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December 1991, Vol. 114,
No. 12
Manufacturing productivity and labor costs in 14 economies
Arthur Neef and Christopher Kask
Labor productivity, as measured by output per hour, rose 2.5 percent in U.S. manufacturing in 1990. Compared with the rates of 11 other industrial nations studied - Canada, Japan, and 9 Western European countries - this figure falls in the middle of the range of productivity growth.
Since 1960, the United States and Canada have had the smallest average annual increases in productivity. Between 1973 and 1979, all 12 economies experienced productivity growth-rate slowdowns. Since 1979, however, the U.S. productivity growth rate has nearly matched the rate of gain prior to 1973. The United Kingdom is the only other country to record a significant improvement since 1979; all of the other countries except Norway have seen their productivity growth rates slow even more.
Unit labor costs, which reflect changes in labor productivity and hourly compensation costs, have a direct effect on the price of manufactured goods and, therefore, affect the competitiveness of a country's products in world trade. A smaller increase (or a decrease) in unit labor costs, relative to other countries, should, ceteris paribus, improve a country's price competitiveness. In 1990, unit labor costs rose less than 1 percent in the United States. This was the smallest increase among all the economies studied, which include those of Korea and Taiwan, in addition to the 11 foreign countries referred to above. The United States also has had the smallest average annual increases since 1960, but Japan, Belgium, and the Netherlands have had even lower average increases since 1979.
On the one hand, the relatively small 1990 increase in U.S. unit labor costs acted to improve the competitive position of U.S. manufacturing. U.S. competitiveness was given a further substantial boost relative to the European countries by exchange rate movements over the course of the year. On the other hand, the U.S. dollar rose relative to the Asian currencies, and unit labor costs, adjusted for exchange rate changes, fell in Japan and Korea.
This excerpt is from an article published in the December 1991 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 comparisons of manufacturing unit labor costs. December 1993.
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