Academic journal article Monthly Labor Review

Comparing 50 Years of Labor Productivity in U.S. and Foreign Manufacturing; Although Manufacturing Labor Productivity Increased Less in the United States Than in Other G-7 Countries over the Last 50 Years, the Growth Rate Has Accelerated in the United States after 1973, While Slowing Down in the Other Countries. (International comparisons).(Statistical Data Included)

Academic journal article Monthly Labor Review

Comparing 50 Years of Labor Productivity in U.S. and Foreign Manufacturing; Although Manufacturing Labor Productivity Increased Less in the United States Than in Other G-7 Countries over the Last 50 Years, the Growth Rate Has Accelerated in the United States after 1973, While Slowing Down in the Other Countries. (International comparisons).(Statistical Data Included)

Article excerpt

Labor productivity in manufacturing has been a topic of interest throughout recent decades. Research was directed at different issues at different times, depending on economic developments. For example, after 1973, discussion focused on whether there was a historical slowdown in productivity growth in the industrialized countries. (1) Currently, an issue has focused on whether and how the introduction of information technology is affecting manufacturing productivity. (2) In addition, the progressive globalization of the world economy, increasing exposure of individual countries to international trade and capital movements, has heightened interest in productivity, particularly in comparisons among countries. For instance, analysts are examining the relations among labor costs, productivity, prices, and competition. (3)

The Bureau of Labor Statistics international comparisons program began estimating and comparing trends in manufacturing labor productivity and unit labor costs in 1973, making comparisons back to 1950. These accumulated data make it possible to now look at these trends from the perspective of half a century.

Labor productivity in the U.S. manufacturing sector grew continuously over the last half of the 20th century, and this growth accelerated during the 1990s. This is different from most of the other countries in this article, for which productivity increases slowed over time. The growth in U.S. labor productivity was accompanied by relative stability in manufacturing employment and hours worked, in contrast to most other countries, where manufacturing employment and hours declined. Historically, increases in manufacturing hourly compensation and in unit labor costs have been more moderate in the United States than elsewhere, although, during the 1990s, other countries have succeeded in reducing their hourly compensation and unit labor cost increases to the U.S. rates or below.

In this article, labor productivity is measured as the value of real manufacturing output produced per hour of labor input. Increases in labor productivity reflect the joint effects of many influences, including capital investment, advances in technology, and organizational efficiencies, as well as improved skill levels of the workforce.

Unit labor costs are defined as the cost of labor input required for the production of one unit of output. They are computed as labor compensation in nominal terms divided by real output. Changes in unit labor costs reflect the net effect of changes in hourly worker compensation and in labor productivity. Unit labor costs rise when compensation per hour rises faster than labor productivity. Conversely, if labor productivity rises faster than hourly compensation, unit labor costs decline.

This article discusses the trends in U.S. manufacturing labor productivity and unit labor costs that have occurred over the half-century 1950-2000, comparing and contrasting these trends with those of the other G-7 countries (Canada, Japan, France, Germany, Italy, and the United Kingdom). (4) Developments in the manufacturing sectors of five other European countries, and of Korea and Taiwan, are also summarized. The data analyzed are from the BLS data on international comparisons, in which U.S. and foreign data are produced according to comparable concepts, definitions, and classifications. (5)

This article first presents an overview of the entire 1950-2000 period, showing the long-term similarities and differences between the manufacturing sectors in the United States and abroad, and contrasting developments during three subperiods: 1950-73; 1973-90; and 1990-2000. The discussion then focuses on each of these three subperiods in turn, examining how changes in labor productivity and labor inputs combined to meet changing demand for output, and explains how changes in manufacturing unit labor costs were in turn the outcome of changes in labor productivity and in hourly compensation rates. …

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