If productivity (activity) increases, more items can be made, or more services can be provided, in the same amount of time so the variable cost of production decreases, because the workers are paid the same for more work, and the labour cost for each item or service is reduced (e.g., two items produced in the time it originally took one to be produced will effectively halve the labour cost of the item, because the labour rate doesn't change). Labour costs are traditionally much higher than cost of materials.