International Comparisons of Hourly Compensation Costs in Manufacturing, 2006
Internet address: http://www.bls.gov/fls USDL: 08-0093 Technical information: (202) 691-5654 For Release: 10:00 A.M. EST Media contact: (202) 691-5902 Friday, January 25, 2008 INTERNATIONAL COMPARISONS OF HOURLY COMPENSATION COSTS IN MANUFACTURING, 2006 Average hourly compensation costs in U.S. dollars for production workers in manufacturing among 33 foreign economies were 82 percent of the U.S. level in 2006, increasing from 79 percent in 2005, according to data issued by the Bureau of Labor Statistics, U.S. Department of Labor. Compensation costs relative to the United States rose or remained unchanged in 30 of the economies covered in 2006. (See table 1.) For the first time, this news release contains data for all employees in addition to the series for production workers. (See discussion on page 6, table B, and table 7.) Both production worker and all employee data are introduced for the Philippines. The all employee series covers most of the countries included in the production worker series, but also introduces Argentina and Slovakia which are not included in the latter series. A note on China's labor costs appears on page 4 of this release. In the United States, hourly compensation costs for production workers in manufacturing were virtually unchanged at $23.82 in 2006. When measured in national currency terms, trade-weighted average costs increased 2.6 percent in the combined 33 foreign economies in 2006. The value of foreign currencies rose 2.0 percent against the U.S. dollar, resulting in a rise in hourly compensation costs in the foreign economies of 4.7 percent on a U.S. dollar basis. (See chart 1 and table A.) Chart 1. Hourly compensation costs in U.S. dollars for production workers in manufacturing, 1975-2006 PRINTED COPY CONTAINS CHART AT THIS POINT. -2- Compensation costs for production workers expressed in U.S. dollars This release provides manufacturing compensation data in terms of both national currencies and U.S. dollars. While data on a national currency basis show underlying wage and benefit trends within each country, frequent and sometimes sharp changes in currency exchange rates can have a large impact on compensation costs on a U.S. dollar basis. Data on a U.S. dollar basis are calculated by dividing compensation costs in the national currency by the exchange rate (expressed as national currency units per U.S. dollar). Compensation costs on a U.S. dollar basis are often used as indicators of competitiveness of manufactured goods in world trade and are the focus of the following discussion. Compensation costs for production workers in manufacturing measured in U.S. dollars continued to rise in 2006 in most of the foreign economies-with only two countries, Japan and New Zealand, showing a decrease in costs. In addition, hourly compensation costs increased by less than one percent in two economies, Taiwan and Switzerland (0.2 percent and 0.6 percent, respectively). The rate of compensation increase in a trade-weighted average of the 33 foreign economies was 4.7 percent in 2006, below the 5.6 percent historical average for the series. (See table A and table 3.) Chart 2. Indexes of hourly compensation costs in U.S. dollars for production workers in manufacturing, 2006 PRINTED COPY CONTAINS CHART AT THIS POINT. Although average costs in the United States continued to be higher than those in most of the economies covered outside of Europe, 14 of the 20 European countries covered had higher hourly compensation costs than the United States, in a few cases more than 40 percent higher. With the value of the euro remaining relatively stable against the U.S. dollar in 2006 (+0.9 percent), European labor costs measured in U.S. dollars showed much weaker growth than in the earlier years of this decade. The only European countries to have double-digit growth in hourly -3- compensation costs on a U.S. dollar basis in 2006 were the Czech Republic and Poland (12.2 and 10.5 percent, respectively), both of which also experienced stronger appreciation of their national currencies against the dollar than the euro did. Compensation costs in Europe, on average, continued to be almost $5 higher on a per hour basis than in the United States. However, there is great variation in the level of compensation costs among the European countries covered. For example, hourly compensation costs in Europe ranged from $4.99 in Poland to more than eight times that level in Norway ($41.05), the highest labor cost country in these comparisons. (See table 2.) Outside of Europe, only Canada and Australia had compensation costs higher than the United States when measured in U.S. dollars. In 2006, the lowest compensation costs relative to the United States were in Mexico and the Philippines (12 percent and 4 percent of the U.S. level, respectively). Annual percent changes in manufacturing compensation costs measured in U.S. dollars also varied considerably in 2006. Hourly compensation costs in Brazil, the Republic of Korea, the Philippines, and Singapore all showed double-digit growth in 2006 (17.8, 15.5, 16.2, and 17.1 percent, respectively), boosted by an appreciation of their national currencies against the U.S. dollar. Japan and New Zealand were the only countries in these comparisons to show a decrease in hourly compensation costs measured in U.S. dollars (-6.2 and -3.3 percent, respectively), largely due to the depreciation of the Japanese yen and New Zealand dollar against the U.S. dollar. BOX: A note on the measures The hourly compensation costs measures in this news release are based on statistics available to BLS as of September 2007. These measures are prepared specifically for international comparisons of employer labor costs in manufacturing. The methods used, as well as the results, differ somewhat from those of other BLS series on U.S. compensation costs. See the Technical Notes for further information regarding definitions, sources, and computation methods, as well as a description of the trade-weighted measures for economic groups. The data for some countries may have been revised in later updates to reflect new or revised data provided to BLS subsequent to this news release. See International Comparisons of Hourly Compensation Costs for Production Workers and All Employees in Manufacturing, 22 Manufacturing Industries at http://www.bls.gov/fls/flshcindnaics.htm for the most recent data. END OF BOX: A note on the measures Exchange rates The trade-weighted 2.0 percent increase in the value of the currencies of the 33 foreign economies against the U.S. dollar was the smallest increase since 2002 (0.4 percent), but well -4- above the average annual change since 1975 (-3.4 percent). The currencies of most economies appreciated in 2006, while the currencies of only seven economies- Mexico, Australia, Japan, New Zealand, Taiwan, Hungary, and Switzerland- depreciated against the dollar. (See table 5.) The movements of the foreign currencies relative to the U.S. dollar in 2006 had an influence on hourly manufacturing compensation costs measured in U.S. dollars. Hourly compensation costs on a national currency basis in the 33 foreign economies rose 2.6 percent. However, when adjusted for the appreciation of the foreign currencies against the U.S. dollar, this increase in costs was magnified to 4.7 percent. The effect that exchange rate changes can have on hourly compensation costs is particularly evident when comparing the labor costs of New Zealand with those of the United States. On a national currency basis, the increase in hourly compensation costs in New Zealand (4.9 percent) was greater than the increase in the United States (0.1 percent). When adjusted for changes in exchange rates, however, the increase in costs on a U.S. dollar basis was significantly lower in New Zealand than in the United States (-3.3 percent versus 0.1 percent). BOX: China Acknowledging the importance of China as one of the United States' largest trading partners, BLS is including data for China in this release. Due to data limitations, data are presented separately and only for 2002-2004. The compensation costs data presented for China are not directly comparable with the data for other countries found in this release. For a description of the methods used to construct the 2002 estimate and possible comparability issues, refer to Judith Banister's August 2005 article in the Monthly Labor Review found on the BLS website at http://www.bls.gov/opub/mlr/2005/08/art3full.pdf. In general, the methods used to update the hourly compensation costs data to 2003 and 2004 are the same as the methods used in the Banister article and are described in a November 2006 article of the Monthly Labor Review at http://www.bls.gov/opub/mlr/2006/11/art4full.pdf. China: Hourly Compensation Costs for All Employees in Manufacturing, 2002-2004 National U.S. Index Year Currency Dollar (United Basis Basis States (Yuan) (US$) =100) 2002 4.73 0.57 3 2003 5.17 0.62 3 2004 5.50 0.67 3 END OF BOX: China -5- Table A. Hourly compensation costs, in national currency and in U.S. dollars, for production workers in manufacturing and exchange rates (U.S. dollars per national currency unit) Percent change, 2005-2006 Hourly Hourly Country compensation, compensation, or area national Exchange U.S. currency Rates dollars Americas United States 0.1 - 0.1 Brazil 5.2 12.0 17.8 Canada .4 6.9 7.3 Mexico 4.5 -.2 4.3 Asia and Oceania Australia 5.4 -1.2 4.1 Hong Kong SAR (1) 2.2 .1 2.4 Israel 4.5 .7 5.2 Japan -.9 -5.3 -6.2 Korea, Republic of 7.7 7.3 15.5 New Zealand 4.9 -7.9 -3.3 Philippines 8.1 7.5 16.2 Singapore 11.7 4.8 17.1 Sri Lanka - - - Taiwan 1.4 -1.2 .2 Europe Austria 2.8 .9 3.8 Belgium 2.5 .9 3.5 Czech Republic 5.8 6.0 12.2 Denmark 2.0 .9 2.9 Finland 4.4 .9 5.4 France 2.8 .9 3.8 Germany 1.7 .9 2.6 Greece 4.2 .9 5.2 Hungary 8.2 -5.1 2.7 Ireland 6.5 .9 7.5 Italy 2.5 .9 3.5 Luxembourg .8 .9 1.7 Netherlands .7 .9 1.7 Norway 4.3 .5 4.8 Poland 6.0 4.3 10.5 Portugal 4.2 .9 5.2 Spain 4.2 .9 5.1 Sweden 3.0 1.3 4.4 Switzerland 1.1 -.6 .6 United Kingdom 4.0 1.3 5.3 Trade-weighted measures (2) All foreign economies 2.6 2.0 4.7 OECD (3) 2.3 1.9 4.2 Europe 2.9 .9 3.9 Asian NIEs (4) 5.8 3.4 9.5 1 Hong Kong Special Administrative Region of China. 2 The 2005-2006 percent changes for the trade-weighted measures are based upon the changes for the countries or areas for which 2006 data are available. 3 Organization for Economic Cooperation and Development. 4 Asian NIEs refer to Hong Kong SAR, Republic of Korea, Singapore, and Taiwan. -6- Compensation costs for all employees For the first time, this news release contains hourly compensation costs data for all employees in manufacturing in addition to the data for production workers. The all employee series begins with data for 1996. Production workers generally include those employees who are engaged in fabricating, assembly, and related activities. All employees include production workers as well as all others employed full or part time in an establishment. (See the technical notes beginning on page 9 for more detailed definitions of production workers and all employees.) The all employee series includes data for Argentina and Slovakia, two countries not covered by the production worker hourly compensation costs. Hong Kong SAR, Sri Lanka, Greece, and Luxembourg are not included in the all employee series as comparable data are not available. As the final column in Table B shows, hourly compensation costs for all employees are higher than those for production workers in each economy covered by the two series, generally ranging from 10 percent to 25 percent higher than production worker hourly compensation costs. The difference between the two series depends not only upon the higher compensation of non-production workers than production workers, but also on the relative employment levels of the two worker groups; typically the larger the portion of all employees accounted for by production workers, the smaller the gap in compensation costs. In the United States, hourly compensation costs for all employees in manufacturing were $29.60 in 2006, 24 percent higher than production worker compensation costs. Only 7 of the 28 foreign economies covered by both the production worker and all employee hourly compensation costs series had a larger difference between the compensation levels of the two groups than the United States. Although Australia was the only non-European economy to have higher hourly compensation costs than the United States in 2006 for all employees when measured in U.S. dollars ($30.10), 12 of 18 European countries had higher compensation costs than the United States. The hourly compensation costs of both the new countries in the series, Argentina and Slovakia, were 22 percent of the United States level. Since high labor costs countries such as Denmark, the Netherlands, Norway, and Sweden have smaller than average gaps between production worker and all employee hourly compensation costs, the range of European compensation costs narrowed when measured on an all employees basis (21 percent to 172 percent of the United States level for production workers versus 21 percent to 156 percent of the United States level for all employees). Measuring compensation costs on an all employees basis changes the position of some countries relative to the United States. For example, production worker compensation costs in Italy were 5 percent higher than in the United States for 2006. However, the gap between production worker and all employee hourly compensation costs is much lower in Italy than in the United States (15 percent versus 24 percent in 2006), so when compensation costs are measured on all employee basis, Italy's costs are about 3 percent lower than the United States. -7- Table B. Hourly Compensation Costs of Production Workers and All Employees in Manufacturing, 2006 Country Production All Production All All Employees or Area Workers Employees Workers Employees (Production (US=100) (US=100) (US$) (US$) Workers =100) Americas United States 100 100 23.82 29.60 124 Argentina - 22 - 6.57 - Brazil 21 20 4.91 5.90 120 Canada 108 98 25.74 29.00 113 Mexico 12 13 2.75 3.72 135 Asia and Oceania Australia 110 102 26.14 30.10 115 Hong Kong SAR (1) 24 - 5.78 - - Israel 54 49 12.98 14.37 111 Japan 85 82 20.20 24.40 121 Korea, Republic of 62 57 14.72 16.87 115 New Zealand 61 54 14.47 16.08 111 Philippines 4 5 1.07 1.36 127 Singapore 36 46 8.55 13.55 158 Sri Lanka - - - - - Taiwan 27 27 6.43 7.95 124 Europe Austria 128 124 30.46 36.70 120 Belgium 134 123 31.85 36.35 114 Czech Republic 28 - 6.77 - - Denmark 149 129 35.45 38.21 108 Finland 126 119 29.90 35.26 118 France 105 114 24.90 33.73 135 Germany 144 139 34.21 41.04 120 Greece 68 - 16.10 - - Hungary 26 28 6.29 8.39 133 Ireland 109 105 25.96 30.99 119 Italy 105 97 25.07 28.71 115 Luxembourg 116 - 27.74 - - Netherlands 136 119 32.34 35.34 109 Norway 172 156 41.05 46.31 113 Poland 21 21 4.99 6.26 125 Portugal 32 32 7.65 9.54 125 Slovakia - 22 - 6.53 - Spain 79 74 18.83 22.05 117 Sweden 133 116 31.80 34.21 108 Switzerland 129 121 30.67 35.68 116 United Kingdom 114 114 27.10 33.71 124 1 Hong Kong Special Administrative Region of China. -8- Additional data available In addition to the compensation cost measures covered in this news release, supplementary tables are available for comparative levels of hourly compensation costs, hourly direct pay, pay for time worked, and the structure of compensation for production workers in manufacturing for all years from 1975 through 2006, and for all employees in manufacturing for all years from 1996 to 2006. Data also are available for national currency hourly compensation and exchange rates in the supplementary tables (http://www.bls.gov/fls). BLS also computes comparative measures for 22 component manufacturing industries. Data for the component industries are not included in this release; in general, the data limitations for the component industries are greater than for total manufacturing. Data are available via the Internet (http://www.bls.gov/fls). This series is updated several times per year as data become available. The data for component industries currently are available on a North American Industry Classification System (NAICS) basis from 1992 to 2005. For further information, contact the Office of Productivity and Technology by phone at 202-691-5654, by e-mail at flshc@bls.gov, or by mail at Bureau of Labor Statistics, 2 Massachusetts Avenue, NE, Room 2150, Washington, DC 20212. Information in this release will be made available to sensory impaired individuals upon request. Voice phone: 202-691-5200; TDD message referral phone: 1-800-877-8339. This material is in the public domain and, with appropriate credit, may be reproduced without permission. It may be translated into foreign languages without permission, with a separate credit for the translation.
- Technical Notes
- Table 1. PRODUCTION WORKERS: Indexes of hourly compensation costs (United States = 100)
- Table 2. PRODUCTION WORKERS: Hourly compensation costs in U.S. dollars
- Table 3. PRODUCTION WORKERS: Annual percent change in hourly compensation costs in U.S. dollars
- Table 4. PRODUCTION WORKERS: Annual percent change in hourly compensation costs in national currency
- Table 5. PRODUCTION WORKERS: Annual percent change in exchange rates
- Table 6. PRODUCTION WORKERS: Hourly compensation costs in national currency units and exchange rates
- Table 7. ALL EMPLOYEES: Indexes of hourly compensation costs (United States = 100)
- Table 8. ALL EMPLOYEES: Hourly compensation costs in U.S. dollars
- Table 9. ALL EMPLOYEES: Annual percent change in hourly compensation costs in U.S. dollars
- Table 10. ALL EMPLOYEES: Annual percent change in hourly compensation costs in national currency
- Table 11. ALL EMPLOYEES: Annual percent change in exchange rates
- Table 12. ALL EMPLOYEES: Hourly compensation costs in national currency units and exchange rates
- Text version of entire news release
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Last Modified Date: January 25, 2008