NEW YORK, Dec. 17, 2014 /PRNewswire/ -- Anemic growth
in worker compensation since the start of the decade has
substantially strengthened the cost advantages of U.S.
manufacturing against other mature economies, according to data on
34 countries released today by the International Labor
Comparisons (ILC) program of The Conference Board. In 2013
(the last year for which data is available), hourly compensation
costs for American manufacturers averaged $36.34, up just $1.59 from 2010. This represents slower growth
than even the crisis years of 2007–10, over which hourly costs grew
$2.71.
"Despite a rapidly shrinking unemployment rate, U.S.
manufacturing saw exceptionally low worker costs growth in recent
years, especially compared to European countries with often weaker
recoveries but more rigid labor markets," said Elizabeth Crofoot,, Senior Economist with the
ILC program. "Our dollar-denominated data reveal a broad spectrum
among advanced economies: At one end, countries where labor costs
are relatively low and still declining—notably Japan and Greece. At the other end, countries—led by
Switzerland, Sweden, Australia, Norway, and Germany—where already high pay and
benefits continue to rise at relatively rapid rates."
"Looking ahead, the dollar's recent return to appreciation may
somewhat shrink the cost advantage built by U.S. manufacturing in
2010–13 over other mature economies," said Bart van Ark, Chief
Economist at The Conference Board. "And while emerging markets in
Asia, Latin America, and Eastern Europe will maintain large cost
advantages over the U.S. for the foreseeable future, depreciation
of their currencies could significantly narrow the gap and put more
pressure on productivity gains to avoid further erosion of those
countries' competitiveness."
In dollar terms, only Greece,
Japan, and Ireland among countries compared saw slower
manufacturing compensation growth than the U.S. between 2010 and
2013. Hourly labor costs in Japan
($29.13) and the U.K. ($31.00) were below American levels in 2013;
compensation was higher in most other large mature economies.
Taking a longer view, local costs in manufacturing as a percentage
of U.S. costs rose between 1997 and 2013 in all economies compared
except Japan, Brazil, and Taiwan.
Germany and the Rest: A Tale
of Two Eurozones?
To isolate the effect of exchange-rate
fluctuations, the ILC report includes data in local currency as
well as in U.S. dollar terms. Among the most striking findings is
the wide disparity of labor-cost trends within the Euro Area.
When denominated in euros:
- Manufacturing labor costs averaged 2.8 percent annual growth in
the Euro Area as a whole between 2010 and 2013. This was up from
2.1 percent in 2008–10, even as the currency union reached historic
levels of unemployment by 2013.
- Yet hard-hit countries are adjusting,
some drastically. Hourly labor costs in Greece have contracted by over 5 percent
annually since 2010, while compensation growth has slowed
substantially in Spain,
Portugal, and (to a lesser degree)
Italy.
- By contrast, labor compensation is surging in Germany—one of
the few countries in the world seeing a truly tight labor market.
Labor costs for German manufacturing grew at an average of 3.4
percent per year in 2010–13, doubling the 1.7 percent annual growth
seen in 2008–10.
- With these gains, hourly compensation to German manufacturing
workers stood at €36.89 in 2013, substantially higher than every
other Euro Area member compared except Belgium (€41.34). When German compensation is
expressed in dollar terms—$48.98—only Belgium, Denmark, Norway, Sweden, and Switzerland among countries compared saw
higher costs in 2013.
"Already high pay and benefits that consistently grow faster
than competing countries are detrimental to the competitive
position of German manufacturing, even if compensated by strong
innovation and high productivity," said Bert Colijn, Senior Economist, Europe at The Conference Board. "But in
Europe's current predicament,
higher labor costs can also be advantageous insomuch as they
accelerate rebalancing across the regions of the Euro Area by
strengthening consumer purchasing power in Germany."
India Overtaking China as Manufacturing's Future
Powerhouse?
Gaps and methodological discrepancies in
official data prevent labor costs for China and India—the world's largest emerging
markets and manufacturing hubs—from being compared directly with
each other and mature economies. In approximating data for both
countries, however, ILC has unearthed two vivid patterns reaching
back to the start of the century. First, China's hourly compensation costs, expressed
as a percent of costs in the U.S., have soared past those of
India, after trailing it as late
as 2005. Second, the proportion of total compensation spent on
social insurance costs has fallen in India since 2002, while dramatically rising
over the same period in China. The
divergence on both trends suggests India is better placed to maintain and extend
its manufacturing competitiveness.
For complete details visit:
www.conference-board.org/ilcprogram/compensation.
About the Conference Board
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To provide the world's leading organizations with the
practical knowledge they need to improve their performance
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status in the United States. www.conference-board.org
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About International Labor Comparisons (ILC)
The data
is published as part of The Conference Board International Labor
Comparisons program. Formerly a division of the U.S. Bureau of
Labor Statistics, ILC is dedicated to producing economic indicators
that optimize research, comparison, and planning in a global
context.
For more information about The Conference Board ILC program:
www.conference-board.org/ilcprogram
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SOURCE The Conference Board