In honor of Labor Day CFO Magazine has an article about the rise and fall of cotton mills in New England. Author R.G. Voorhees draws lessons from the Lowell Mills – where a focus on labor costs prevented mill managers from investing in maintenance and technology.
The new cloth-making business put both capital and labor to work on a
scale that demanded not just new machines, but new management.
Unfortunately, the accounting and financial technology of the day
wasn't up to the task. Financial managers of the time focused on the
familiar — costs of labor and materials — but oddly enough, often
ignored the potential challenges of maintenance, obsolescence and
technological change that came with their new machines. Without a good
understanding of the importance of depreciation and reserves, writes
one historian, "The known expense of labor received more attention than
the largely unknown problems of capital expense."
Finance in History: Labor Days
August 30, 2007
Lowell National Historic Park
National Park Service