. he was not. In fact he made a wise decision. Remember the 8 laborers standing by the side watching the excavator do their jobs? They still get paid. So instead of spending 520 to have the trench dug, he will be spending 820 instead for the same job if he had rented the excavator.
However, do bear in mind that the trench might not be completed manually in one day. If the jobs carries on to the next day, he will be loose 220 instead. Two days of pay for the 8 laborers will come to 1040. If he had rather paid the excavator to have it done in one day and let his workers have it easy for the day, he would be only spending 820.
As it is, it all boils down to experience and a lot of luck. Through experience, a contractor can tell by the look of the earth beneath his feet and make a good estimate on the hours needed to dig the trench. After that he better pray for good fortune. If he is so unfortunate that something unexpected happens while the trench is being dug, like hitting a live cable or a main water supply pipe, then there is nothing much he can do but to blame his ill luck.