A perspective on U.S. and foreign compensation costs in manufacturing

Monthly Labor Review

Volumn 125, Issue 6, 2002, Pages 36-48

  Sparks, Chris ^a   Bikoi, Theo ^a   Moglia, Lisa ^a  

^a BUREAU OF LABOR STATISTICS   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 11244347841     PISSN: 00981818     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (15)

1. See, for example, "Manufacturing costs, productivity, and competitiveness, 1979-93," by Edwin R. Dean and Mark K. Sherwood, Monthly Labor Review, October 1994, pp. 3-16, for a discussion of input costs, product prices and competitiveness. The offsetting impact on product prices due to productivity gains is discussed in "Labor Productivity in U.S. and Foreign Manufacturing - a Half Century of Comparisons" on p. xx.
2. See, for example, "Manufacturing costs, productivity, and competitiveness, 1979-93," by Edwin R. Dean and Mark K. Sherwood, Monthly Labor Review, October 1994, pp. 3-16, for a discussion of input costs, product prices and competitiveness. The offsetting impact on product prices due to productivity gains is discussed in "Labor Productivity in U.S. and Foreign Manufacturing - a Half Century of Comparisons" on p. xx.
3. "Labor costs - annual update 2001," European Industrial Relations Observatory On-Line.
4. "EU labour costs 1999," Statistics in focus, Population and social conditions, Theme 3, 3/2001.
5. The Ministers of Finance and Central Bank Governors of five countries (France, Germany, Japan, the United Kingdom, and the United States) met on September 22, 1985, at the Plaza Hotel in New York, in order to review economic developments and policies in their countries. The results of their meeting were summarized in an agreement, known as the "Plaza Accord." In particular, they noted that the "appreciation of the U.S. dollar" was among the factors that have "contributed to large, potentially destabilizing external imbalances among major industrial countries" and that an "appreciation of the main nondollar currencies against the dollar is desirable. They stand ready to cooperate more closely to encourage this when to do so would be helpful." For further information, see the University of Toronto Library and the G8 Research Group at the University of Toronto on the Internet at http:/ /www.library.utorouto.ca/g7/finance/fm850922.htm
6. The purpose of this article is to decompose the rather distinct speedups and slowdowns in hourly compensation growth rates for the 28 competitors as illustrated in chart 1. There was no attempt to select time periods to eliminate possible cyclical factors.
7. Europe includes the 15 countries of the European Union, Norway, and Switzerland. For the purposes of constructing a time series for hourly compensation for Europe, data for Germany included in the trade-weighted averages for Europe relate to the former West Germany only. Data for Germany are available only from 1993-2000; no data are available for 1975-92. Approximately 90 percent of manufacturing employment for Germany is in the former West Germany, and the level of hourly compensation in Germany is approximately 4 percent lower than in the former West Germany. Using data for Germany rather than data for the former West Germany would lower the level of European compensation costs by approximately 1 percent.
8. China is not included because the data needed to construct hourly compensation cost estimates for production workers are not available. Available earnings data are monthly earnings on an all-employee basis; earnings data and hours worked for production workers in manufacturing are not available. In addition, comprehensive surveys on components of compensation not included in earnings are not available.
9. The international comparisons of compensation costs do not indicate relative living standards of workers or the purchasing power of their income. Prices of goods and services vary greatly among countries, and total compensation costs include not only payments made directly to workers, but also employer payments to funds for the benefit of workers. Many of these payments to funds may benefit the workers only indirectly (as is the case with employer payments for unemployment insurance) or at some point in the future (for example, payments to retirement funds). See the technical appendix on p. xx.
10. The hourly compensation cost measures used in this article differ from the hourly compensation data in "Comparing 50 years of labor productivity in U.S. and foreign manufacturing" on p. 51 of this issue. Hourly compensation data in that article are calculated from national accounts aggregate employee compensation data and estimates of labor input. In addition, the hourly compensation data used in that article relate to all employees or all employed persons. Only indexes of hourly compensation are calculated; no level data are available. Data in the current article are computed using establishment survey data on average earnings and supplementary labor cost data from periodic labor cost surveys and other data sources. These data relate to production and related workers only. See the appendix on p. 63 of this issue.
11. Separate data for pay for time worked are not available for Mexico and the Asian NIEs.
12. Although the trade-weighted average of other direct pay as a percentage of total compensation in Europe is 17 percent, the percentage of other direct pay ranges from just under 10 percent in Ireland to 20 percent or more in Austria, Belgium, and Italy. More information about compensation cost structure in individual European countries can be found in the Supplementary Tables for BLS News Release "International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing," available on the Internet at http:// www.bls.gov/fls
13. On January 1, 1999, 11 European countries joined the European Monetary Union (EMU): Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. At the same time, currencies of EMU members were established at fixed conversion rates to the euro, the official currency of the EMU. Exchange rates between the national currencies of EMU countries and the U.S. dollar are no longer reported; only the exchange rate between the euro and the U.S. dollar is available.
14. The large drop in social insurance in 1987 was primarily the result of a reduction of the rate of employer contributions to the Central Provident Fund (a social security fund) in Singapore. The rate of employer contribution was cut from 25 percent of monthly earnings to 10 percent of monthly earnings effective April 1, 1986.
15. The exchange rates used in this article are annual averages of daily rates for the entire year. Because this devaluation occurred near the end of 1994, its impact on the annual average of that year was minimized. The full impact of the devaluation is evident in the annual average for 1995, the first full year following the devaluation.