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
Labor Comparisons
RESEARCH REPORT R-1542-14-RR
by Elizabeth Crofoot, Eric Hayek, and Michael Paterra

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.

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)

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)

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)

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 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.
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
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
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.
Employment-population ratios by sector (1970–2012)

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.
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 rate
Male-female gap
Women’s labor force participation rate
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.
Gap between men and women’s labor force participation rates
(1970–2012)

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

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.
Hourly compensation costs in manufacturing, by component,
US dollars (2012)

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.
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 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.
Hourly compensation costs in manufacturing industries,
US dollars (2012)

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
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)

-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%
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.
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 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%
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.
Annual percent change in manufacturing productivity, output,
and hours worked (2012)

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
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)

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.
Manufacturing unit labor costs, annual percent change (2012)

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

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.
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 rate
Positive compensation-inflation gap
Average annual inflation rate
Negative compensation-inflation gap
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.
Gap between manufacturing compensation growth rate
and inflation (2007–2012)

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

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)
productivityandulc/technicalnotes)
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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Board. Founded in 1976, it is a
magazine of ideas and opinion for the
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March/April 2009
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THE
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