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It is a case for low operating leverage.
Higher labor cost is higher variable cost, thus for incremental sale / production, the leverage effect on profitability is not that significant as that would have been seen in case of lower variable costs. Thus the operating leverage is less here
Industry or process where a larger portion of total costs is due to labor as compared with the portion for costs incurred in purchase, maintenance, and depreciation of capital equipment. Agriculture, construction, and coal-mining industries are examples of labor intensive industries.
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