Academic journal article Monthly Labor Review

U.S. and Foreign Productivity and Unit Labor Costs

Academic journal article Monthly Labor Review

U.S. and Foreign Productivity and Unit Labor Costs

Article excerpt

Between 1979 and 1995, output per hour in U.S. manufacturing grew at a slower rate than in several other countries, but modest growth in hourly compensation helped the United States to restrain growth in unit labor costs relative to its foreign competitors

Labor productivity in U.S. manufacturing grew 3.4 percent in 1995, down about 1/2 percentage point from its 1994 performance. However, in a comparison of 11 industrial countries--the United States, Canada, Japan, and 8 Western European nations--only 3 countries (Italy, Japan, and Sweden) had higher productivity growth than the United States. In a comparison over the entire 1979-95 period, the United States fared less well--U.S. productivity growth rose faster than that of only 3 of 10 competitors, and only Norway had a slower rate of growth in the 1990s.

U.S. manufacturing unit labor costs were nearly unchanged in 1995, rising only 0.3 percent. In a comparison of 14 economies--a group that includes Denmark, Korea, and Taiwan, in addition to the 11 economies mentioned earlier--10 had greater unit labor cost increases than the United States, when unit labor costs are measured on a U.S. dollar basis to take account of relative changes in exchange rates. Unit labor costs increased by 10 percent or more in six European countries.

Between 1979 and 1995, half of the economies had rates of unit labor cost growth that were either less than or about the same as that of the United States. The U.S. rate ranked sixth lowest in the 1990s, compared with third lowest in the 1980s.

This article examines comparative trends in manufacturing productivity (output per hour) and unit labor costs in 1995, the most recent year for which comparative data are available, and for the 1979-95 period. The analysis covers the United States, Canada, Japan, Belgium, France, Germany (the former West Germany), Italy, the Netherlands, Norway, Sweden, and the United Kingdom.

Comparative unit labor cost trends for Denmark, Korea, and Taiwan have been developed and are included in the analysis. However, the Bureau of Labor Statistics does not compute productivity measures for Korea and Taiwan because reliable labor input measures have not been developed. In addition, productivity measures for Denmark are not available due to a lack of hours data since 1993. (See the appendix for a description of the country measures.)

Comparative growth, 1994-95

Productivity. U.S. manufacturing labor productivity (output per hour) grew 3.4 percent in 1995, down from a 4.1-percent increase in 1994. All countries, except the United Kingdom, had positive productivity growth rates, with output per hour in France, Germany, and the Netherlands, increasing at roughly the U.S. rate. Productivity fell about 1 percent in the United Kingdom. (See table 1.)

Table 1. Annual percent changes in manufacturing productivity, unit labor costs, and related measures, 14 countries or areas, 1994-95

Country or area    Output      Output     Total     Employment
                   per hour               hours

United States        3.4         3.5        0.1         0.8
Canada               1.0         3.8        2.8         2.4
Japan                5.7         3.5       -2.1        -2.8
Korea                (1)        10.7        (1)         (1)
Taiwan               (1)         6.1        (1)         (1)
Belgium              1.0         3.1        2.1         3.0

Denmark              (1)         2.9        (1)         3.3
France               3.0         3.2         .2          .1
Germany              3.1          .3       -2.7        -2.3
Italy                4.0         5.8        1.7        -1.4
Netherlands          3.4         2.3       -1.0        -1.3
Norway                .9         2.9        2.0         2.5
Sweden               5.1         9.8        4.5         3.5
United Kingdom       -.8         2.2        3.0         2.4

                      Hourly         Unit labor costs
Country or area     compensation    National      U. … 
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