Labor Productivity and Its Impact on Product Price

Coal mines in the United States are the most productive in the world in terms of efficient labor employment. This is because of an abundance of workable coal beds, large infusions of capital, improved management practices and continuing competitive pressures. The standard unit of measurement for labor productivity is expressed as tons/manshift, although for underground mines, operators often refer to tons per machineshift. Articles written concerning labor productivity generally focus on measurement techniques, safety considerations, application of technology and training. This article will illustrate by example the impact of labor efficiency (or inefficiency) on the ultimate selling price of coal, f.o.b. mine site. During the past several years, the coal industry has seen significant improvement in labor use. Figure 1 shows the trends in productivity for all active mines in the United States from 1985 through 1994. Productivity in 1985 was 20.1 t/manshift (22.1 st/ manshift). This factor has increased almost linearly throughout that period to 37.5 t/manshift (41.2 st/manshift). This is a 7.2% annual compound growth rate.