15.5: The Marginal Product of Labor II

The marginal product of labor, or MP_L, measures the increase in output that results from adding one more unit of labor, assuming the level of all other inputs remain constant.

Calculating the Marginal Product of Labor

The marginal product of labor is calculated as follows:

MP_L = (ΔQ/ΔL)

where,

MP_L is the marginal product of labor

ΔQ is the change in total output

ΔL is the change in labor

The marginal product of labor is subject to the law of diminishing returns. However, the falling contribution to total output when adding more workers is not due to a decline in the skills or quality of each subsequent worker hired. Rather, it is assumed for simplicity that all workers possess identical skills and productive capacity. Diminishing marginal product of labor arises because as more workers are hired, each additional worker has access to fewer fixed input resources, such as a fixed amount of capital.

Marginal Physical Product of Labor

Marginal Product of Labor is also known as the Marginal Physical Product of Labor or MPP_L. It quantifies the increase in physical units of a product manufactured due to the employment of an extra worker. The term "physical" emphasizes that it measures tangible units of output. Using "physical" distinguishes MPP_L from measures that could be influenced by prices or market values. It focuses purely on the quantity of output, providing a clear and concrete understanding of productivity. By emphasizing the physical aspect, the term MPP_L directs attention to the efficiency of the production process, rather than external economic factors. It helps in understanding how changes in labor input affect the volume of production.

The marginal product of labor or MP_L is calculated as the quotient of change in the quantity of output to change in the quantity of labor while keeping other inputs constant.

Consider the schedule showing the MP_L of labor in an orchard producing mangoes.

The first worker picks 200 mangoes in a day, which is the total output of one worker. The output goes up to 360 after the second worker is hired. MP_L is 160 at this stage.

Due to the law of diminishing marginal product, MP_L declines with the hiring of each new worker. Note that diminishing MP_L does not arise from any differences in the quality of labor across workers. All hired workers are assumed to be equally skilled.

Graphically, the number of workers is plotted on the x-axis and the MP_L on the y-axis.

The MP_L curve starts from the point when the firm employs one worker. It shows the downward-sloping marginal product of labor as more workers are added.

MP_L is also known as the marginal physical product of labor or MPP_L, as it shows the additional physical units of the product manufactured.