International Compensation Costs

Elizabeth Zamora and Jacob Kirchmer Lower wages in foreign markets and the rise in outsourcing by U.S. companies have become important topics in the debate on U.S. competitiveness. Though discussion of these issues tends to evoke images of the quickly growing information technology sector and of other service sectors especially vulnerable to outsourcing, debate has also focused on the impact of globalized markets on U.S. manufacturing activities. The United States remains, by far, the world’s leading producer of manufactured goods, accounting for 17.5 percent of total world manufacturing output in 2008.1 However, manufacturing employment in the United States has been declining over the long term, partly because of rising productivity2 and partly because of the emergence of developing economies as important producers and exporters of manufactured goods.3 One measurement of the international standing of U.S. manufacturing is the hourly cost to the manufacturer of employing labor, or what is referred to in this article as the hourly compensation cost. This cost is one of the important factors used in evaluating international manufacturing competitiveness,4 both at the sector level and at levels below it. Average compensation costs in industries within the manufacturing sector, however, can differ greatly from the average cost of Elizabeth Zamora and Jacob Kirchmer are economists in the Division of International Labor Comparisons in the Office of Productivity and Technology at the Bureau of Labor Statistics. Email: zamora.elizabeth@bls. gov or kirchmer.jacob@ bls.gov Compensation costs in manufacturing across industries and countries, 1975–2007