2010 Report: Global manufacturing labor rates, trends and competitiveness

China had highest rate of labor force participation for persons ages 25 to 54. U.S. remains leading producer of manufactured goods. Largest labor force was combined EU-15 countries. Sweden had highest social insurance costs as a percent of manufacturing hourly compensation. Republic of Korea had largest increase in manufacturing labor productivity. Spain, Portugal only European countries with lower hourly manufacturing compensation costs than U.S.

Trends in the global manufacturing labor force, hourly manufacturing compensation costs, manufacturing labor productivity and unit labor costs are all useful for partially assessing international competitiveness for companies with manufacturing and labor at the core of their product or services. (See, also: Report: China manufacturing hourly labor rate, compensation costs impact EMS)

Information presented in this article represents related manufacturing and labor data VentureOutsource.com believes is of interest to our decision-making users.

The data that follows is part of a report released by the U.S. Bureau of Labor Statistic (www.bls.gov) and is based mainly upon the output of the BLS program of international comparisons of labor force, compensation, prices, and productivity.

To increase country and indicator coverage, BLS data are supplemented by data from the Organization for Economic Cooperation and Development (www.oecd.org) and other organizations. Due to the nature of data presented and the amount of time required to ensure data is as accurate as possible, readers will note the amount of time data timeframes precede the April 2010 release date of this report. Visit the BLS website for report methodology and additional information.

Size of the labor force, 2008 [Fig.1]
The labor force is comprised of all employed and unemployed persons, that is, all members of the working-age population who are either (1) working for pay, profit, or family gain, or (2) available for and actively seeking work. The labor force represents the supply of labor in an economy. The size of the labor force is affected by the size of the country’s population.

The EU-15 countries combined had the largest labor force, followed by the United States.

Fig. 1

Hourly compensation costs, 2007 [Fig. 2]
Hourly compensation costs measure the cost to employers to hire one hour of labor in manufacturing. They include payments made directly to workers, as well as employer expenditures on social insurance.

In some countries, taxes and subsidies related to employment also are included. For this measure, hourly compensation costs in national currencies have been converted to U.S. dollars using market exchange rates.

Manufacturing hourly compensation costs were highest in Norway, at 1.8 times the U.S. level. Australia, Canada, and 10 of the 12 European countries had higher hourly compensation costs than the United States. Spain and Portugal were the only two European countries that had lower hourly compensation costs than the United States. Hourly compensation costs were under $11 in Mexico, Taiwan, and Portugal.

Fig. 2

Average annual growth rates for hourly compensation costs, 1997 to 2007
(All employees in manufacturing) [Fig. 3]
Hourly compensation costs can be measured in the national currency of each country or converted to U.S. dollars using exchange rates. When national currencies are converted to U.S. dollars, growth in hourly compensation is magnified if the foreign currency appreciated against the dollar, or lessened if the foreign currency depreciated. The differences between the two growth rates represent the effects of changes in exchange rates.

During this period (1997 to 2007), the national currency of every country, except Mexico, Singapore, and Taiwan, appreciated against the U.S. dollar; therefore, growth in manufacturing hourly compensation costs was greater in U.S. dollars than in national currencies for all but these three countries. Growth in U.S. hourly compensation costs was relatively low.

Fig. 3

Employer social insurance expenditures and other labor taxes as a percent of hourly compensation costs, 2007 (All employees in manufacturing) [Fig. 4]
Social insurance expenditures refer to the value of contributions made by employers to secure employee entitlement to benefits such as, for example, retirement and disability pensions, health insurance, occupational injury and illness compensation, unemployment insurance, or life insurance; these contributions often provide delayed future income and benefits to employees. Other labor taxes refer to taxes on payrolls or employment (or reductions to reflect subsidies).

Social insurance costs as a percent of manufacturing hourly compensation costs ranged widely, from 12.3% (Denmark) to 33.1% (Sweden) in European countries, and from 4.6% (New Zealand) to 26.3% (Mexico) in non-European countries.

Fig. 4

Average annual growth rates for manufacturing productivity, output, and hours worked, 1998 to 2008 [Fig. 5]
Manufacturing labor productivity is a measure of economic efficiency that shows how effectively hours worked are converted into output. When output growth is larger than growth in hours worked, productivity increases; conversely, when growth in hours worked is larger than output growth, productivity decreases. Advances in productivity can increase national income.

In all countries, manufacturing output growth was larger than growth in hours worked, indicating increasing productivity; specifically, as output increased, hours worked decreased in all but four countries. The Republic of Korea had the largest increase in manufacturing labor productivity, followed by Sweden, Taiwan, and the United States; growth was lowest in Italy.

Fig. 5

Average annual growth rates for manufacturing unit labor costs in U.S. dollars, 1998 to 2008 [Fig. 6]
Unit labor costs are calculated by dividing hourly compensation (compensation per hour) by productivity (output per hour). This indicator, therefore, measures the cost of labor compensation expended to produce one unit of output. Unit labor costs have a large impact on an economy’s international cost competitiveness; declines in unit labor costs indicate that an economy is becoming more cost competitive.

Manufacturing unit labor costs declined only in Taiwan, Japan, Singapore, and the United States. Australia had the largest increase in unit labor costs.

Fig. 6

Manufacturing output as a percent of world manufacturing output, 2008 [Fig. 7]
Manufacturing output as a percent of world manufacturing output measures the relative contribution of the manufacturing sector of each country to world output.

Although U.S. employment in manufacturing has decreased steadily in recent years, the United States remains the world’s leading producer of manufactured goods.

The EU-15 countries’ combined share of world manufacturing output surpassed that of the United States.

Fig. 7

Share of world population, 2008 [Fig. 8]
Shares of world population across countries provide one indication of the relative size of the economies, and are the basis for considerations of overall productive potential. The six large emerging economies accounted for nearly half of the world’s population, with China and India together accounting for 37%.

Fig. 8

Age composition of the population, 2007 [Fig. 9]
The age composition of the population measures the share of the total population for working-age persons (ages 15 to 64), children (ages 14 and under), and the elderly (ages 65 and over). Working-age persons constitute the vast majority of the labor force; therefore, a larger proportion of persons in this age group represents a potentially greater ability to care for children and the elderly and to maintain solvency of public child-care and retirement programs.

For each of these countries, the working-age population was between 63 percent and 72 percent of the entire population. South Africa and India had the highest proportion of children, accounting for almost one-third of those countries’ total populations. In contrast, the Russian Federation and the United States had the highest percentage of the elderly.

Fig. 9

Labor force participation rates by age, 2008 [Fig. 10]
Labor force participation rates measure the proportion of the working-age population that is actively engaged in the labor market by being either employed or unemployed.

Differing labor force participation rates by age across countries can reflect the economic need to work at young and old ages, legal age restrictions on working, cultural and legal norms about retirement ages and retirement benefits, as well as the availability or lack of educational opportunities for the young.

China had the highest rate of labor force participation for prime-age persons (ages 25 to 54), whereas Indonesia had the highest percentage of older persons in the labor force (70.2% for persons ages 55 to 64, and 39.5% for persons ages 65 and over). Youths and persons ages 55 to 64 participated in the labor force to a much lesser extent in South Africa than in the other countries.

Fig. 10

Employment as a percent of the working-age population by sex, 2008 [Fig. 11]
Employment as a percent of the working-age population, also known as the employment-to-population ratio, indicates the capacity to create employment in an economy. Employment levels alone are insufficient to compare human resource utilization across countries because they do not take into account differences in the number of potential workers.

India had the largest gap in employment-to-population ratios between women and men, with 32.4% of working-age women employed and 77.4% of working-age men employed; China had the narrowest gap between women and men.

Fig. 11

Industry output as a percent of world industry output, 2008 [Fig. 12]
Industry output as a percent of world industry output measures the relative contribution of the industry sector of each country to world output. The six large emerging economies accounted for about one-fifth of total world industry output, with China constituting 12%.

Fig. 12

Source: www.bls.gov, VentureOutsource.com, April 2010