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International differences in employers' compensation costs.

International differences in employers' compensation costs

In 1987, hourly compensation costs for manufacturing production workers in Germany, Norway, and Switzerland were 25 percent to 30 percent higher than the U.S. cost level, and in Belgium, Denmark, the Netherlands, and Sweden, 8 to 12 percent higher, according to studies conducted by the Bureau of Labor Statistics. Compensation costs in France, Italy, Austria, and Finland rose to more than 90 percent of the U.S. level in 1987; Japanese costs rose to 84 percent and Canadian costs, to about 90 percent; while relative compensation costs rose to more than 60 percent in the United Kingdom and Australia, and to about 60 percent in Spain. (See table 1.)

For Japan and all the European countries, 1987 compensation costs were up sharply from their 1985 relative levels-which ranged ftom about 40 to 80 percent of average U.S. costs. Japan's level was a new high; France, Italy, Austria, Finland, Norway, and Switzerland surpassed their peaks reached in 1979 or 1980; and Germany matched its previous peak levels of 1979 and 1980.

Hourly compensation costs in the newly industrializing Asian and Latin American countries or areas remained less than 20 percent of U.S. costs, although costs in Hong Kong, Korea, Taiwan, and Brazil were up 20 to 50 percent from 1985. Compensation costs in U.S. dollars for Singapore and Mexico actually declined, howeverfor Singapore, because of a wage freeze and cuts in employer social benefit contributions and for Mexico, because of the devaluation of the peso. Mexico's relative compensation costs in 1987 were 10 percent of the U.S. level, compared with a peak of 34 percent of U.S. costs in 1981.

For most of the European countries and Japan, exchange rate changes accounted for more than 80 percent of the narrowing in cost differentials with the United States since 1985. Between 1985 and 1987, the value of the Japanese yen relative to the U.S. dollar rose 65 percent, and gains in the relative values of the currencies of the European industrial countries ranged from 26 to 64 percent.

Measured in national currency, hourly compensation costs rose 6 percent in Japan and from 6 to 18 percent in industrial Europe (except Norway, where hourly costs rose 30 percent, of which 7 percent resulted from a 2-1/2hour cut in the standard workweek), compared with 4 percent in the United States. Measured in U.S. dollars, costs rose 75 percent in Japan, 46 percent in the United Kingdom, and about 60 to 80 percent in the other European countries.

Recent exchange rate trends. The value of the U.S. dollar has continued to fall relative to the currencies of every country studied, except Brazil, Mexico, Hong Kong, example, the unit value associated with a product sold in a self-service "discount" store may be lower than the unit value associated with the same product sold in a store that provides many sales clerks and delivery service. The output measure, therefore, reflects changes in the level of service provided to customers, insofar as differences in unit values reflect the difference in service among the various types of establishments.

In addition to the deflated value technique, weights relating to labor importance were used to combine segments of the output index into a total output measure. The weights used were gross margin weights. These weights, calculated for each merchandise line category, represent the percentage markup provided by the retail hardware store industry. Gross margins are used in place of labor importance weights which are unavailable for this industry. These procedures result in a final output index that is closer, conceptually, to the preferred output measure.

The index of hours for the retail hardware store industry is for all persons, that is, hours for paid employees, self-employed, and unpaid family workers. As in all of the output per hour measures published by the Bureau of Labor Statistics, hours and employment are each considered homogeneous and additive. Adequate information does not exist to weight the various types of labor separately.

The indexes of output per hour relate total output to one input--labor time. The indexes do not measure the specific contribution of labor, capital, or any other single factor. Rather, they reflect the joint effect of many interrelated influences such as changes in technology, capital investment, capacity utilization, store design and layout, skill and effort of the work force, managerial ability, and labor-management relations.

No explicit adjustments were made to the measures to take into account increases or decreases in some services provided to the consumer. There has been some shift to self-service operations. This has shifted some of the hours in retailing from the employee to the consumer. However, data are not available to measure the effect of this change.

The basic sources for the output series for this measure consist of the total sales data and sales by merchandise line reported by the U.S. Department of Commerce. The deflators were developed using various Consumer Price Indexes published by the Bureau of Labor Statistics. The gross margin weights were developed from data reported by the U.S. Department of Commerce.

The basic sources for the all person hour series consist of data on employment and hours published by the Bureau of Labor Statistics and the Bureau of the Census, supplemented by data from special tabulations compiled for the Bureau of Labor Statistics by the Bureau of the Census.
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Author:Capdevielle, Patricia
Publication:Monthly Labor Review
Date:May 1, 1988
Previous Article:Retail hardware stores register productivity gain.
Next Article:Part-time employment in Great Britain: establishment survey data.

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