Productivity and labor costs trends in manufacturing, 12 countries, (EXCERPT), Monthly Labor Review Online, March 1986

Productivity and labor cost trends
in manufacturing, 12 countries

Edwin Dean, Harry Boissevain and James Thomas

Manufacturing productivity, as measured by output per hour, rose in 1984 in the united States and 11 other industrial countries studied. The United States had a substantial increase of 5 percent, but this was exceeded by five of the other countries—Japan, France, Italy, the Netherlands, and Sweden. Belgium, West Germany,¹ and the United Kingdom about matched the U.S. gain; Canada, Denmark, and Norway had smaller increases.

Manufacturing output grew in all 12 countries in 1984, for the first time since 1973. The U.S. and Japanese output growth rates of more than 11 percent were the largest, and the French increase of 2 percent was the lowest. Productivity rose in the United States, Canada, Japan, Denmark, Norway and Sweden because output rose at a greater rate than hours.² The productivity increases for the other countries resulted from a combination of output gains coupled with decreased hours.

Unit labor costs, which reflect changes in productivity and hourly compensation, fell in the United States, Canada, Japan, Germany, and the Netherlands; and rose in the other European countries. However, unit labor costs measured in U.S. dollars were again significantly influenced by changes in currency exchange rates, as they have been since 1980. The dollar remained stable with the Japanese yen, but appreciated 5 percent against the Canadian dollar and 7 to 14 percent against the European currencies. Consequently, unit labor costs fell in each of the 11 foreign countries when measured in U.S. dollars, with the falloffs ranging from 3 to 15 percent—compared with a 1-percent decline in the United States.

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Footnotes

1 The Federal Republic, including West Berlin.

2 The data relate to all employed persons, including the self-employed, in the United States and Canada, and to all wage and salary employees in the other countries. Hours refer to hours paid in the United States; hours worked in the other countries.
Compensation comprises all payments made by employers directly to their employees (before deductions) and employer contributions to legally required insurance programs and to contractual and private welfare plans for the benefit of employees. Labor costs include, in addition to compensation, employer expenditures for recruitment and training; the cost of cafeterias, medical facilities, and other plant facilities and services; and taxes (other than social security taxes, which are part of compensation) levied on payrolls or employment rolls. Annual data are not available for total labor costs. Labor costs as measured in the data series used for this article, approximate more closely the concept of compensation. However, compensation has been adjusted to include all significant changes in taxes that are regarded as labor costs. For the United States and Canada, compensation of self-employed workers is measured by assuming that their hourly compensation is equal to the average for wage and salary employees.

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