Progress in labor-saving investment is also suggested by the fact that software investment has been expanding recently in some previously labor-intensive industries of the nonmanufacturing sector, such as construction as well as accommodation and food services. Labor-saving investment leads to an improvement in labor productivity through a rise in capital intensity, which represents capital per worker.
Firms are facing upward pressure on labor costs fueled by the labor shortage. Given the low tolerance of households for price rises, firms have been trying to deal with cost increases by improving labor productivity rather than passing them on to sales prices. This is due to their fear of losing market share through raising prices.