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2014 Charting international labor comparisons

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2014 Charting international labor comparisons

  1. 1. Charting International Labor Comparisons
  2. 2. The Conference Board creates and disseminates knowledge about management and the marketplace to help businesses strengthen their performance and better serve society. Working as a global, independent membership organization in the public interest, we conduct research, convene conferences, make forecasts, assess trends, publish information and analysis, and bring executives together to learn from one another. The Conference Board is a not-for-profit organization and holds 501(c)(3) tax-exempt status in the USA. www.conferenceboard.org
  3. 3. 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 Comparisons RESEARCH REPORT R-1542-14-RR by Elizabeth Crofoot, Eric Hayek, and Michael Paterra
  4. 4. Charting International Labor Comparisons With 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.
  5. 5. www.conferenceboard.org Research Report Charting International Labor Comparisons 5 Chart 1 Gross 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)
  6. 6. ARG AUL AUT BEL BRZ CAN CHN CZE DNK EST FIN FRA GER GRC HUN IND IRL ISR ITA JPN KOR MEX NLD NOR NZL PHL POL PRT SAF SGP SPA SVK SWE SWZ TAI TUR UKG USA North America Western Europe Asia Oceania Middle East Latin America Africa Eastern Europe Research Report Charting International Labor Comparisons www.conferenceboard.org6 Chart 2 Gross 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)
  7. 7. www.conferenceboard.org Research Report Charting International Labor Comparisons 7 Chart 3 Joblessness 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)
  8. 8. 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 Research Report Charting International Labor Comparisons www.conferenceboard.org8 Chart 4 Unemployment 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. Source: The Conference Board, International Labor Comparisons program Unemployment rates for youth and adults, adjusted to US concepts (2012)
  9. 9. 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 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 1970 1980 1990 2000 2012 www.conferenceboard.org Research Report Charting International Labor Comparisons 9 Chart 5 Over 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. Source: The Conference Board, International Labor Comparisons program Employment-population ratios by sector (1970–2012)
  10. 10. Research Report Charting International Labor Comparisons www.conferenceboard.org10 Chart 6 Labor 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. Source: The Conference Board, International Labor Comparisons program Labor force size and participation rates by sex (2012)
  11. 11. 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 rate Male-female gap Women’s labor force participation rate www.conferenceboard.org Research Report Charting International Labor Comparisons 11 Chart 7 Men 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. Source: The Conference Board, International Labor Comparisons program Gap between men and women’s labor force participation rates (1970–2012)
  12. 12. Research Report Charting International Labor Comparisons www.conferenceboard.org12 Chart 8 The 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. Source: The Conference Board, International Labor Comparisons program Hourly compensation costs in manufacturing, selected economies and regions, as a percentage of costs in the United States (2000–2012)
  13. 13. www.conferenceboard.org Research Report Charting International Labor Comparisons 13 Chart 9 Hourly 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. Source: The Conference Board, International Labor Comparisons program Hourly compensation costs in manufacturing, by component, US dollars (2012)
  14. 14. Research Report Charting International Labor Comparisons www.conferenceboard.org14 Chart 10 Another 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. Source: The Conference Board, International Labor Comparisons program Components of manufacturing hourly compensation costs, as a percentage of total compensation (2012)
  15. 15. $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 www.conferenceboard.org Research Report Charting International Labor Comparisons 15 Chart 11 Hourly 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. Source: The Conference Board, International Labor Comparisons program Hourly compensation costs in manufacturing industries, US dollars (2012)
  16. 16. 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 0 40 80 120 160 200 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 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 Index 2002=100 Index 2002=100 Research Report Charting International Labor Comparisons www.conferenceboard.org16 Chart 12 Manufacturing 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)
  17. 17. -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 increase Hours growth Output 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 4.6 6.4 6.5 7.3% www.conferenceboard.org Research Report Charting International Labor Comparisons 17 Chart 13 Increases 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. Source: The Conference Board, International Labor Comparisons program Average annual percent change in manufacturing productivity, output, and hours worked (2000–2012)
  18. 18. -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 increase Productivity decrease Hours growth Output growth -6.9 -4.7 -3.1 -1.4 -1.3 -1.3 -1.1 -1.0 -0.9 -0.8 -0.5 -0.4 0.4 0.8 2.3 2.4 3.8 4.0 5.6% Research Report Charting International Labor Comparisons www.conferenceboard.org18 Chart 14 In 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. 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 Annual percent change in manufacturing productivity, output, and hours worked (2012)
  19. 19. 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 4.0 4.5 5.0 5.5 6.0 6.5 7.0 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 www.conferenceboard.org Research Report Charting International Labor Comparisons 19 Chart 15 Since 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)
  20. 20. Research Report Charting International Labor Comparisons www.conferenceboard.org20 Chart 16 Unit 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. 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 Manufacturing unit labor costs, annual percent change (2012)
  21. 21. www.conferenceboard.org Research Report Charting International Labor Comparisons 21 Chart 17 Consumer 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. Source: The Conference Board, International Labor Comparisons program Average annual inflation rate, as measured by the Consumer Price Index and Harmonized Index of Consumer Prices (2007–2012)
  22. 22. Research Report Charting International Labor Comparisons www.conferenceboard.org22 Chart 18 Harmonized 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. Source: The Conference Board, International Labor Comparisons program HICP-based annual inflation rate (1997–2012)
  23. 23. -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 rate Positive compensation-inflation gap Average annual inflation rate Negative compensation-inflation gap www.conferenceboard.org Research Report Charting International Labor Comparisons 23 Chart 19 The 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. Source: The Conference Board, International Labor Comparisons program Gap between manufacturing compensation growth rate and inflation (2007–2012)
  24. 24. Research Report Charting International Labor Comparisons www.conferenceboard.org24 About This Report This 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. Methodology The 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
  25. 25. www.conferenceboard.org Research Report Charting International Labor Comparisons 25 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).
  26. 26. Membership in The Conference Board For more information about how to become a member of The Conference Board please contact membership@conferenceboard.org. To order publications or register for a conference: Online www.conferenceboard.org Email orders@conferenceboard.org Phone customer services at +1 212 339 0345 Other Publications from The Conference Board The Conference Board Review is the quarterly magazine of The Conference Board. Founded in 1976, it is a magazine of ideas and opinion for the world’s business leaders that raises tough questions about leading-edge issues at the intersection of business and society. www.tcbreview.com StraightTalk® The Conference Board Chief Economist Bart van Ark provides economic research, objective analysis, and forecasts to help new economy business executives in their strategic decision-making assess economic conditions affecting their markets worldwide. ( www.conferenceboard.org/ straighttalk) IDEAS AND OPINIONS FOR THE WORLD'S BUSINESS LEADERS March/April 2009 www.tcbreview.com THE CONFERENCE BOARD REVIEW WHO SAYS YOU’RE A GOOD GLOBAL CITIZEN? WHEN THEY HEAR YOU BUT DON’T LISTEN HOW MANY SENIOR EXECUTIVE VPS ARE TOO MANY? After the Storm Boards and CEOs will face a changed landscape. FROM THE CONFERENCE BOARD CHIEF ECONOMIST straighttalk® 2013 V24 N1 GLOBAL ECONOMIC OUTLOOK 2014 Time to realize the opportunities for growth © 2014 by The Conference Board, Inc. All rights reserved. Printed in the U.S.A. ISBN No. 0-8237-1093-9
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