2014 charting international labor comparisons

Charting International

Labor Comparisons

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CONTENTS

5 CHART 1 Share of world gross domestic product, selected economies (1980–2013)

6 CHART 2 Real gross domestic product (GDP) per capita and per person employed (2013)

7 CHART 3 Unemployment rates adjusted to US concepts (1996–2012)

8 CHART 4 Unemployment rates for youth and adults, adjusted to US concepts (2012)

9 CHART 5 Employment-population ratios by sector (1970–2012)

10 CHART 6 Labor force size and participation rates by sex (2012)

11 CHART 7 Gap between men and women’s labor force participation rates (1970–2012)

12 CHART 8 Hourly compensation costs in manufacturing, selected economies and regions, as a percentage of costs in the United States (2000–2012)

13 CHART 9 Hourly compensation costs in manufacturing, by component, US dollars (2012)

14 CHART 10 Components of manufacturing hourly compensation costs, as a percentage of total compensation (2012)

15 CHART 11 Hourly compensation costs in manufacturing industries, US dollars (2012)

16 CHART 12 Productivity (output per hour worked) in manufacturing (1950–2012)

17 CHART 13 Average annual percent change in manufacturing productivity, output, and hours worked (2000–2012)

18 CHART 14 Annual percent change in manufacturing productivity, output, and hours worked (2012)

19 CHART 15 Gap between productivity and real hourly compensation in manufacturing (1980–2012)

20 CHART 16 Manufacturing unit labor costs, annual percent change (2012)

21 CHART 17 Average annual inflation rate, as measured by the Consumer Price Index and Harmonized Index of Consumer Prices (2007–2012)

22 CHART 18 HICP-based annual inflation rate (1997–2012)

23 CHART 19 Gap between manufacturing compensation growth rate and inflation (2007–2012)

24 About This Report

24 Methodology

Charting International Labor ComparisonsRESEARCH REPORT R-1542-14-RR

by Elizabeth Crofoot, Eric Hayek, and Michael Paterra

Charting International

Labor ComparisonsWith international trade at an all-time high, global markets are the new normal for US companies and residents. In 2012, the total volume of trade (imports and exports) in the United States was nearly $5 trillion — the largest in the world. US international competitiveness can be assessed by comparing key economic measures across countries. These measures include gross domestic product, unemployment rates, compensation costs, labor productivity rates, and consumer prices. In this collection of charts, we compare these and other measures across countries in the Americas, Europe, Asia, and Oceania to get a glimpse of how individual economies have performed in recent years and historically.

www.conferenceboard.org Research Report Charting International Labor Comparisons 5

Chart 1Gross domestic product (GDP) is a measure of a country’s economic output. China’s share of world GDP increased steadily during the past three decades, from approximately 3 percent in 1980 to over 17 percent in 2013. By 2001, China’s GDP had surpassed Japan’s. As a percent-age of total world GDP, the United States, Western Europe, and Japan each declined slightly over the last two decades, partly due to China’s growth. India’s share of world GDP also grew from 2 percent in 1980 to over 5 percent in 2013, closing in on Japan’s share of GDP. The rest of the world’s share of world GDP declined steadily between the mid-1980s and the mid-1990s, but recovered somewhat from 2000 to 2010.

Note: GDP is converted to 2013 US dollars using 2005 EKS purchasing power parities (PPPs). PPPs are currency

conversion rates that indicate the amount of money needed to purchase equivalent baskets of goods in different

countries. Western Europe includes Austria, Belgium, Cyprus, Denmark, Finland, France, Germany (West Germany

for 1980–1989), Greece, Iceland, Ireland, Italy, Luxembourg, Malta, Netherlands, Norway, Portugal, Spain, Sweden,

Switzerland, Turkey, and the United Kingdom.

Source: The Conference Board, Total Economy Database

Share of world gross domestic product, selected economies

(1980–2013)

ARG

AUL

AUT

BEL

BRZ

CAN

CHN

CZE

DNK

EST

FIN

FRA

GER

GRC

HUN

IND

IRL

ISR

ITAJPN

KOR

MEX

NLD

NOR

NZL

PHL

POLPRT

SAF

SGP

SPA

SVK

SWE

SWZ

TAI

TUR

UKG

USA

North America

Western Europe

Asia

Oceania

Middle EastLatin America

Africa

Eastern Europe

Research Report Charting International Labor Comparisons www.conferenceboard.org6

Chart 2Gross domestic product (GDP) per person employed is a general indicator of productivity, while GDP per capita is an indicator of the overall wealth of a country. Increases in productivity signal potential for increases in a country’s standard of living. Historically, overall productivity and wealth have tended to grow together for all countries shown. Countries that gravitate toward the upper left of the chart have higher productivity (GDP per person employed) relative to their wealth (GDP per capita) than countries that gravitate to the lower right. In 2013, for example, emerging economies such as South Africa, Turkey, and the Philippines had higher productivity relative to wealth. In contrast, productivity was relatively lower than wealth in advanced economies, including Singapore, Switzerland, and Norway.

Note: In this chart, AUL stands for Australia, AUT stands for Austria, and IND stands for India. GDP is converted to

2013 US dollars using 2005 EKS purchasing power parities (PPPs). PPPs are currency conversion rates that indicate

the amount of money needed to purchase equivalent baskets of goods in different countries.

Source: The Conference Board, Total Economy Database

Real gross domestic product (GDP) per capita and per person

employed (2013)


Chart 3Joblessness in most countries shown in Chart 3 exhibited a U-shaped trend during the last decade. The bottom-ing out of unemployment rates before the 2008–2009 global recession was followed by large increases. Unemployment rates in 2012 were greater than prerecession levels in all countries compared except Germany, Turkey, and South Korea. However, labor markets in countries outside of Europe, including the United States, Canada, and Japan, showed signs of recovery in recent years. Although Germany experienced record low unemployment in 2012, labor markets in other parts of Europe continued to struggle. Unemployment rates in Spain, Italy, and the Netherlands, for instance, showed an upward trend after the recession and through 2012.

Note: Data for Mexico refer to 2005–2012, data for South Africa refer to 2008–2012, and data for Turkey refer to

2006–2012.

Source: The Conference Board, International Labor Comparisons program

Unemployment rates adjusted to US concepts (1996–2012)

Adults (25 and older)

Teenagers (15-19)

Young adults (20-24)

0% 10% 20% 30% 40% 50% 60% 70% 80%

Japan

South Korea

Germany

Mexico

Netherlands

Turkey

Australia

Canada

United States

New Zealand

United Kingdom

France

Sweden

Italy

Spain


Chart 4Unemployment rates for youth (teenagers and young adults) are generally higher than those for adults, partly because youth have lower levels of education, skills, and work experience. They are, therefore, more vulnerable to economic downturns.

Among the countries compared in Chart 4, youth unemployment rates are highest in southern Europe. In Italy and Spain, for example, youth unemployment rates in 2012 topped 50 percent for teenagers and exceeded 30 percent for young adults. In Germany, on the other hand, youth joblessness is less pronounced, partly due to a formal apprenticeship program that provides young persons with on-the-job train-ing and job placement opportunities. However, such apprenticeship pro-grams or similar safety nets for youth are rare in other countries, and youth generally run higher risks for jobless-ness and prolonged unemployment.

Note: For Canada, Spain, Sweden, the United Kingdom, and the United States, “teenager” refers to anyone between

the ages 16 and 19. For Mexico, “teenager” refers anyone between the ages of 14 and 19. Youth unemployment refers

to teens and young adults who do not have a job, are actively seeking work, and are available to start work.


Unemployment rates for youth and adults, adjusted to US concepts

(2012)

0% 10% 20% 30% 40% 50% 60% 70%

Australia

Canada

Netherlands

Sweden

South Korea

United States

United Kingdom

Japan

Germany

France

Spain

Italy

Agriculture Industry Services

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2012

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2012

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2012

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2012

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2012

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2012


Chart 5Over the past 40 years, the percent-age of the working age population employed has remained above 50 percent in almost all of the countries compared in Chart 5, but the share of those employed in each sector has shifted over time. The share of the working age population employed in agriculture dropped by more than half in all countries compared except the Netherlands, and the share of the working age population employed in industry fell in all countries except South Korea. In contrast, the share of the working age population employed in services increased in all countries compared and was near 40 percent or above by 2012 in all countries except Spain and Italy.

Note: Employment population ratios are adjusted to US concepts. Agriculture includes agriculture, forestry,

hunting, and fishing. Industry includes manufacturing, mining, and construction. The services category includes

transportation, communication, public utilities, trade, finance, public administration, private household services,

and miscellaneous services. Data for the Netherlands, the United Kingdom, and France refer to 1975-2012. Data for

Spain refer to 1980-2012.


Employment-population ratios by sector (1970–2012)


Chart 6Labor force participation rates provide information about what percentage of the working age population is employed or actively seeking work. Labor force participa-tion rates are higher for men than women in all countries compared, but relatively fewer women are working or actively seeking work in Turkey (27.2 percent) and Mexico (42.0 percent). On the other end of the spectrum, men and women are much more evenly engaged in the labor forces of Canada, New Zealand, and the United States, which have among the highest overall rates of labor force participation.

Note: Participation rates for men and women are a percentage of the total male or female working age population.

Each bubble represents the size of the labor force for that country. “Selected Europe” includes France, Germany,

Italy, the Netherlands, Spain, Sweden, and the United Kingdom.


Labor force size and participation rates by sex (2012)

Turkey

Mexico

South Korea

Japan

Italy

Spain

South Africa

Australia

United Kingdom

United States

Germany

Netherlands

New Zealand

France

Canada

Sweden

20% 30% 40% 50% 60% 70% 80% 90%

Men’s labor force participation rateMale-female gap

Women’s labor force participation rate


Chart 7Men continue to have higher rates of labor force participation than women, but the gap between the two has been narrowing over the past 40 years in all countries compared in Chart 7. In most countries, this is due to a combination of a decreas-ing rate of participation for men and an increasing rate for women. In 2012, the gap between the sexes was narrowest in Sweden, Canada, and France, and widest in Turkey, Mexico, and South Korea. Mature economies generally have a smaller gap than emerging economies, with the exception of Japan. Among mature economies compared, Japan has the largest gap due to a declining male labor force participation rate over the last 40 years, while the rate for women has remained roughly stable (between 45 and 50 percent). In contrast, South Africa has a small gap for an emerging economy due to its relatively low rate of participation for men.

Note: Participation rates for men and women are a percentage of the total male or female working age population.

Data for Mexico refer to 2005-2012, data for South Africa refer to 2008-2012, and data for Turkey refer to 2006-2012.


Gap between men and women’s labor force participation rates

(1970–2012)


Chart 8The global marketplace often means that companies, especially in manufacturing, relocate certain operations from one country to another. While there are many criteria for making location deci-sions, labor cost differences across countries are a critical factor. Hourly compensation costs, or the average hourly cost (including benefits) to employ a worker, vary significantly across countries and regions in manufacturing.

With the exception of a dip in compensation during the global recession, emerging economies in East Asia and Eastern Europe, as well as Brazil, have experienced rapid increases in manufacturing compensation costs relative to costs in the United States since the early-to-mid 2000s.

Although there are several techni-cal limitations with compensation estimates for China and India that diminish the meaningfulness of international comparisons, benchmarking compensation to the US level provides a less sensitive yardstick than costs expressed in US dollar terms. Between 2002 and 2009, manufacturing compensation costs in China grew the fastest of all countries compared in Chart 8 (16.4 percent annually, on average). However, at just 5.1 percent of US compensation costs in 2009, Chinese manufacturing com-pensation still remains far below labor costs in most other areas compared. By 2009, though, com-pensation costs in China relative to the US surpassed compensation costs in the Philippines (5.0 percent) and India (3.6 percent). Note: Data for China refer to 2002–2009. Data for India refer to 2000–2010 and correspond to the organized (or

formal) manufacturing sector only. Due to limitations with official Chinese and Indian data sources, compensation

estimates for China and India are not directly comparable to compensation estimates for other countries. The Euro

Area includes EU member states that have adopted the Euro as of January 1, 2011, except Cyprus, Luxembourg,

Malta, and Slovenia. Eastern Europe includes the Czech Republic, Estonia, Hungary, Poland, and Slovakia. East Asia

ex-Japan includes the Philippines, Singapore, South Korea, and Taiwan.


Hourly compensation costs in manufacturing, selected economies and

regions, as a percentage of costs in the United States (2000–2012)


Chart 9Hourly compensation costs, which measure the average hourly cost to employ a worker, include the follow-ing components: pay for time actually worked, including base wages and overtime; directly paid benefits, including leave pay and seasonal bonuses; and social insurance expenditures incurred by employers, including health and retirement plans. Employers’ social contributions often provide delayed future income and benefits to employees and are therefore an indirect form of worker compensation.

In 2012, among 34 countries compared in Chart 9, total hourly compensation costs in US manu-facturing ranked approximately in the middle at $35.67. In addition to Australia and Canada, countries with higher hourly compensation costs were primarily in northern and western Europe. Countries with lower hourly compensation costs were primarily in southern and eastern Europe, Asia, and Latin America.

Note: For Mexico, Norway, South Korea, and Taiwan pay for time worked and directly paid benefits are combined

into total direct pay. Pay for time worked refers to base wages and salaries, overtime pay, bonuses and premiums

paid each pay period, and cost of living adjustments. Directly paid benefits are leave pay, irregular bonuses, and

pay in kind. Employer social insurance expenditures are legally required, private, and contractual social benefit

costs and labor-related taxes minus subsidies.


Hourly compensation costs in manufacturing, by component,

US dollars (2012)


Chart 10Another way to compare manufac-turing compensation costs across countries is to view the components of compensation as a percentage of total costs. (See Chart 9 for data in US dollars.)

Pay for time worked, including base wages and overtime, constitute 50 to 75 percent of total compensation in most countries compared. In 2012, the share of pay for time worked was less than 50 percent only in Belgium, where other forms of manufacturing worker compensation carry a larger weight.

Directly paid benefits primarily comprise pay for leave time, irregular bonuses, and pay in kind. The percent-age of compensation for directly paid benefits tends to be higher in many European countries (due in large part to leave pay) and Japan (where seasonal bonuses are a large portion of costs). In 2012, for example, direct benefits constituted at least a quarter of total compensation in Poland and Japan. Directly paid benefits are a relatively smaller portion of compensation costs (i.e., less than 10 percent in 2012) in the United States, Australia, and Canada.

In countries with the highest ratio of social insurance costs (e.g., Sweden, Brazil, and Belgium), social insurance makes up approximately one-third of total compensation costs. In the United States, social insurance costs account for about 24 percent of total compensa-tion, while in Asian countries, with the exception of the South Korea, social insurance is less than 20 percent.

The total benefits portion of compensa-tion costs can be seen by combining social insurance with directly paid benefits. Total benefits surpass 40 percent in 14 countries. In contrast, the ratio of benefit costs in the United States is about 33 percent.

Note: For Mexico, Norway, South Korea, and Taiwan, pay for time worked and directly paid benefits are combined

into total direct pay. “Pay for time worked” refers to base wages and salaries, overtime pay, bonuses and

premiums paid each pay period, and cost of living adjustments. “Directly paid benefits” are leave pay, irregular

bonuses, and pay in kind. “Employer social insurance expenditures” are legally required, private, and contractual

social benefit costs and labor-related taxes minus subsidies.


Components of manufacturing hourly compensation costs,

as a percentage of total compensation (2012)

$0 10 20 30 40 50 60 70 80

US Dollars

MEX

POL

HUN

TAI

EST

BRZ

PRT

ISR

KOR

NZL

SPA

UKG

ITA

JPN

USA

FRA

AUT

GER

AUL

DNK

SWE

BEL

NOR

= Manufacturing Average = Other Manufacturing Industries

Wood

Apparel

Wood

Wood

Wood

Food

Leather

Wood

Apparel

Wood

Apparel

Apparel

Leather

Wood

Textiles

Apparel

Manufacturing

Apparel

Apparel

Furniture

Apparel

Apparel

Wood

Pharmaceuticals

Pharmaceuticals

Coke & Petroleum

Pharmaceuticals

Basic Metals

Coke & Petroleum

Chemicals

Pharmaceuticals

Coke & Petroleum

Basic Metals

Tobacco

Tobacco

Tobacco

Coke & Petroleum

Non-metallic minerals

Coke & Petroleum

Beverages

Coke & Petroleum

Coke & Petroleum

Coke & Petroleum

Coke & Petroleum

Basic Metals

Computers


Chart 11Hourly compensation costs, or the hourly cost to the manufacturer of employing labor, are one of the most important indica-tors of international cost competitiveness in manufacturing. Assessing compensation costs for submanufacturing industries, however, can be more instructive than assessing average compensation for the manufacturing sector as a whole, which often masks important differences in costs and competitiveness at the industry level.

In Chart 11, a country flag represents the average compensation cost in manufactur-ing for that country, and each notch along a country line represents average costs in a particular submanufacturing industry. Within each country, industry compensa-tion costs can vary greatly from average manufacturing compensation.

The overall spread of compensation costs across industries can be compared across countries by looking at the relative — and not the absolute — distance of costs between the highest and the lowest com-pensated industries. In 2012, for example, the highest paid industry was more than double the lowest paid industry in 13 of the 23 countries compared in Chart 11. The greatest variation in compensation across industries occurred in Brazil and Mexico, as well as in countries in eastern Europe and Asia. In Brazil, for instance, compensation in coke and petroleum prod-ucts manufacturing was more than eight times the labor costs in the apparel indus-try. In contrast, industry compensation costs were relatively more compressed in Australia, New Zealand, and countries in northern and western Europe.

Historically, the highest and lowest compensated industries have tended to be similar across countries. In 2012, coke and petroleum products and phar-maceuticals were among the highly paid industries, while the lower paid industries included apparel and wood products manufacturing.


Hourly compensation costs in manufacturing industries,

US dollars (2012)

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1950 1960 1970 1980 1990 2000 2010 1950 1960 1970 1980 1990 2000 2010 1950 1960 1970 1980 1990 2000 2010

1950 1960 1970 1980 1990 2000 2010 1950 1960 1970 1980 1990 2000 2010 1950 1960 1970 1980 1990 2000 2010

1950 1960 1970 1980 1990 2000 2010

1950 1960 1970 1980 1990 2000 2010

1950 1960 1970 1980 1990 2000 2010 1950 1960 1970 1980 1990 2000 2010

United States Australia Belgium

Canada Czech Republic Denmark

Finland France Germany

Italy Japan Netherlands

Norway Singapore South Korea

Spain

United Kingdom

Sweden Taiwan

Index2002=100

Index2002=100


Chart 12Manufacturing productivity, defined as output per hour worked, measures how effectively labor hours are converted into output. Increases in labor productivity indicate that a country’s workforce is becoming more efficient.

Historically, while manufacturing productivity has increased in all countries over the long run, the rate of productivity growth has varied across countries. Among advanced European economies in Chart 12, Finland and Sweden exhibited the fastest average annual productivity growth (6 percent or higher) during the 1990s and 2000s (i.e., prior to the global recession). Manufacturing productivity growth in emerging economies in Asia has also been historically robust. In South Korea, for example, productivity increased at 10.5 percent per year between 1990 and 2000, on average. In east-ern Europe, another emerging bloc, productivity in the Czech Republic grew at an average annual rate of 9.7 percent from 2000 to 2007. On the other hand, Australia and Norway have had the slowest long-run pro-ductivity growth (on average under 2 percent per year between 1979 and 2012) of the countries compared.

Manufacturing productivity weak-ened due to the 2008–2009 global recession in all economies shown in Chart 12. However, the extent of the impact differed among countries. Following the crisis, manufacturing productivity declines were largest in Finland, Germany, and Sweden, while productivity growth merely slowed in South Korea, Taiwan, and Norway. During the period from 2007 to 2012, manufacturing productivity was weakest among the Euro Area economies.

Note: For Belgium and Taiwan, data relate to manufacturing

employees (wage and salary earners). For all other countries, data

relate to all employed persons (employees and self-employed

workers) in manufacturing.

Source: The Conference Board, International Labor Comparisons

program

Productivity (output per hour worked) in manufacturing (1950–2012)

-4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8%

Czech Republic

Taiwan

South Korea

United States

Sweden

Singapore

Spain

Denmark

United Kingdom

Japan

Germany

Norway

Netherlands

Finland

France

Australia

Canada

Belgium

Italy

Productivity increaseHours growthOutput growth

0.6

0.7

0.9

1.6

2.3

2.3

2.4

2.5

2.7

2.7

2.8

2.8

3.0

3.6

4.5

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6.5

7.3%


Chart 13Increases in labor productivity, or output per hour worked, are approximately equal to the differ-ence between the growth of output and the growth of hours worked; the larger the gap between output and hours, the greater the productivity growth.

Despite the 2008–2009 global reces-sion, productivity increased between 2000 and 2012 in all countries compared. The largest productivity gains were in the Czech Republic, Taiwan, and South Korea, and these gains were primarily the result of strong output growth (while hours stayed the same or dipped slightly). Productivity growth in Japan resulted from approximately equal portions of output growth and hours decline. Productivity also increased in Spain, Denmark, and the United Kingdom despite falling output because the number of hours worked fell even more. Moreover, productivity gains were driven by a reduction in hours worked in 12 of the 19 countries compared.

Note: For Belgium and Taiwan, data relate to manufacturing employees (wage and salary earners). For all other

countries, data relate to all employed persons (employees and self-employed workers) in manufacturing.


Average annual percent change in manufacturing productivity,

output, and hours worked (2000–2012)

-10% -8% -6% -4% -2% 0% 2% 4% 6% 8%

Spain

Denmark

United States

South Korea

Norway

Canada

Taiwan

Sweden

Germany

Czech Republic

Italy

Netherlands

France

Belgium

Australia

Singapore

United Kingdom

Japan

Finland

Output < Hours = Productivity Decreases

Output > Hours = Productivity Increases

Productivity increaseProductivity decrease

Hours growthOutput growth

-6.9

-4.7

-3.1

-1.4

-1.3

-1.3

-1.1

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-0.9

-0.8

-0.5

-0.4

0.4

0.8

2.3

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3.8

4.0

5.6%


Chart 14In 2012, manufacturing productivity (output per hour worked) declined in 12 of the 19 countries compared in Chart 14. For a majority of countries that saw a decrease in productivity, such as Finland and France, the trend was driven by falling output despite a modest decline in hours worked. For Japan and the United Kingdom, however, the decline in output was exacerbated by an increase in hours worked, which led to even larger productivity losses.

In contrast, productivity increases, such as those in the United States and Norway, were primarily the result of gains in output. The main exception was Spain, where the fall in hours far outpaced the decline in output, resulting in the largest productivity increase in 2012 of the countries compared.




Annual percent change in manufacturing productivity, output,

and hours worked (2012)

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1980 1990 2000 2010 1980 1990 2000 2010 1980 1990 2000 2010

1980 1990 2000 2010 1980 1990 2000 2010 1980 1990 2000 2010

1980 1990 2000 2010 1980 1990 2000 2010 1980 1990 2000 2010

1980 1990 2000 2010 1980 1990 2000 2010 1980 1990 2000 2010

1980 1990 2000 2010

1980 1990 2000 2010

1980 1990 2000 2010 1980 1990 2000 2010

Productivity Real hourly compensation

United States Sweden Japan

Taiwan Finland Singapore

Netherlands Belgium United Kingdom

Spain Canada France

Germany

Norway

Denmark Italy


Chart 15Since 1980, labor productivity has outpaced real hourly compensation in nearly all of the economies compared in Chart 15, creating a productivity-compensation gap. Increases in productivity signal potential for increases in labor income and, by extension, increases in the standard of living of workers. To the extent that compensation growth does not track productivity growth, the fruits of productivity gains are not equally distributed among the factors of production.

The size of the productivity-compen-sation gap varies by country, ranging from the largest in the United States to the smallest (nearly nonexistent) in Norway. The gap has also emerged at different times across the countries compared, starting in the 1970s in the United States and in the late 1990s in Singapore.

Note: Charted values are natural logarithms of productivity and

compensation indexes. For Belgium and Taiwan, data relate to

manufacturing employees (wage and salary earners). For all other

countries, data relate to all employed persons (employees and

self-employed workers) in manufacturing.

Source: The Conference Board, International Labor Comparisons

program

Gap between productivity and real hourly compensation in

manufacturing (1980–2012)


Chart 16Unit labor costs (ULCs), or total compensation divided by real output, are the direct link between productiv-ity and the cost of labor required in generating output. In 2012, manu-facturing ULCs in national currency terms increased in all countries compared in Chart 16, with the exceptions of Spain, Denmark, and the United States.

When converted to a common currency, ULCs are used to com-pare cost competitiveness across countries. In US dollar terms, when ULCs in other countries rise faster (or decline slower) than ULCs in the United States, US cost competitive-ness improves. As such, ULCs are a widely used measure in assessing firms’ location decisions.

Despite almost across-the-board increases in ULCs in national cur-rency units, when the same data are expressed in US dollars, the results are mixed. In 2012, due to the appreciation of the US dollar, ULCs in US dollar terms increased in nine of the 19 countries. Therefore, US manufacturing increased competi-tiveness against all countries where ULCs in US dollars rose, as well as in Norway. Notably, US competitiveness increased against all Asian countries (Taiwan, South Korea, Singapore, and Japan) and had the largest improve-ment against the United Kingdom. On the other hand, the US competitive position deteriorated against eight of the 19 countries. This decline was most notable in Spain and other Euro Area economies that saw greater declines in US dollar-based ULCs than the United States.




Manufacturing unit labor costs, annual percent change (2012)


Chart 17Consumer price indexes (CPIs) and harmonized indexes of consumer prices (HICP) are two measures of consumer price changes. The HICP, however, are adjusted for comparabil-ity across countries, whereas the CPI are not adjusted.

From 2007 to 2012, inflation aver-aged between 1.5 and 2.5 percent in all but four of the countries compared in Chart 17. Prices increased at a faster rate in the United Kingdom and Belgium, while Japan was the only country where prices have declined since 2007. The two inflation rates were identical in six out of the 14 countries selected. Of the remain-ing eight, the difference between the two rates was greater than 0.1 percent in four countries, with the greatest differences occurring in the United States and Sweden. For most countries, the differing trends reflect differences in the way owner-occupied housing is treated by the CPI and the HICP.

Note: The HICP and CPIs are two measures of consumer price inflation. The HICP is adjusted for comparability

across countries, while the CPIs are not adjusted.


Average annual inflation rate, as measured by the Consumer Price

Index and Harmonized Index of Consumer Prices (2007–2012)


Chart 18Harmonized indexes of consumer prices (HICP) are an internationally comparable measure of consumer price inflation. Prior to the global recession, HICP-based inflation in most of the economies compared in Chart 18 peaked in 2008, as 12 of 16 economies reached inflation of 3 percent or higher that year. During the recession, price growth slowed in all countries and moved into defla-tionary territory in Spain, the United States, Japan, and Switzerland. By 2012, however, inflation recovered to over 2 percent in a majority of countries compared.

Other than the dip during the reces-sion, annual inflation in the Euro Area has remained above 2 percent since 2000, highlighting how recent deflationary risk in the area has acted contrary to the historical trend.

Note: The harmonized index of consumer prices (HICP) is an internationally comparable measure of consumer price

inflation.


HICP-based annual inflation rate (1997–2012)

-1% 0% 1% 2% 3% 4% 5% 6%

Compensation Growth < Inflation = Negative Compensation-Inflation Gap

Compensation Growth > Inflation = Positive Compensation-Inflation Gap

South Korea

Norway

Sweden

Singapore

Austria

Spain

Germany

Finland

Belgium

Denmark

France

Czech Republic

Italy

Japan

Switzerland

Australia

United States

Netherlands

Canada

Taiwan

United Kingdom

Nominal hourly compensation costs, average growth ratePositive compensation-inflation gap

Average annual inflation rate

Negative compensation-inflation gap


Chart 19The gap between the growth rates of nominal compensation costs and consumer price indexes (CPIs) indicates the degree to which manu-facturing worker compensation has kept up with inflation. Between 2007 and 2012, nominal compensation growth, on average, outpaced infla-tion in almost all of the economies shown in Chart 19. The compensa-tion-inflation gap was largest in South Korea, Norway, and Sweden. As a result, these countries experienced the largest growth in real manufac-turing compensation of the countries compared. Nominal compensation growth rates lagged inflation in only three countries: Canada, Taiwan, and the United Kingdom.

Note: Hourly compensation growth rates are based on national currency-denominated costs. Inflation as

measured by each country’s consumer price index (CPI). National CPIs are not adjusted for comparability.


Gap between manufacturing compensation growth rate

and inflation (2007–2012)


About This ReportThis report was prepared by the International Labor Comparisons (ILC) program at The Conference Board. The ILC program publishes monthly and annual reports of international labor market data that are comparable across countries. This annual publication is intended to showcase ILC’s comparable labor market indicators and help users evaluate the economic performance of one country relative to others through charts and accompany-ing insights. The 2014 edition of Charting International Labor Comparisons features 2012 data, and data trends over time, for the main indicators published by ILC: unem-ployment rates, labor force participation rates, hourly compensation costs, unit labor costs, labor productivity, and indexes of consumer prices. Charts and analysis refer to labor markets in up to 38 countries, including emerging economies in Asia, Eastern Europe, and Asia. For more information about ILC or to subscribe to our monthly newsletter, visit www.conference-board.org/ilcprogram.

MethodologyThe International Labor Comparisons (ILC) program pre-pares international comparisons of economic indicators that are comparable across countries. Other organizations compile data on similar indicators, but statistics from different countries are often not comparable and do not allow for meaningful comparative analysis. In contrast, ILC adjusts economic statistics to facilitate meaningful and accurate comparisons between countries by using a common conceptual framework. These data can be used to evaluate the economic performance of one country relative to others.

ILC prepares comparable labor indicators in four main areas: (1) labor force measures, including employment, unemployment, and labor force participation rates; (2) hourly compensation costs in manufacturing; (3) productivity and unit labor costs in manufacturing; and (4) indexes of consumer prices. For each of these areas, ILC develops a comparative database by obtaining data from various sources, assessing the data for comparabil-ity, adjusting the data to a comparable framework, and documenting data limitations.

OBTAINING COUNTRY DATA

ILC obtains secondary data from national and international statistical agencies, administrative offices, labor organiza-tions, and employer confederations. Data are compiled from labor force and establishment surveys, national

accounts, price programs, and administrative and legal reports. In some cases, ILC requests special tabulations from national statistical offices to address data gaps or to enhance the comparability of ILC indicators.

ASSESSING COUNTRY DATA

Each country collects and disseminates data according to its own unique definitions, which are often determined by cultural and socioeconomic norms. Even countries that are part of an economic group or that abide by international standards incorporate nuances in their data collection processes that address the unique characteristics of their population and economy. Before any comparisons can be made, ILC examines the methodology of each country series to first understand the concepts behind the data. For example, ILC assesses survey coverage and defini-tions, sample size and nonresponse rates, the national accounts or classification systems used, seasonal adjust-ment methods, breaks in series, and other aspects of data collection that affect comparability across countries. ILC also analyzes questionnaires to compare specific ques-tions and wording used (often in different languages) to capture similar concepts.

ADJUSTING COUNTRY DATA

For each of the four areas, ILC has developed specific methodologies to ensure comparability.

ILC adjusts labor force data to US concepts as defined by the Current Population Survey (CPS). Persons counted as employed, unemployed, or not in the labor force may differ across countries. Some types of workers that are catego-rized differently include new entrants into the workforce, persons on layoff or working part-time, students, military personnel, and unpaid family workers. Where labor force concepts deviate from those of the US CPS, ILC gathers the necessary data to remove the definitional differences. For some countries, for example, ILC removes the career military from the labor force to conform to the US civilian labor force concept.

For the hourly compensation series, country “average earnings” statistics are adjusted to the ILC definition of employer compensation costs. ILC compensation costs relate to employees in manufacturing and include all direct payments made to workers (wages and salaries, pay for leave time, bonuses, pay in kind, etc.) and employer expen-ditures on social insurance benefits and labor-related taxes (net of subsidies). The definition of “average earn-ings” varies considerably by country and frequently does


not include all items of labor cost incurred by employers. ILC calculates total compensation for each country by adjusting “average earnings” series for items of direct pay, social insurance, and labor-related taxes not included in the reported earnings figure. For instance, if bonuses are not included in “average earnings,” ILC obtains data on average annual bonuses and incorporates this additional cost as part of compensation. In addition, “average earnings” data are often reported on a monthly or annual basis. ILC gathers data on hours worked to adjust earnings to a per hour worked basis. Earnings statistics are also adjusted, where possible, to account for major differences in worker coverage, or changes over time in survey cover-age or the industrial classification used.

ILC constructs trends of manufacturing labor productivity (output per hour worked) and unit labor costs (compen-sation per unit of output) from three basic aggregate measures: output, total hours worked, and total compen-sation. Output refers to real value added in manufacturing based on national accounts definitions. Underlying hours worked, compensation, and employment series refer to all employed persons (employees, unpaid family workers, and the self-employed) in manufacturing. Where necessary, ILC estimates indicators for the self-employed to adjust underlying measures referring to employees to a total-employed basis. For earlier years, for some countries, ILC calculates total hours worked using total employment series and data on average hours worked. ILC also adds employer taxes (net of subsidies) to labor cost variables to calculate total compensation. Productivity and unit labor costs are prepared according to the United Nations System of National Accounts 1993 (SNA93) for the most recent years. To obtain historical time series and calculate long-term growth rates, ILC links together data series for earlier years that were compiled according to different accounting systems.

Consumer price indexes (CPI) are calculated by adjusting the official indexes of each country to a common base year (2005). Although the change in the base year allows for some degree of comparison, ILC does not further adjust the indexes for strict comparability. National differences exist, for example, in population coverage, fre-quency of market basket weight changes, and treatment of homeowner costs. However, the harmonized indexes of consumer prices (HICP) are an internationally comparable measure of consumer price inflation. The HICP conform to the conceptual basis of the European Union.

DOCUMENTING DATA LIMITATIONS

Despite ILC efforts to assess country methodologies and adjust for comparability, not all data concepts can be perfectly aligned. In some cases, the data needed to make an adjustment are not available. While the goal of ILC is to prepare comparable international data, a corollary objec-tive is to inform data users of where comparisons should not be made or should be made with caution. For each of the four areas, ILC documents instances where deviations from the conceptual standard persist and strict compara-bility cannot be achieved.

ILC has developed the expertise to address the myriad of data challenges inherent in cross-country comparisons of labor market indicators. While most international databases merely compile data from various sources, ILC combines disparate data sets from each country into meaningful international comparisons.

For additional information on ILC sources and methodol-ogy by data product, see ILC technical notes at:

(www.conference-board.org/ilcprogram/laborforceannual/technicalnotes)

(www.conference-board.org/ilcprogram/compensation/technicalnotes)

(www.conference-board.org/ilcprogram/productivityandulc/technicalnotes)

(www.conference-board.org/ilcprogram/consumerpricesannual/technicalnotes)

For sources and methods on the GDP and per capita income data, visit The Conference Board Total Economy Database (www.conference-board.org/data/economydatabase).

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