The trade-weighted average of hourly compensation costs in U.S. dollars for all employees in manufacturing among 31 foreign economies was 85 percent of the U.S. level in 2007, increasing from 79 percent in 2006, according to data issued March 26 by the U.S. Department of Labor’s Bureau of Labor Statistics. Compensation costs relative to the United States rose or remained unchanged in all but one of the economies covered in 2007.
In the United States, hourly compensation costs for all employees in manufacturing rose 1.9 percent from the 2006 level to $30.56 in 2007. When measured in national currency terms, trade-weighted average costs increased 3.4 percent in the combined 31 foreign economies in 2007. The value of foreign currencies rose 4.9 percent against the U.S. dollar, resulting in a rise in hourly compensation costs in the foreign economies of 8.5 percent on a U.S. dollar basis.
Compensation costs for all employees expressed in U.S. dollars
This release provides manufacturing compensation data in terms of both national currencies and U.S. dollars. While data on a national currency basis show underlying wage and benefit trends within each country, frequent and sometimes sharp changes in currency exchange rates can have a large impact on compensation costs in U.S. dollar terms. Data on a U.S. dollar basis are calculated by dividing compensation costs in the national currency by the exchange rate (expressed as national currency units per U.S. dollar). Compensation costs on a U.S. dollar basis are often used as indicators of competitiveness of manufactured goods in world trade and are the focus of the following discussion.
Compensation costs for all employees in manufacturing measured in U.S. dollars continued to rise in 2007 in most of the foreign economies – with only one country, Japan, showing a decrease in costs (-1.5 percent). Hourly compensation costs in Taiwan increased only marginally, by 0.6
percent. The rate of compensation increase in a trade-weighted average of the 31 foreign economies was 8.5 percent in 2007, more than double the 3.9 percent historical average for the series.
Although average costs in the United States continued to be higher than those in most of the economies covered outside of Europe, 13 of the 19 European countries covered had higher hourly compensation costs than the United States, in most cases more than 20 percent higher. Hourly
compensation costs in Denmark, Germany, and Norway were especially high when compared to the United States (56 percent higher, 66 percent higher, and 80 percent higher, respectively). The euro appreciated against the U.S. dollar in 2007 by a considerable amount (+9.1 percent), causing double-digit growth in labor costs measured in U.S. dollars in most European countries. Trade-weighted average hourly compensation costs in the four Eastern European countries in the series grew 23.0 percent when measured in U.S. dollars due in part to double-digit increases in the exchange rates of their national currencies against the U.S. dollar.
Compensation costs in Europe, on average, continued to be almost $9 higher on a per hour basis than in the United States. However, there is great variation in the level of compensation costs among the European countries covered. For example, hourly compensation costs in Europe
ranged from $7.69 in Poland to more than seven times that level in Norway ($55.03), the highest labor cost country in these comparisons.
Outside of Europe, only Canada and Australia had compensation costs higher than the United States when measured in U.S. dollars. In 2007, the lowest compensation costs relative to the United States were in Mexico and the Philippines (13 percent and 4 percent of the U.S. level, respectively). In the East Asia ex-Japan economies, the trade-weighted average of hourly compensation costs rose to 43 percent of the U.S. level in 2007, continuing the upward trend seen since 2002, when compensation costs in the region were 32 percent of the U.S. level.
Annual percent changes in manufacturing compensation costs measured in U.S. dollars varied considerably in 2007 among the non-European countries. The only economies outside of Europe that did not show double-digit increases in hourly compensation costs were Canada, Mexico, Japan, and Taiwan. As mentioned above, Japan was the only country in these comparisons to show a decrease in hourly compensation costs measured in U.S. dollars due to both the depreciation of the Japanese yen and a relatively unchanged hourly compensation cost in the national currency of that country. This is the third consecutive year that Japan has had negative growth in hourly compensation costs when measured in U.S. dollars.
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