What is Productivity? >
What is unit labor cost?
Unit Labor Cost (ULC) is how much a business pays its workers to produce one unit of output.
Businesses pay workers compensation that can include both wages and benefits, such as health insurance and retirement contributions.
Expressing unit labor cost in this way shows that increases in hourly compensation tend to increase unit labor costs, and increases in output per hour worked—labor productivity—tend to reduce them.
Thus, labor productivity increases can offset the effect of wage increases on unit labor cost.