Technical Notes
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TECHNICAL NOTES
The tables in this news release present international comparisons of
hourly compensation costs for production workers and all employees 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. For several reasons, the
comparisons based on the more readily available average earnings statistics
published by many countries can be 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 in this news release are based on statistics
available to BLS as of September 2007. These measures may be revised as data
are collected to update compensation measures for component industries. Data
for component industries are available at
http://www.bls.gov/fls/flshcindnaics.htm.
For the first time, this news release contains data for all employees in
addition to the series for production workers. The production worker series
starts in 1975 and the all employee series in 1996. In addition, production
worker and all employee data are introduced for the Philippines and all
employee data are introduced for Argentina and Slovakia.
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 pay for time worked and other direct pay. Social
insurance expenditures and other labor taxes include employer expenditures for
legally required insurance programs, contractual and private benefit plans,
and other labor taxes. Other labor taxes refer to 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. BLS 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 2
percent of total labor costs in most countries 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.
All employees include production workers as well as all others employed
full or part time in an establishment during a specified payroll period.
Temporary employees are included. Persons are considered employed if they
receive pay for any part of the specified pay period. The self-employed,
unpaid family workers, and workers in private households are also excluded.
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Hourly Compensation Costs consists of:
* Hourly Direct Pay
- Pay for Time Worked
+ Basic wages
+ Piece rate
+ Overtime premiums
+ Shift differentials
+ Bonuses and premiums paid regularly
+ Cost-of-living adjustments
- Other Direct Pay
+ Pay for time not worked (vacations, holidays, and other leave,
except sick leave)
+ Seasonal and irregular bonuses
+ Social allowances
+ Pay in kind
* Employer Social Insurance Expenditures (both legally required and contractual
and private) and Other Labor Taxes
- Retirement and disability pensions
- Health insurance
- Income guarantee insurance and sick leave
- Life and accident insurance
- Occupational injury and illness compensation
- Unemployment insurance
- Family allowances
- Other social insurance expenditures
- Taxes (or subsidies) on payrolls or employment
Data on Hourly Direct Pay, Pay for Time Worked, and Social Insurance
Expenditures can be found in the supplementary tables to this news release at
http://www.bls.gov/fls/hcompsupptabtoc.htm.
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 and subsidies. 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. These surveys typically
cover firms with a minimum of one to ten employees.
For most countries, adjustment factors are obtained from periodic labor
cost surveys or censuses of manufacturers and interpolated or projected to
non-survey years on the basis of other information. Generally, these surveys
cover all employees in the establishment; survey data are used in both
production worker and all employee series. Other 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 the United States, the adjustment factors are
specially constructed for international comparisons using data from several
surveys. The methods used, as well as the results, differ somewhat from those
for other BLS series on U.S. compensation costs.
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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 remain. Exceptions to
these methods, as well as data sources can be found in "Country Notes and
Sources" located at www.bls.gov/fls.
Exchange Rates and Currencies
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. There are currently other member countries of the EMU that
are not covered in this report. Currencies of EMU members were established at
fixed conversion rates to the euro, the official currency of the EMU. For the
EMU countries data on hourly compensation costs are reported in euros and
exchange rates for the EMU countries relate to euros per dollar for 1999 to
the present; for the years 1975-1998, hourly compensation data are published
in the old national currencies used in each country before the adoption of the
euro. 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, with the exception of Greece which uses the official fixed conversion
rate for 2001.
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. In contrast, other industries are included
in the NAICS definition of manufacturing but not in the definition of
manufacturing for most foreign economies, such as some processing of foods,
some packaging, and retail sales of bakery products from the production
facility. 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 is estimated and removed using data from
national sources or 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, and the
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change is less than one percent in most countries. For Hong Kong, the effect
of the adjustments is 2 to 4 percent in several years.
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 in 2004 are China,
India, Malaysia, and Thailand. 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/2006/11/art4full.pdf. The compensation data on
China are not directly comparable with the data for other countries found in
this news 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 covered
in the series. The group labeled "Euro Area" consists of the 12 European
Union member countries in this release that have adopted the euro as the
common currency as of January 1, 2001 (Austria, Belgium, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and
Spain). The group labeled "Europe" consists of the members of the Euro Area
and the Czech Republic, Denmark, Hungary, Norway, Poland, Slovakia, Sweden,
Switzerland, and the United Kingdom. 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. If data for the most recent year(s) are missing for a country,
trade-weighted estimates are computed using the average percent change of all
the other economies in the series to estimate the missing year(s). An economy
is included in trade-weight series beginning with the start year of that
economy's data series.
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.
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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
Argentina 0.3 Germany 5.6
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 Slovakia 0.1
Philippines 0.8 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 Economic Groups (2)
Belgium 1.5 33 foreign economies 75.5
Czech Republic 0.1 OECD(3) 66.2
Denmark 0.3 Europe 22.4
Finland 0.3 Euro Area (4) 16.1
France 2.7 Asian NIEs 9.1
(1) Hong Kong Special Administrative Region of China.
(2) Trade shares for Economic Groups refer to the country coverage of the
production worker series. The relevant trade shares for the all employee
series are: 31 Foreign Economies, 74.4; OECD, 66.1; Europe, 22.3; Euro Area,
15.9; Asian NIES, 7.9.
(3) Organization for Economic Cooperation and Development.
(4) Euro Area consists of the European Union member countries in this
release that have adopted the euro as the common currency as of January 1, 2001.
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
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Mexico and Taiwan, 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
inter-country 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 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.
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International Comparison of Hourly Compensation Costs in Manufacturing, 2006
List of Tables
Page 16 Table 1. PRODUCTION WORKERS: Indexes of hourly compensation costs
in manufacturing, 34 countries or areas and selected economic
groups, selected years, 1975-2006
Page 17 Table 2. PRODUCTION WORKERS: Hourly compensation costs in U.S.
dollars in manufacturing, 34 countries or areas and selected
economic groups, selected years, 1975-2006
Page 18 Table 3. PRODUCTION WORKERS: Annual percent change in hourly
compensation costs in U.S. dollars in manufacturing, 34 countries
or areas and selected economic groups, selected years, 1975-2006
Page 19 Table 4. PRODUCTION WORKERS: Annual percent change in hourly
compensation costs in national currency in manufacturing, 34
countries or areas and selected economic groups, selected years,
1975-2006
Page 20 Table 5. PRODUCTION WORKERS: Annual percent change in exchange
rates (U.S. dollars per national currency unit), 34 countries or
areas and selected economic groups, selected years, 1975-2006
Page 21 Table 6. PRODUCTION WORKERS: Hourly compensation costs in national
currency in manufacturing and exchange rates, 34 countries or
areas, 2006
Page 22 Table 7. ALL EMPLOYEES: Indexes of hourly compensation costs in
manufacturing, 32 countries or areas and selected economic groups,
selected years, 1996-2006
Page 23 Table 8. ALL EMPLOYEES: Hourly compensation costs in U.S. dollars
in manufacturing, 32 countries or areas and selected economic
groups, selected years, 1996-2006
Page 24 Table 9. ALL EMPLOYEES: Annual percent change in hourly
compensation costs in U.S. dollars in manufacturing, 32 countries
or areas and selected economic groups, selected years, 1996-2006
Page 25 Table 10. ALL EMPLOYEES: Annual percent change in hourly
compensation costs in national currency in manufacturing, 32
countries or areas and selected economic groups, selected years,
1996-2006
Page 26 Table 11. ALL EMPLOYEES: Annual percent change in exchange rates
(U.S. dollars per national currency unit), 32 countries or areas
and selected economic groups, selected years, 1996-2006
Page 27 Table 12. ALL EMPLOYEES: Hourly compensation costs in national
currency in manufacturing and exchange rates, 32 countries or
areas, 2006
Last Modified Date: January 25, 2008
Bureau of Labor Statistics
