Industrial Differentiation of Labour Costs Adjustment to the Business Cycle

The article refers to the problem of the adjustments in costs (esp. labour costs) to the scope of activity having business cycle fluctuations taken into consideration. The literature overview allows us to state that there are some delays in adjusting the costs to the changes in the scope of activity. Since the costs of adjusting capacity are likely to vary depending on the nature of the inputs, we expect to see sectoral differences in the time and the scope of labour costs adjustment around the business cycle. The subject of this article is important for the company’s owners, managers, investors, and financial analysts. The main hypothesis is that there are some industrial differences in labour costs adjustments since some industries are more vulnerable to fluctuations around business cycle. The research covers a 10-year period (2005-2014) including the period of economic slowdown and economic revival. We applied two basic measures- the growth rate of sales revenue and the growth rate of labour costs. The sample consists of two industries – retail trade and construction. Our research findings support our hypothesis. For the construction industry the changes in sales revenue are much higher than for retail trade industry. Subsequently, the changes in labour costs are much higher in construction industry than in retail trade industry. The originality of this article lies in the applied method. We carried out our research taking into account labour costs in relation to sales revenues. Sales revenues are deemed to be a measure of the scope of activity. We carried out our research for two industries. Our research is based on individual data not aggregated ones. The article is organized as follows: we start with an overview of the literature on business cycle and strategies of firm restructuring, then we present some empirical findings from different countries; we conduct the analysis and present conclusions.