Internet address: http://www.bls.gov/fls USDL: 06-2020 Technical information: (202) 691-5654 For Release: 10:00 A.M. EST Media contact: (202) 691-5902 Thursday, November 30, 2006 INTERNATIONAL COMPARISONS OF HOURLY COMPENSATION COSTS FOR PRODUCTION WORKERS IN MANUFACTURING, 2005 Average hourly compensation costs in U.S. dollars for production workers in manufacturing among 32 foreign economies were 80 percent of the U.S. level in 2005, virtually unchanged from 79 percent in 2004, 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 21 of the economies covered in 2005. (See table 1.) Data for Poland, a relatively low labor cost country, are included in this release for the first time. A note on China's labor costs appears on page 5 of this release. In the United States, hourly compensation costs for production workers in manufacturing increased 3.6 percent in 2005, to $23.65. When measured in national currency terms, trade-weighted average costs increased 2.9 percent in the combined 32 foreign economies in 2005. This was less than the increase in the United States, but the value of foreign currencies rose 3.1 percent against the U.S. dollar, resulting in a rise in hourly compensation costs in the foreign economies of 6.1 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, 1975-2005 PRINTED COPY CONTAINS CHART AT THIS POINT. -2- Compensation costs 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 2005 in most of the foreign economies-with only one country, Japan, showing a decrease in costs. The rate of compensation increase in a trade-weighted average of the 32 foreign economies was 6.1 percent in 2005, above the 5.7 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, 2005 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, 12 of the European countries 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 virtually unchanged against the U.S. dollar in 2005 (+0.1 percent), European labor costs measured in U.S. dollars showed much weaker growth than in the previous three years. Fifteen of the nineteen European countries for which data are available recorded annual growth rates in hourly compensation costs of between 1.0 and 4.5 percent in 2005. This is in contrast with the 2002 to 2004 period, when most European countries exhibited double-digit growth. The only -3- European countries to have double-digit growth in hourly compensation costs on a U.S. dollar basis in 2005 were the Czech Republic and Poland (12.1 and 17.9 percent, respectively), both of which also experienced strong appreciation of their national currencies. Compensation costs in Europe, on average, continued to be almost $4 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 $4.54 in Poland to more than eight times that level in Norway ($39.14), the highest labor cost country in these comparisons. (See table 2.) Outside of Europe, annual percent changes in manufacturing compensation costs measured in U.S. dollars varied considerably in 2005. Hourly compensation costs in Brazil and the Republic of Korea continued to grow strongly in 2005 (29.9 and 21.8 percent, respectively), boosted by an appreciation of the Brazilian real and Korean won against the U.S. dollar. Japan was the only country in these comparisons to show a decrease in hourly compensation costs measured in U.S. dollars (-0.4 percent), despite an increase in costs on a national currency basis, due to the depreciation of the Japanese yen 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 2006. 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 Hourly Compensation Costs for Production Workers in Manufacturing, 33 Countries or Areas, 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 3.1 percent increase in the value of the currencies of the 32 foreign economies against the U.S. dollar was the smallest increase since 2002 (0.4 percent), but well above the average annual change since 1975 (-3.4 percent). The currencies of most economies appreciated in 2005, while the currencies of only six countries-Denmark, Israel, Japan, Sweden, Switzerland, and the United Kingdom-depreciated against the dollar. (See table 5.) The movements of the foreign currencies relative to the U.S. dollar in 2005 had an influence on hourly manufacturing compensation costs measured in U.S. dollars. Hourly compensation costs on a national currency basis in the 32 foreign economies rose 2.9 percent, less than in the United States. When adjusted for the appreciation of the foreign currencies against the U.S. dollar, those costs increased 6.1 percent, higher than in the United States. -4- 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, 2004-2005 Hourly Hourly Country compensation, compensation, or area national Exchange U.S. currency Rates dollars Americas United States 3.6 - 3.6 Brazil 8.1 20.2 29.9 Canada 1.9 7.4 9.4 Mexico 4.1 3.7 7.9 Asia and Oceania Australia 2.9 3.6 6.5 Hong Kong SAR (1) 2.4 .1 2.6 Israel 3.6 -.1 3.5 Japan 1.4 -1.7 -.4 Korea 8.9 11.8 21.8 New Zealand 3.4 6.1 9.7 Singapore 2.2 1.6 3.8 Sri Lanka - - - Taiwan 2.8 3.9 6.8 Europe Austria 3.0 .1 3.1 Belgium 2.5 .1 2.6 Czech Republic 4.5 7.3 12.1 Denmark 3.0 -.1 2.9 Finland 4.0 .1 4.1 France 3.0 .1 3.1 Germany 1.4 .1 1.5 Greece - - - Hungary 6.2 1.6 7.8 Ireland 3.6 .1 3.7 Italy 2.7 .1 2.8 Luxembourg 4.1 .1 4.2 Netherlands 3.3 .1 3.4 Norway 2.7 4.6 7.5 Poland 4.3 13.0 17.9 Portugal 4.4 .1 4.5 Spain 3.7 .1 3.8 Sweden 2.8 -1.6 1.1 Switzerland 1.2 -.2 1.0 United Kingdom 4.3 -.6 3.6 Trade-weighted measures (2) All foreign economies 2.9 3.1 6.1 OECD (3) 2.9 3.2 6.2 Europe 2.9 -.1 2.8 Asian NIEs 5.0 6.0 11.5 1 Hong Kong Special Administrative Region of China. 2 The 2004-2005 percent changes for the trade-weighted measures are based upon the changes for the countries or areas for which 2005 data are available. 3 OECD refers to the Organization for Economic Cooperation and Development. -5- 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 for the first time. 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. China's data refer to all employees while data for other countries only refer to production workers. Since non-production workers in manufacturing often are compensated at higher rates than their production worker counterparts, the inclusion of non- production workers in China's data may affect comparability with other countries. In addition, it is likely that certain groups of workers are not fully captured in the annual administrative data published by China's National Bureau of Statistics, specifically migrant workers and workers employed in small-scale and private enterprises and the informal sector. Data for 2002 are from 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 estimates to 2003 and 2004 are the same as the methods used in the Banister article. A more detailed explanation and analysis of the 2003 and 2004 data for China will be available in a forthcoming article in the November 2006 issue of the Monthly Labor Review. 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 The effect that exchange rate changes can have on hourly compensation costs is particularly evident when comparing the labor costs of Canada with those of the United States. On a national currency basis, the increase in hourly compensation costs in Canada (1.9 percent) was less than the increase in the United States (3.6 percent). When adjusted for changes in exchange rates, however, the increase in costs on a U.S. dollar basis was significantly higher in Canada than in the United States (9.4 percent versus 3.6 percent). 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 2005. Data also are available for national currency hourly compensation and exchange rates from 1975 through 2005 in the supplementary tables (http://www.bls.gov/fls). -6- 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 upon request and via the Internet (http://www.bls.gov/fls). The data for component industries currently are available on a North American Industry Classification System (NAICS) basis from 1992 to 2004. 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. -12- Table 1. Indexes of hourly compensation costs for production workers in manufacturing, 33 countries or areas and selected economic groups, selected years, 1975-2005 Country or area 1975 1980 1985 1990 1995 2000 2002 2003 2004 2005 Americas United States............. 100 100 100 100 100 100 100 100 100 100 Brazil.................... - - - - - 18 12 12 14 17 Canada.................... 99 92 88 110 96 84 78 88 95 101 Mexico.................... 24 23 12 11 10 11 12 11 11 11 Asia and Oceania Australia................. 91 88 64 88 89 73 72 89 102 105 Hong Kong SAR (1)......... 12 16 14 22 28 28 27 25 24 24 Israel.................... 33 35 29 52 55 58 52 52 53 53 Japan..................... 48 57 49 85 137 112 87 91 96 92 Korea, Republic of........ 5 10 10 25 42 42 41 44 49 57 New Zealand............... 53 56 36 57 60 43 43 53 60 63 Singapore................. 13 16 20 25 44 37 31 32 32 32 Sri Lanka................. 5 2 2 2 3 2 2 2 2 - Taiwan.................... 6 11 12 26 35 32 26 26 26 27 Europe Austria................... 73 92 60 121 147 97 97 115 125 124 Belgium................... 94 122 65 121 149 102 102 120 132 130 Czech Republic............ - - - - 15 14 18 21 24 26 Denmark................... 101 112 64 124 147 111 114 136 151 150 Finland................... 75 86 65 143 142 99 102 122 134 135 France.................... 73 92 59 104 112 79 80 95 105 104 Germany................... - - - - 175 115 114 134 142 140 Greece.................... 27 39 29 46 53 - - - - - Hungary................... - - - - 16 14 18 21 25 26 Ireland................... 50 63 47 79 80 65 72 86 96 96 Italy..................... 75 84 60 117 91 70 69 82 90 89 Luxembourg................ 101 120 59 108 137 89 88 104 116 117 Netherlands............... 107 125 69 121 140 98 104 124 135 135 Norway.................... 112 123 82 147 145 115 131 147 160 166 Poland.................... - - - - - 14 15 16 17 19 Portugal.................. 25 21 12 24 30 23 24 28 31 31 Spain..................... 41 61 36 76 74 54 56 68 75 75 Sweden.................... 116 129 76 140 126 103 95 113 125 121 Switzerland............... 98 114 75 139 168 107 111 125 132 129 United Kingdom............ 54 78 49 85 80 86 86 96 109 109 Trade-weighted measures (2) All foreign economies (3). 62 67 52 80 87 70 65 73 79 80 OECD (3,4)................ 67 73 56 85 92 74 70 79 85 86 Europe (3)................ 79 99 61 113 123 90 91 107 117 116 European Union-15 (5)..... 78 98 60 112 123 91 92 107 118 116 Asian NIEs (6)............ 8 12 13 25 39 36 33 34 36 39 Dash means data not available. (1) Hong Kong Special Administrative Region of China. (2) For a description of trade-weighted measures and economic groups, see the Technical Notes preceding these tables. (3) Data for the Czech Republic for 1975-1994, for Hungary for 1975-1993, and for Poland 1975-1996 are not included. (4) Organization for Economic Cooperation and Development. (5) European Union-15 refers to European Union member countries prior to the expansion of the European Union to 25 countries on May 1, 2004. (6) The Asian NIEs are Hong Kong SAR, the Republic of Korea, Singapore and Taiwan. Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2006. -13- Table 2. Hourly compensation costs in U.S. dollars for production workers in manufacturing, 33 countries or areas and selected economic groups, selected years, 1975-2005 Country or area 1975 1980 1985 1990 1995 2000 2002 2003 2004 2005 Americas United States............. 6.16 9.63 12.71 14.81 17.17 19.65 21.33 22.20 22.82 23.65 Brazil.................... - - - - - 3.50 2.57 2.74 3.15 4.09 Canada.................... 6.11 8.87 11.20 16.33 16.50 16.48 16.72 19.53 21.77 23.82 Mexico.................... 1.46 2.20 1.59 1.57 1.70 2.07 2.49 2.44 2.44 2.63 Asia and Oceania Australia................. 5.60 8.44 8.18 13.09 15.36 14.40 15.38 19.79 23.38 24.91 Hong Kong SAR (1)......... 0.75 1.50 1.73 3.22 4.80 5.45 5.66 5.54 5.51 5.65 Israel.................... 2.02 3.41 3.65 7.69 9.41 11.41 11.00 11.62 12.01 12.42 Japan..................... 2.97 5.46 6.27 12.59 23.47 21.93 18.60 20.26 21.84 21.76 Korea, Republic of........ 0.32 0.95 1.23 3.70 7.28 8.23 8.77 9.69 11.13 13.56 New Zealand............... 3.28 5.44 4.55 8.48 10.35 8.38 9.10 11.69 13.65 14.97 Singapore................. 0.83 1.53 2.52 3.74 7.57 7.18 6.71 7.18 7.38 7.66 Sri Lanka................. 0.28 0.22 0.28 0.35 0.48 0.48 0.49 0.51 0.52 - Taiwan.................... 0.38 1.03 1.51 3.91 5.99 6.19 5.64 5.69 5.98 6.38 Europe Austria................... 4.50 8.87 7.57 17.91 25.26 19.14 20.71 25.51 28.53 29.42 Belgium................... 5.77 11.74 8.21 17.85 25.67 20.13 21.77 26.55 30.01 30.79 Czech Republic............ - - - - 2.63 2.83 3.83 4.72 5.45 6.11 Denmark................... 6.24 10.77 8.10 18.35 25.28 21.87 24.31 30.22 34.46 35.47 Finland................... 4.63 8.30 8.20 21.15 24.31 19.44 21.78 27.10 30.67 31.93 France.................... 4.50 8.90 7.48 15.36 19.26 15.46 17.13 21.14 23.89 24.63 Germany................... - - - - 30.10 22.67 24.22 29.64 32.50 33.00 Greece.................... 1.69 3.73 3.67 6.82 9.07 - - - - - Hungary................... - - - - 2.69 2.79 3.92 4.76 5.63 6.07 Ireland................... 3.06 6.02 6.00 11.77 13.75 12.72 15.26 19.09 21.94 22.76 Italy..................... 4.64 8.09 7.56 17.28 15.69 13.84 14.75 18.11 20.48 21.05 Luxembourg................ 6.22 11.51 7.48 16.00 23.56 17.51 18.71 23.12 26.57 27.68 Netherlands............... 6.58 12.05 8.73 17.98 24.03 19.33 22.12 27.47 30.76 31.81 Norway.................... 6.90 11.80 10.47 21.76 24.84 22.56 27.93 32.73 36.41 39.14 Poland.................... - - - - - 2.81 3.29 3.52 3.85 4.54 Portugal.................. 1.52 1.98 1.46 3.59 5.09 4.49 5.07 6.24 7.02 7.33 Spain..................... 2.52 5.86 4.64 11.30 12.70 10.65 11.95 15.01 17.14 17.78 Sweden.................... 7.14 12.44 9.61 20.81 21.68 20.18 20.23 25.19 28.42 28.73 Switzerland............... 6.03 10.96 9.55 20.63 28.90 20.95 23.77 27.78 30.21 30.50 United Kingdom............ 3.35 7.52 6.22 12.61 13.79 16.84 18.36 21.33 24.76 25.66 Trade-weighted measures (2) All foreign economies (3). 3.82 6.49 6.61 11.83 14.99 13.66 13.90 16.19 17.95 18.89 OECD (3,4)................ 4.13 7.00 7.08 12.62 15.85 14.59 14.92 17.47 19.43 20.43 Europe (3)................ 4.87 9.49 7.72 16.80 21.19 17.77 19.48 23.70 26.62 27.33 European Union-15 (5)..... 4.80 9.40 7.61 16.58 21.07 17.89 19.53 23.83 26.81 27.52 Asian NIEs (6)............ 0.49 1.15 1.62 3.71 6.62 7.06 7.04 7.49 8.16 9.28 Dash means data not available. (1) Hong Kong Special Administrative Region of China. (2) For a description of trade-weighted measures and economic groups, see the Technical Notes preceding these tables. (3) Data for the Czech Republic for 1975-1994, for Hungary for 1975-1993, and for Poland 1975-1996 are not included. (4) Organization for Economic Cooperation and Development. (5) European Union-15 refers to European Union member countries prior to the expansion of the European Union to 25 countries on May 1, 2004. (6) The Asian NIEs are Hong Kong SAR, the Republic of Korea, Singapore and Taiwan. Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2006. -14- Table 3. Annual percent change in hourly compensation costs in U.S. dollars for production workers in manufacturing, 33 countries or areas and selected economic groups, selected years, 1975-2005 Country or area 1975- 1975- 1980- 1985- 1990- 1995- 2000- 2003 2004 2005 2005(1) 1980 1985 1990 1995 2000 2005 Americas United States............. 4.6 9.3 5.7 3.1 3.0 2.7 3.8 4.1 2.8 3.6 Brazil.................... - - - - - - 3.2 6.7 14.9 29.9 Canada.................... 4.6 7.7 4.8 7.8 .2 .0 7.6 16.8 11.4 9.4 Mexico.................... 2.0 8.5 -6.3 -.2 1.5 4.0 4.9 -2.0 .0 7.9 Asia and Oceania Australia................. 5.1 8.6 -.6 9.9 3.3 -1.3 11.6 28.7 18.1 6.5 Hong Kong SAR (2)......... 6.9 14.8 2.8 13.2 8.3 2.6 .7 -2.2 -.6 2.6 Israel.................... 6.2 11.0 1.4 16.1 4.1 3.9 1.7 5.6 3.4 3.5 Japan..................... 6.9 13.0 2.8 14.9 13.3 -1.3 -.2 8.9 7.8 -.4 Korea, Republic of........ 13.3 24.3 5.2 24.6 14.5 2.5 10.5 10.5 14.9 21.8 New Zealand............... 5.2 10.7 -3.5 13.3 4.1 -4.1 12.3 28.5 16.8 9.7 Singapore................. 7.7 12.9 10.6 8.2 15.1 -1.0 1.3 7.0 2.8 3.8 Sri Lanka................. 2.1 -5.0 5.2 4.7 6.4 .0 - 3.1 1.9 - Taiwan.................... 9.8 21.8 8.0 21.0 8.9 .7 .6 1.0 4.9 6.8 Europe Austria................... 6.5 14.5 -3.1 18.8 7.1 -5.4 9.0 23.2 11.8 3.1 Belgium................... 5.7 15.3 -6.9 16.8 7.5 -4.7 8.9 21.9 13.1 2.6 Czech Republic............ - - - - - 1.5 16.6 23.3 15.4 12.1 Denmark................... 6.0 11.5 -5.5 17.8 6.6 -2.8 10.1 24.3 14.0 2.9 Finland................... 6.6 12.4 -.2 20.9 2.8 -4.4 10.4 24.4 13.2 4.1 France.................... 5.8 14.6 -3.4 15.5 4.6 -4.3 9.8 23.5 13.0 3.1 Germany................... - - - - - -5.5 7.8 22.4 9.7 1.5 Greece.................... 7.4 17.2 -.3 13.2 5.9 - - - - - Hungary................... - - - - - .8 16.8 21.3 18.3 7.8 Ireland................... 6.9 14.5 -.1 14.4 3.2 -1.5 12.3 25.1 14.9 3.7 Italy..................... 5.2 11.8 -1.3 18.0 -1.9 -2.5 8.7 22.8 13.1 2.8 Luxembourg................ 5.1 13.1 -8.3 16.4 8.0 -5.8 9.6 23.6 14.9 4.2 Netherlands............... 5.4 12.9 -6.2 15.6 6.0 -4.3 10.5 24.2 12.0 3.4 Norway.................... 6.0 11.3 -2.4 15.8 2.7 -1.9 11.7 17.2 11.2 7.5 Poland.................... - - - - - - 10.1 6.9 9.3 17.9 Portugal.................. 5.4 5.4 -5.8 19.7 7.3 -2.5 10.3 23.1 12.6 4.5 Spain..................... 6.7 18.4 -4.6 19.5 2.4 -3.5 10.8 25.6 14.2 3.8 Sweden.................... 4.8 11.7 -5.0 16.7 .8 -1.4 7.3 24.5 12.8 1.1 Switzerland............... 5.6 12.7 -2.7 16.7 7.0 -6.2 7.8 16.9 8.7 1.0 United Kingdom............ 7.0 17.5 -3.7 15.2 1.8 4.1 8.8 16.2 16.1 3.6 Trade-weighted measures (3) All foreign economies (4). 5.7 12.1 .2 11.6 4.9 -.1 6.3 12.9 9.0 6.1 OECD (4,5)................ 5.4 11.7 -.4 11.3 4.4 -.3 6.8 13.9 9.6 6.2 Europe (4)................ 6.1 14.5 -3.8 16.7 4.5 -2.7 9.1 21.7 12.6 2.8 European Union-15 (6)..... 6.1 14.6 -3.9 16.7 4.4 -2.6 9.1 22.0 12.8 2.8 Asian NIEs (7)............ 10.4 20.2 6.7 19.0 12.1 1.3 4.6 5.3 7.6 11.5 Rates of change based on compound rate method. Dash means data not available. (1) 1975-2004 for Sri Lanka. 1975-1998 for Greece. (2) Hong Kong Special Administrative Region of China. (3) Trade-weighted percent changes computed as the trade-weighted average of the rates of change for the individual countries or areas. For description of trade-weighted measures and economic groups, see the Technical Notes preceding these tables. (4) Data for the Czech Republic, Hungary, and Poland are not included for 1975-2004, 1975-1980, 1980-1985, 1985-1990, and 1990-1995. Data for Poland also are not included for 1995-2000. (5) Organization for Economic Cooperation and Development. (6) European Union-15 refers to European Union member countries prior to the expansion of the European Union to 25 countries on May 1, 2004. (7) The Asian NIEs are Hong Kong SAR, the Republic of Korea, Singapore and Taiwan. Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2006. -15- Table 4. Annual percent change in hourly compensation costs in national currency for production workers in manufacturing, 33 countries or areas and selected economic groups, selected years, 1975-2005 Country or area 1975- 1975- 1980- 1985- 1990- 1995- 2000- 2003 2004 2005 2005(1) 1980 1985 1990 1995 2000 2005 Americas United States............. 4.6 9.3 5.7 3.1 3.0 2.7 3.8 4.1 2.8 3.6 Brazil.................... - - - - - - 9.2 12.3 9.3 8.1 Canada.................... 5.3 10.8 8.1 4.5 3.5 1.6 3.3 4.2 3.6 1.9 Mexico.................... 27.8 22.5 51.8 61.1 19.7 12.4 7.9 9.4 4.6 4.1 Asia and Oceania Australia................. 7.0 11.6 9.6 7.5 4.3 3.6 5.7 7.2 4.6 2.9 Hong Kong SAR (2)......... 8.6 14.9 12.5 13.2 8.2 2.7 .7 -2.3 -.6 2.4 Israel.................... 42.7 68.3 200.9 29.2 12.8 10.4 3.7 1.5 1.7 3.6 Japan..................... 3.4 7.0 3.9 4.1 3.8 1.4 .3 .8 .6 1.4 Korea, Republic of........ 16.1 30.0 13.1 19.6 16.5 10.6 8.3 5.4 10.3 8.9 New Zealand............... 7.1 15.6 10.3 9.2 2.1 3.0 3.0 2.5 2.3 3.4 Singapore................. 6.4 10.6 11.2 4.1 9.6 2.9 .6 4.1 -.3 2.2 Sri Lanka................. 12.0 12.7 16.2 13.1 11.7 8.5 - 4.0 6.8 - Taiwan.................... 9.2 20.5 10.2 11.8 8.5 4.1 1.2 .6 1.8 2.8 Europe Austria................... 4.9 7.9 6.4 5.3 4.6 2.3 2.7 2.9 1.8 3.0 Belgium................... 5.3 10.1 7.3 4.1 4.9 3.1 2.6 1.8 2.9 2.5 Czech Republic............ - - - - - 9.4 6.0 6.2 5.2 4.5 Denmark................... 6.1 11.1 7.2 5.8 4.5 4.6 3.7 3.7 3.8 3.0 Finland................... 7.6 12.7 10.5 9.8 5.6 3.3 4.0 3.9 3.0 4.0 France.................... 6.6 14.3 12.3 4.5 2.8 2.7 3.4 3.1 2.9 3.0 Germany................... - - - - - 2.2 1.5 2.2 -.2 1.4 Greece.................... 18.3 23.9 26.1 16.4 14.2 - - - - - Hungary................... - - - - - 18.5 9.0 5.5 7.0 6.2 Ireland................... 8.1 16.2 14.0 4.8 3.8 4.8 5.8 4.5 4.6 3.6 Italy..................... 8.3 18.0 15.8 7.5 4.3 2.6 2.4 2.6 2.9 2.7 Luxembourg................ 4.7 8.0 5.7 3.8 5.4 2.0 3.2 3.2 4.6 4.1 Netherlands............... 4.2 7.6 3.9 2.5 3.3 3.7 4.1 3.7 1.9 3.3 Norway.................... 6.7 10.1 9.1 8.6 3.0 4.8 4.9 3.9 5.9 2.7 Poland.................... - - - - - - 3.7 1.9 2.8 4.3 Portugal.................. 12.1 20.7 20.5 15.3 8.3 5.0 3.9 2.8 2.5 4.4 Spain..................... 9.8 23.8 13.4 7.9 6.6 3.9 4.4 4.8 3.9 3.7 Sweden.................... 6.8 12.2 9.5 8.3 4.7 3.6 3.0 3.5 2.6 2.8 Switzerland............... 3.0 3.4 5.0 4.1 3.5 .7 1.4 1.0 .5 1.2 United Kingdom............ 7.7 16.5 8.2 8.1 4.3 4.9 4.9 6.7 3.5 4.3 Trade-weighted measures (3) All foreign economies (4). 10.2 15.0 18.4 15.6 7.6 3.7 3.8 4.3 3.1 2.9 OECD (4,5)................ 9.8 14.0 15.9 15.8 7.5 3.6 4.0 4.6 3.3 2.9 Europe (4)................ 5.7 12.4 8.8 5.8 4.4 .3 3.3 3.6 2.3 2.9 European Union-15 (6)..... 5.8 12.8 9.0 5.8 4.5 .2 3.4 3.7 2.4 3.0 Asian NIEs (7)............ 11.3 21.6 11.8 13.6 11.8 6.2 3.7 2.7 4.4 5.0 Rates of change based on compound rate method. Dash means data not available. (1) 1975-2004 for Sri Lanka. 1975-1998 for Greece. (2) Hong Kong Special Administrative Region of China. (3) Trade-weighted percent changes computed as the trade-weighted average of the rates of change for the individual countries or areas. For description of trade-weighted measures and economic groups, see the Technical Notes preceding these tables. (4) Data for the Czech Republic, Hungary, and Poland are not included for 1975-2004, 1975-1980, 1980-1985, 1985-1990, and 1990-1995. Data for Poland also are not included for 1995-2000. (5) Organization for Economic Cooperation and Development. (6) European Union-15 refers to European Union member countries prior to the expansion of the European Union to 25 countries on May 1, 2004. (7) The Asian NIEs are Hong Kong SAR, the Republic of Korea, Singapore and Taiwan. Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2006. -16- Table 5. Annual percent change in exchange rates (U.S. dollars per national currency unit), 33 countries or areas and selected economic groups, selected years, 1975-2005 Country or area 1975- 1975- 1980- 1985- 1990- 1995- 2000- 2003 2004 2005 2005(1) 1980 1985 1990 1995 2000 2005 Americas United States............. - - - - - - - - - - Brazil.................... - - - - - - -5.6 -5.0 5.1 20.2 Canada.................... -.6 -2.7 -3.1 3.2 -3.2 -1.6 4.2 12.1 7.6 7.4 Mexico.................... -20.2 -11.5 -38.3 -38.0 -15.2 -7.5 -2.8 -10.5 -4.4 3.7 Asia and Oceania Australia................. -1.8 -2.7 -9.3 2.2 -1.0 -4.7 5.6 20.0 12.9 3.6 Hong Kong SAR (2)......... -1.5 -.1 -8.6 .0 .1 -.1 .0 .2 .0 .1 Israel.................... -25.6 -34.1 -66.3 -10.2 -7.7 -5.9 -1.9 4.0 1.6 -.1 Japan..................... 3.4 5.6 -1.1 10.5 9.1 -2.7 -.4 8.0 7.1 -1.7 Korea, Republic of........ -2.5 -4.4 -6.9 4.2 -1.7 -7.4 2.0 4.9 4.1 11.8 New Zealand............... -1.8 -4.3 -12.6 3.7 1.9 -7.0 9.1 25.3 14.2 6.1 Singapore................. 1.2 2.1 -.5 3.9 5.1 -3.9 .7 2.8 3.1 1.6 Sri Lanka................. -8.8 -15.7 -9.5 -7.5 -4.8 -7.8 - -.9 -4.6 - Taiwan.................... .6 1.1 -2.0 8.2 .3 -3.2 -.5 .4 3.1 3.9 Europe Austria................... 1.5 6.1 -9.0 12.8 2.4 -7.5 6.2 19.8 9.9 .1 Belgium................... .4 4.7 -13.2 12.2 2.5 -7.6 6.2 19.8 9.9 .1 Czech Republic............ - - - - - -7.2 10.0 16.1 9.8 7.3 Denmark................... -.1 .4 -11.9 11.4 2.0 -7.1 6.2 19.9 9.8 -.1 Finland................... -.9 -.3 -9.7 10.1 -2.6 -7.4 6.2 19.8 9.9 .1 France.................... -.7 .3 -14.0 10.5 1.8 -6.8 6.2 19.8 9.9 .1 Germany................... - - - - - -7.5 6.2 19.8 9.9 .1 Greece.................... -9.2 -5.4 -21.0 -2.7 -7.3 - - - - - Hungary................... - - - - - -14.9 7.2 15.0 10.6 1.6 Ireland................... -1.1 -1.5 -12.3 9.2 -.7 -6.1 6.2 19.8 9.9 .1 Italy..................... -2.9 -5.3 -14.8 9.8 -6.0 -4.9 6.2 19.8 9.9 .1 Luxembourg................ .4 4.7 -13.2 12.2 2.5 -7.6 6.2 19.8 9.9 .1 Netherlands............... 1.2 4.9 -9.8 12.7 2.6 -7.6 6.2 19.8 9.9 .1 Norway.................... -.7 1.1 -10.5 6.6 -.3 -6.4 6.5 12.8 5.0 4.6 Poland.................... - - - - - - 6.1 4.9 6.3 13.0 Portugal.................. -6.0 -12.7 -21.9 3.8 -1.0 -7.1 6.2 19.8 9.9 .1 Spain..................... -2.8 -4.3 -15.9 10.8 -3.9 -7.1 6.2 19.8 9.9 .1 Sweden.................... -1.9 -.4 -13.2 7.8 -3.7 -4.9 4.2 20.3 10.0 -1.6 Switzerland............... 2.5 9.0 -7.4 12.0 3.3 -6.9 6.3 15.8 8.2 -.2 United Kingdom............ -.7 .9 -11.0 6.6 -2.4 -.8 3.7 8.9 12.1 -.6 Trade-weighted measures (3) All foreign economies (4). -3.4 -2.0 -12.4 -.4 -2.2 -3.5 2.4 8.4 5.8 3.1 OECD (4,5)................ -3.4 -1.7 -12.2 -.7 -2.5 -3.5 2.7 9.1 6.1 3.2 Europe (4)................ .4 2.0 -11.6 10.4 .1 -2.7 5.6 17.6 10.0 -.1 European Union-15 (6)..... .3 1.7 -11.8 10.3 -.1 -2.5 5.6 17.7 10.1 -.1 Asian NIEs (7)............ -.8 -1.0 -4.5 4.8 .4 -4.5 .7 2.5 3.1 6.0 Rates of change based on compound rate method. Dash means data not available. (1) 1975-2004 for Sri Lanka. 1975-1998 for Greece. (2) Hong Kong Special Administrative Region of China. (3) Trade-weighted percent changes computed as the trade-weighted average of the rates of change for the individual countries or areas. For description of trade-weighted measures and economic groups, see the Technical Notes preceding these tables. (4) Data for the Czech Republic, Hungary, and Poland are not included for 1975-2004, 1975-1980, 1980-1985, 1985-1990, and 1990-1995. Data for Poland also are not included for 1995-2000. (5) Organization for Economic Cooperation and Development. (6) European Union-15 refers to European Union member countries prior to the expansion of the European Union to 25 countries on May 1, 2004. (7) The Asian NIEs are Hong Kong SAR, the Republic of Korea, Singapore and Taiwan. Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2006. -17- Table 6. Hourly compensation costs in national currency units and exchange rates, 33 countries or areas, 2005 Country or area Compensation costs Exchange Rates Americas United States............. 23.65 .. Brazil.................... 9.97 2.435 Canada.................... 28.87 1.212 Mexico.................... 28.67 10.89 Asia and Oceania Australia................. 32.65 1.311 Hong Kong SAR (1)......... 43.94 7.778 Israel.................... 55.76 4.488 Japan..................... 2395 110.1 Korea, Republic of........ 13881 1024 New Zealand............... 21.24 1.419 Singapore................. 12.74 1.664 Sri Lanka................. - - Taiwan.................... 205.0 32.13 Europe Austria................... 23.63 .8033 Belgium................... 24.74 .8033 Czech Republic............ 146.4 23.96 Denmark................... 212.6 5.995 Finland................... 25.65 .8033 France.................... 19.78 .8033 Germany................... 26.51 .8033 Greece.................... - - Hungary................... 1212 199.6 Ireland................... 18.28 .8033 Italy..................... 16.91 .8033 Luxembourg................ 22.23 .8033 Netherlands............... 25.55 .8033 Norway.................... 252.1 6.441 Poland.................... 14.68 3.236 Portugal.................. 5.89 .8033 Spain..................... 14.29 .8033 Sweden.................... 214.6 7.471 Switzerland............... 38.00 1.246 United Kingdom............ 14.09 .5490 Dash means data not available. (1) Hong Kong Special Administrative Region of China. National currency units are: United States, dollar; Brazil, real; Canada, dollar; Mexico, peso; Australia, dollar; Hong Kong, dollar; Israel, new shekel; Japan, yen; Republic of Korea, won; New Zealand, dollar; Singapore, dollar; Sri Lanka, rupee; Taiwan, dollar; Austria, euro; Belgium, euro; Czech Republic, koruna; Denmark, krone; Finland, euro; France, euro; Germany, euro; Greece, euro; Hungary, forint; Ireland, euro; Italy, euro; Luxembourg, euro; Netherlands, euro; Norway, krone; Poland, zloty; Portugal, euro; Spain, euro; Sweden, krona; Switzerland, franc; United Kingdom, pound. Note: For data for all years 1975-2005, see the supplementary tables to this news release at http://www.bls.gov/fls. Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2006. -7- TECHNICAL NOTES The tables in this news release present international comparisons of hourly compensation costs for production workers in manufacturing in selected countries or areas. The total compensation measures are prepared by the Bureau of Labor Statistics in order to assess international differences in employer labor costs. Comparisons based on the more readily available average earnings statistics published by many countries can be very misleading. National definitions of average earnings differ considerably; average earnings do not include all items of labor compensation; and the omitted items of compensation frequently represent a large proportion of total compensation. The compensation measures are computed in national currency units and are converted into U.S. dollars at prevailing commercial market currency exchange rates. The foreign currency exchange rates used in the calculations are the average daily exchange rates for the reference period. They are appropriate measures for comparing levels of employer labor costs. They 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 commercial market exchange rates are not reliable indicators of relative differences in prices. The compensation measures in this news release are based on statistics available to BLS as of September 2006. These measures may be revised as data are collected to update compensation measures for component industries. Beginning with this release, BLS has prepared measures of hourly compensation costs for Poland. Because of data limitations, the measures cover only the years 1997-2005. Definitions Hourly compensation costs include (1) hourly direct pay and (2) employer social insurance expenditures and other labor taxes. Hourly direct pay includes all payments made directly to the worker, before payroll deductions of any kind, consisting of (a) pay for time worked and (b) other direct pay. Pay for time worked includes basic time and piece rates plus overtime premiums, shift differentials, other premiums and bonuses paid regularly each pay period, and cost-of-living adjustments. Other direct pay includes pay for time not worked (vacation, holidays, and other leave, except sick leave), seasonal or irregular bonuses and other special payments, selected social allowances, and the cost of payments in kind. Social insurance expenditures and other labor taxes include (c) employer expenditures for legally required insurance programs and contractual and private benefit plans and (d) other labor taxes. Social insurance expenditures include employer expenditures for retirement and disability pensions, health insurance, income guarantee insurance and sick leave, life and accident insurance, occupational injury and illness compensation, unemployment insurance, and family allowances. Other labor taxes includes taxes on payrolls or employment (or reductions to reflect subsidies), even if they do not finance programs that directly benefit workers, because such taxes are regarded as labor costs. The BLS definition of hourly compensation costs is not the same as the International Labor Office (ILO) definition of total labor costs. Hourly compensation costs do not include all items of labor costs. The costs of recruitment, employee training, and plant facilities and services-such as cafeterias and medical clinics-are not included because data are not available for many countries. The labor costs not included account for no more than 4 percent of total labor costs in any country for which the data are available. Production workers generally include those employees who are engaged in fabricating, assembly, and related activities; material handling, warehousing, and shipping; maintenance and repair; janitorial and guard services; auxiliary production (for example, power plants); and other services closely related to the above activities. Working supervisors are generally included; apprentices and other trainees are generally excluded. Methods Total compensation is computed by adjusting each country's average earnings series for items of direct pay not included in earnings and for employer expenditures for legally required insurance, contractual and private benefit plans, and other labor taxes. For the United States and other countries that measure earnings on an hours-paid basis, the figures are also adjusted in order to approximate compensation per hour worked. Earnings statistics are obtained from surveys of employment, hours, and earnings or from surveys or censuses of manufactures. Adjustment factors are obtained from periodic labor cost surveys and interpolated or projected to non-survey years on the basis of other information for most countries. The information used includes tabulations of employer social security contribution rates provided by the International Social Security Association, information on contractual and legislated fringe benefit changes from labor bulletins, and statistical series on indirect labor costs. For other countries, adjustment factors are obtained from surveys or -8- censuses of manufactures or from reports on fringe-benefit systems and social security. For the United States, the adjustment factors are special calculations for international comparisons based on data from several surveys. The statistics are also adjusted, where necessary, to account for major differences in worker coverage; differences in industrial classification systems; and changes over time in survey coverage, sample benchmarks, or frequency of surveys. Nevertheless, some differences in industrial coverage remain and, with the exception of the United States, Canada, and several other countries, the data exclude very small establishments (less than 5 employees in Japan and less than 10 employees in most European and some other countries). For the United States, the methods used, as well as the results, differ somewhat from those for other BLS series on U.S. compensation costs. Hourly compensation costs are converted to U.S. dollars using the average daily exchange rate for the reference period. The exchange rates used are prevailing commercial market exchange rates as published by either the U.S. Federal Reserve Board or the International Monetary Fund. On January 1, 1999, several European countries joined the European Monetary Union (EMU): Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Greece joined on January 1, 2001. Currencies of EMU members were established at fixed conversion rates to the euro, the official currency of the EMU. In this release, data on hourly compensation costs in national currency and exchange rates for the EMU countries relate to euros for 1999 to present; for the years 1975-1998 these data are published in the old national currencies used in each country before the euro was adopted. In order to include data on trends in national currency compensation costs and exchange rates for the entire time period, BLS converts national currency for 1975- 1998 to a "euro" basis for calculation. The conversions for all years 1975-1998 are made using the official fixed conversion rates for 1999. Industrial classification The hourly compensation measures relate to manufacturing on a North American Industry Classification System (NAICS) basis. NAICS is the common industrial classification used by the United States, Canada, and Mexico. The NAICS definition of manufacturing differs somewhat from the definition of manufacturing used in other countries. Some industries that are not included in the NAICS definition of manufacturing, such as publishing of books and sound recordings, some repair and maintenance of equipment, and some business support services, are included in the definition of manufacturing in most other industrial classifications. Other industries, such as some processing of foods, some packaging, and retail sales of bakery products from the production facility, are included in the NAICS definition of manufacturing but not in the definition of manufacturing for most foreign economies. Most of the differences other than the treatment of publishing are very minor and do not have a noticeable impact on overall manufacturing averages. BLS makes adjustments to remove publishing from manufacturing for the foreign economies in which it is classified as a part of manufacturing, except for Sri Lanka, for which the data necessary to remove publishing are not available. For the countries for which adjustments are made, the effect of publishing on manufacturing wages was estimated and removed using data from national sources, the United Nations Industrial Statistics Database, the International Labor Office (ILO), and other sources. Except for Hong Kong, the effect of removing publishing from manufacturing does not change the level of hourly compensation costs for any economy more than 1.5 percent. For Hong Kong, the effect of the adjustments is 2 to 4 percent in several years. Country notes The following are exceptions to the standard coverage and definitions explained above: Australia. Compensation relates to production workers and non- production workers other than those in managerial, executive, professional, and higher supervisory positions. Hong Kong SAR. Average of selected manufacturing industries. The industries covered accounted for about 63 percent of all persons employed in manufacturing in 2001. Compensation excludes overtime pay. Hong Kong became a Special Administrative Region (SAR) of China in July 1997. Austria. Excludes workers in establishments considered handicraft manufacturers. In 1986, handicraft employment was about 35 percent of all manufacturing employment. In 2003, the handicraft blue collar workers' average monthly gross wage was $1,893. The average monthly gross wage of manufacturing blue-collar workers was $2,156. Finland. Data are for industrial workers and include workers in mining and electrical power plants which account for around 3 percent of industrial employment. For comparability with other countries, compensation excludes some obligatory training and plant facilities costs; in 1994, these costs would add 1.6 percent to average hourly compensation costs. -9- Germany. Excludes workers in establishments considered handicraft manufacturers. Handicraft employment in Germany was 20.3 percent of all employment in manufacturing in 1994. Average hourly earnings of production workers were about 3 percent lower in manufacturing including handicrafts than in manufacturing excluding handicrafts in 1990. Ireland. Data refer to September for 1975. Mexico. Compensation costs data for Mexico exclude petroleum and coal products manufacturing. Norway. For comparability with other countries, compensation excludes some obligatory training and plant facilities costs; in 1994, these costs would add 2.2 percent to average hourly compensation costs. Trade-weighted measures The trade weights used to compute the average compensation cost measures for selected economic groups are weights based on the relative dollar value of U.S. trade in manufactured commodities (exports plus imports) with each country or area in 2004. (See the following table.) The trade data are compiled by the U.S. Census Bureau. The only countries not covered in the trade-weighted measures of this report that accounted for as much as one percent of such trade are China, Malaysia, Thailand, and India. Hourly compensation costs data for China are included in this report in a special text box. In addition, an article on manufacturing compensation costs in China is available on the BLS website at http://www.bls.gov/opub/mlr/2005/08/art3full.pdf. The compensation data on China are not directly comparable with the data for other countries found in this new release. The countries included in the Organization for Economic Cooperation and Development (OECD) trade-weighted measure are Canada, Mexico, Australia, Japan, the Republic of Korea, New Zealand, and all European countries. The group labeled "European Union-15" consists of the 15 members of the European Union before the expansion to 25 countries on May 1, 2004 (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom). The group labeled "Europe" consists of the 15 members of the European Union-15, the Czech Republic, Hungary, Norway, Poland, and Switzerland. The group labeled "Asian NIEs" consists of the four newly industrialized economies of Hong Kong SAR, the Republic of Korea, Singapore, and Taiwan. The trade-weighted measures relate to all the countries or areas covered in the series. Estimates are computed for missing country data using the average trend in other economies to estimate the missing data. Trade weighted average percent changes for the 32 foreign economies are computed both including and excluding Brazil, the Czech Republic, Hungary, and Poland because a lack of data for these countries prior to the mid-1990s. The trade-weighted average rates of change are computed as the trade-weighted arithmetic average of the rates of change for the individual countries or areas; the trade-weighted average hourly compensation costs are computed as the trade-weighted arithmetic average of cost levels for the individual countries or areas. Rates of change derived from the trade-weighted average hourly compensation cost levels need not be the same as the trade-weighted average rates of change. -10- Share of total U.S. imports and exports of manufactured products in 2004 (in percent) Country or area 2004 Country or area 2004 and economic trade and economic trade group share group share Brazil 1.7 Greece 0.1 Canada 20.0 Hungary 0.2 Mexico 12.5 Ireland 1.9 Italy 2.0 Australia 1.1 Luxembourg 0.1 Hong Kong SAR(1) 1.3 Netherlands 1.8 Israel 1.2 Norway 0.2 Japan 9.4 Poland 0.1 Korea, Republic of 3.7 Portugal 0.2 New Zealand 0.2 Spain 0.7 Singapore 1.8 Sweden 0.8 Sri Lanka 0.1 Switzerland 1.0 Taiwan 2.9 United Kingdom 3.8 Austria 0.4 Belgium 1.5 Economic Groups Czech Republic 0.1 32 foreign economies 74.7 Denmark 0.3 OECD(2) 66.2 Finland 0.3 Europe 22.4 France 2.7 European Union-15(3) 20.8 Germany 5.6 Asian NIEs 9.1 1 Hong Kong Special Administrative Region of China. 2 Organization for Economic Cooperation and Development. 3 Includes the 15 European Union members prior to expansion on May 1, 2004. Data limitations Because compensation is partly estimated, the statistics should not be considered as precise measures of comparative compensation costs. In addition, the figures are subject to revision as the results of new labor cost surveys or other data used to estimate compensation costs become available. The comparative level figures in this report are averages for all manufacturing industries and are not necessarily representative of all component industries. In the United States and some other countries, such as Japan, differentials in hourly compensation cost levels by industry are fairly wide. Labor costs versus labor income The hourly compensation figures in U.S. dollars shown in the tables provide comparative measures of employer labor costs; they do not provide intercountry comparisons of the purchasing power of worker incomes. Prices of goods and services vary greatly among countries, and the commercial market exchange rates used to compare employer labor costs do not reliably indicate relative differences in prices. Purchasing power parities, that is, the number of foreign currency units required to buy goods and services equivalent to what can be purchased with one unit of U.S. or other base-country currency must be used for meaningful international comparisons of the relative purchasing power of worker incomes. Total compensation converted to U.S. dollars at purchasing power parities would provide one measure for comparing relative real levels of labor income. It should be noted, however, that total compensation includes employer payments to funds for the benefit of -11- workers in addition to payments made directly to workers. (For a few countries, the compensation measures also include taxes or subsidies on payrolls or employment even if they do not finance programs which directly benefit workers.) Payments into these funds provide either deferred income (for example, payments to retirement funds), a type of insurance (for example, payments to unemployment or health benefit funds), or current social benefits (for example, family allowances), and the relationship between employer payments and current or future worker benefits is indirect. On the other hand, excluding these payments would understate the total value of income derived from work because they substitute for worker savings or self-insurance to cover retirement, medical costs, etc. Total compensation, because it takes account of employer payments into funds for the benefit of workers, is a broader income concept than either total direct earnings or direct spendable earnings. An even broader concept would take account of all social benefits available to workers, including those financed out of general revenues as well as those financed through employment or payroll taxes.