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June 2002, Vol. 125, No. 6
A perspective on U.S. and foreign compensation costs in manufacturingChris Sparks, Theo Bikoi, and Lisa Moglia
In 2000, for the first time since 1989, average hourly compensation costs for manufacturing production workers in the United States rose above hourly compensation costs in Europe in U.S. dollar terms. U.S. hourly compensation costs remained well above cost levels in Canada, Mexico, and a group of four newly industrializing economies (NIEs) in Asia—Hong Kong, Korea (the Republic of Korea), Singapore, and Taiwan. Costs in Japan, however, were 11 percent higher than costs in the United States in 2000. (See chart 1.)
With declining barriers to world trade and the increasing importance of trade in many countries, business and labor leaders, and other analysts are concerned with the competitiveness of their countries’ exports. Labor costs are a major factor influencing the costs of goods produced by a country relative to those of its trading partners, and consequently its international competitiveness.1 Reflecting the importance of these labor costs, the European Commission and European Council, for example, have called on member states for moderation in both wage and nonwage labor costs.2 Eurostat, the statistical office of the European Union, notes that "labour costs considerably influence the choices of political, economic and social decisionmakers, as they account for some two-thirds of the production costs of goods and services. Moreover, knowledge of labour cost levels is an essential tool in the strategic planning of investment, production, employment policy or wage levels in collective bargaining."3
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1 See, for example, "Manufacturing costs, productivity, and competitiveness, 1979–93," by Edwin R. Dean and Mark K. Sherwood, Monthly Labor Review, October 1994, pp. 3–16, for a discussion of input costs, product prices and competitiveness. The offsetting impact on product prices due to productivity gains is discussed in "Comparing 50 years of labor productivity in U.S. and foreign manufacturing" on p. 51.
2 "Labor costs—annual update 2001," European Industrial Relations Observatory On-Line.
3 "EU labour costs 1999," Statistics in focus, Population and social conditions, Theme 3, 3/2001.
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