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International comparisons of hourly compensation costs
Patricia Capdevielle
In 1988, hourly compensation costs for manufacturing production workers in Canada rose to 98 percent of average U.S. costs and in Japan the level rose to 95 percent of U.S. costs. (See table 1 and chart 1.) The trade-weighted average cost level for 15 European countries rose to 105 percent of the U.S. level and the average cost level in the Asian newly industrializing economies of Hong Kong, Korea, Singapore, and Taiwan rose to 19 percent of U.S. costs. For all 22 foreign countries for which 1988 data are available, the trade-weighted average compensation cost level rose from 80 percent of the U.S. cost level in 1987 to 87 percent in 1988. Canada and Japan accounted for two-thirds of this relative increase.
Compensation cost levels in 1988 were higher than 1987 relative costs for all 22 foreign countries or areas. For Japan, Korea, Taiwan, and Hong Kong, they were also new long-term highs relative to the U.S. cost level. France, Germany, Italy, Switzerland, and five other European countries also exceeded their previous peaks versus U.S. cost levels. However, Canada, Australia, Belgium, Denmark, the Netherlands, Portugal, and Sweden were still below earlier peaks recorded between 1975 and 1980, and Singapore was below its 1984 peak.
The 1988 average compensation costs for the European countries were up significantly from their 1985 low, but just 2 percentage points above their previous 1980 peak, relative to U.S. cost levels. For all 22 foreign countries, however, the 1988 average cost level was 14 percentage points above the 1980 peak, reflecting the much higher 1988 relative cost levels for Canada and Japan.
Compensation costs include pay for time worked, other direct pay, employer expenditures for legally required insurance programs and contractual and private benefit plans, and for some countries, other labor taxes. Social insurance cost increases contributed modestly to the 1988 compensation cost increases for the United States, Canada, Singapore, and several European countries. For Finland and the Netherlands, reductions in annual hours worked in the form of additional paid holidays contributed 1 percent to their 1988 cost increases.
This excerpt is from an article published in the June 1989 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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International unemployment indicators, 1983-93.—Aug. 1995.
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