This can occur over extended periods of minimal production or hiring changes. Monitoring this number can help a company identify a phenomenon known as the law of diminishing marginal returns. Companies often experience an increase in MPL upon hiring new talent or improving production capabilities through innovation. A single unit of labor commonly represents the efforts of one employee in the company. Marginal product of labor (MPL) is a company's total output increase when it adds a single labor unit and production factors don't change. In this article, we review what marginal product of labor is, explore how to calculate it, include some examples to help you understand how to use this formula and detail some tips to help you start using this calculation. As a human resources, production or finance professional, learning how to calculate marginal product of labor can help you calculate this labor formula accurately. Analyzing marginal product of labor can help management teams understand more about how hiring additional team members can affect production capabilities and labor returns. Companies use a variety of calculations, reports and tools to make effective business decisions that can positively impact revenue, productivity and customer satisfaction.
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