32  Monthly Labor Review • June 2010

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

Rankings of manufacturing industries based on employers’ labor costs 

for production workers changed very little from 1975 to 2007 

and also did not tend to differ much from country to country; 

however, trends in the range and dispersion of labor costs 

have varied substantially across countries

manufacturing compensation. Measures of 

compensation costs at the sector level are 

instructive but often mask important differences among industries. A country’s overall 

compensation cost advantage in the production of manufactured goods does not imply 

that its compensation costs for the production of, for example, apparel and automobiles are equally competitive. 

This article compares hourly compensation 

cost data from 1975 to 2007 published by 

BLS across 18 industries within manufacturing5

 in the United States and in selected foreign economies. A fairly basic use of these 

industry data is to directly compare labor 

costs in similar industries across countries. 

This study, however, takes an additional step 

by analyzing how industries’ compensation 

costs vary not only across countries but also 

over time. As a foundation, a brief literature 

review and an overview of general trends in 

compensation costs at the all-manufacturing 

level are first presented. The analysis then 

moves to industries within the manufacturing sector. To elucidate differences in labor 

costs at the industry level, this article ranks 

manufacturing industries according to their 

mean hourly compensation costs for employers, focusing on the highest and lowest 

ranked industries in several representative 

countries. Because data suggest that ranking 

order has remained fairly stable over time 
Monthly Labor Review • June 2010  33

and is similar across countries, each manufacturing industry is classified into one of four compensation cost categories ranging from “low” to “high.” Such groupings allow 

for a generalized discussion of relative compensation costs 

at the industry level. Next, the article addresses national 

differences in the dispersion of compensation costs between the industries with the lowest compensation costs 

for employers and those with the highest costs. The study 

concludes with an analysis of whether the positioning of 

industries in other countries is similar or dissimilar to that 

in the United States.

This article finds that BLS comparative data are consistent with the larger economic literature on the dispersion 

of earnings across industries. That is, BLS data indicate 

that the rankings of industries within manufacturing by 

employers’ compensation costs have changed little over 

time and are similar from country to country. In contrast, differences among countries in the degree of dispersion of hourly compensation costs are more notable: 

differences in labor costs among industries are small and 

have remained so over time for some countries, whereas 

for others, such differentials are large and have fluctuated 

greatly from year to year.6 Finally, the study analyzes ratios 

involving manufacturing industries and the manufacturing sector as a whole both in the United States and in 

other countries, and it identifies those economies which 

are most and least similar to that of the United States 

with regard to these ratios.

Framework for analysis

The data in this article are from a long-standing BLS comparative series on international hourly compensation costs 

in manufacturing.7 Compensation cost data for industries 

within manufacturing have been made available by BLS 

(though not always formally published) since 1980. This 

study analyzes hourly compensation cost data for production workers8

 in manufacturing and in 18 industries 

within manufacturing for the period from 1975 to 2007.9

BLS also publishes hourly compensation cost statistics 

for all employees in manufacturing, a category that includes production workers as well as all other employees 

in manufacturing establishments. The BLS all-employees 

series begins in 1996 and thus is less suitable for historical analysis. It should be noted that assessing data for all 

employees in manufacturing would result in higher compensation cost levels, since this worker group also includes 

salaried workers and managers, who tend to be paid higher wages. However, the distribution of compensation costs 

across industries and countries does not vary substantially 

by category of worker (all employees or production workers), so the use of the all-employees BLS series would result in similar conclusions with regard to industry rankings, dispersion, and the positioning of foreign industries 

relative to those of the United States.10

The economies included in this study are those of the 

United States, the remaining Group of Seven countries 

(Canada, Japan, France, Germany, Italy, and the United 

Kingdom), Mexico, the Republic of Korea (hereinafter 

South Korea), Taiwan, and Sweden. Although the BLS 

comparative series for production workers covers 34 economies, a subset of these economies is chosen to provide 

more in-depth analysis and because a variety of industry 

data are not available for all countries. In addition, most 

of the economies selected are those of countries exhibiting 

high trade levels with the United States, such as Canada 

and Mexico, and some economies were chosen to represent certain regions, such as Asia and Europe. South Korea and Taiwan are included specifically to represent the 

relatively quickly growing economies of East Asia. Sweden serves to represent the Scandinavian region, known 

for its relatively compressed wage distribution, which is 

due, in part, to high unionization rates.11 China and India, 

both major trading partners with the United States, are 

conspicuously absent from this analysis. See the box on 

pages 43 and 44, which addresses the exclusion of China 

and India and provides some information on the dispersion of earnings and compensation costs among industries 

within manufacturing in those countries.

For each economy, compensation cost data are examined for the 18 industries within manufacturing listed 

in exhibit 1, as the industries are defined by the North 

American Industry Classification System (NAICS).12 It 

should be noted that the quality of data at the industry 

level is often not as high as that at the sector level and 

may affect the comparability of industry compensation 

cost measures. Such quality issues include differences in 

industrial classification systems, gaps in source data sets, 

and source data derived from samples that are relatively 

small. Where possible, however, BLS makes adjustments 

and estimations to mitigate these issues and to enhance 

the comparability of compensation cost measures.13 For 

example, for countries outside North America, data are 

adjusted to correspond with NAICS industry definitions.

For every country in this study, BLS produces compensation cost estimates for each manufacturing industry listed 

in exhibit 1; the estimates cover the years 1975 to 2007. 

There are some missing data, however. For Canada and 

Mexico, hourly compensation cost data series for manufacturing industries begin with 1983 and 1985, respec-
International Compensation Costs

34  Monthly Labor Review • June 2010

tively, because comparable source data for earlier years are 

unavailable. Sweden has the smallest industry data set of 

all countries included in this analysis. For Sweden, data 

are missing for all years for 8 of the 18 industries listed 

in exhibit 1, including the textiles and textile products 

(NAICS 313–314), apparel manufacturing (NAICS 315), 

leather and allied products (NAICS 316), motor vehicles 

and parts (NAICS 3361–3363), and aerospace products 

and parts (NAICS 3364) industries. However, data for 

the combined industry of textiles, apparel, and leather 

manufacturing (NAICS 313–316) and for transportation 

equipment manufacturing (NAICS 336) are reported for 

all years. Because these industries encompass some of the 

missing industries, and because they correspond to the 

low end and high end, respectively, of the compensation 

cost spectrum, the data on Sweden remain largely representative of the country’s compensation costs.14 For a 

number of other countries, there are gaps in data coverage 

that are less prevalent than the gaps for Canada, Mexico, 

and Sweden, and these gaps do not affect the overall comparability of the measures or the analysis in this article.

To make sound comparisons, national manufacturing 

data for all economies are adjusted to a common concept 

of compensation costs. Hourly compensation costs consist of direct payments made to workers (including base 

wages, overtime pay, bonuses, and pay for vacations, holidays, and other leave), employer expenditures for social 

insurance and other worker benefits, and taxes on payrolls 

or employment.15 From the perspective of employers, assessing compensation costs instead of worker earnings or 

wages is more meaningful because it captures not only the 

take-home pay that employees receive but also all other labor costs that employers incur. For this reason, the 

terms “compensation cost” and “labor cost” are used interchangeably throughout the following discussion. Hourly 

compensation costs are computed in national currency 

units and are converted to U.S. dollars with the average 

daily exchange rate16 for the reference year.17

This article aims to make relevant comparisons of compensation costs across countries and industries within the 

manufacturing sector. This study’s findings are not transferable to other sectors of the economy, such as services 

and information technology. The manufacturing sector 

provides the most data for making hourly compensation 

cost comparisons, and the BLS compensation cost indicators presented in this article are adjusted to a common 

conceptual basis to facilitate these comparisons.

A brief literature review

This international analysis of hourly compensation costs 

in manufacturing industries builds upon a vast literature 

addressing interindustry wage differentials. Multicountry 

comparisons of distributions of wages by industry make 

up a much smaller portion of the literature, although 

such comparisons have been a topic of interest since the 

1940s.18 It should be noted that the terms “wages,” “earnings,” and “compensation” in the literature are often not 

explicitly defined and are frequently used interchangeably 

to denote worker pay. The BLS definition of “compensation” is a broader measure of worker pay, including both 

direct wage payments made to the worker and social benefits. In the majority of studies reviewed, analysis relates 

to wages as opposed to compensation costs.

In the earliest works, various authors reached similar 

findings relating to interindustry wage differentials. For 

instance, in 1944 Stanley Lebergott19 found that, when 

ranked by average hourly earnings, manufacturing industries were placed in similar orders in the United States, 

Canada, the United Kingdom, Sweden, Switzerland, and 

even the Soviet Union to some degree. Using various data 

sets and analyzing different countries, relatively more recent studies, such as those of Alan B. Krueger and Lawrence H. Summers (1986),20 Josef Zweimuller and Erling 

Barth (1992),21 and Maury Gittleman and Edward N. 

Wolff (1993),22 arrive at similar conclusions: that industry rankings according to earnings levels are similar across 

countries and have remained so over time. In line with 

Exhibit 1. North American Industry Classification System (NAICS)

 manufacturing industries covered in this article

NAICS 

code(s) Industry

31–33 (All) Manufacturing

311–312 Food, beverage, and tobacco product manufacturing

313–314 Textiles and textile product mills

315 Apparel manufacturing

316 Leather and allied product manufacturing

321 Wood product manufacturing

322 Paper manufacturing

325 Chemical manufacturing

326 Plastics and rubber products manufacturing

327 Nonmetallic mineral product manufacturing

331 Primary metal manufacturing

332 Fabricated metal product manufacturing

333 Machinery manufacturing

334 Computer and electronic product manufacturing

335 Electrical equipment, appliance, and component

manufacturing

336 Transportation equipment manufacturing

3361–3363 Motor vehicle and parts manufacturing

3364 Aerospace product and parts manufacturing

337 Furniture and related product manufacturing
Monthly Labor Review • June 2010  35

shared industry rankings, these sources also note that the 

lowest and highest wage industries tend to be the same in 

many countries.

In their article, Gittleman and Wolff also address 

changes in the degree of wage dispersion across manufacturing industries. They find that, although industry 

rankings according to earnings levels are similar from one 

country to another and have remained fairly stable, the 

degree of industry wage dispersion varies considerably 

across countries and has tended to expand and contract 

over time. Gittleman and Wolff also discuss the factors affecting levels of and trends in industrial wage differentials. 

They note that regression results pointing to causal factors are sensitive to the period covered, to the regression 

specification used, and to econometric problems (such as 

multicollinearity) that limit their interpretation. However, 

Gittleman and Wolff ’s findings suggest that higher capital intensity, greater openness to exporting, and growth 

in total factor productivity among industries significantly 

increase wage dispersion. Conversely, the researchers find 

that high levels of unionization within a country significantly decrease wage dispersion. 

More recently, a 2003 study by the European Commission has investigated interindustry wage differentials in 

the European Union.23 The study finds strong variation 

in wages both across countries and within sectors of the 

economy including manufacturing, mining and quarrying, 

energy and electricity, construction, and services. Among 

manufacturing industries, wages in the year 2000 are 

found to be generally above average in metals, tobacco, and 

fuel and petroleum, whereas wages in textiles and textile 

products and in wood products are found to be lower than 

average. That same year, among the E.U. member states or 

accession countries, the greatest interindustry wage differentials were found in the United Kingdom and France, 

and the lowest were found in Denmark and Slovenia.

Interindustry wage differentials and the related issues of 

rank and wage dispersion are investigated in this article 

as well, but in the broader context of hourly compensation costs. As is shown in the following sections, results 

based on data published by BLS are in line with findings in 

the larger economic literature. The data on compensation 

costs used in this study permit more meaningful comparisons of employers’ labor costs across countries than data 

from studies based on employee earnings only. Further, 

BLS compensation cost data for all countries are adjusted 

to an hourly basis and adjusted to meet NAICS industry 

definitions. Together, the broad measure of hourly compensation costs and the adjustments to enhance multicountry comparability yield more reliable results.

Trends in all-manufacturing compensation costs

This section examines overall trends in manufacturingsector mean hourly compensation costs in 11 economies 

for the period from 1975 to 2007. Trends at the sector 

level serve as a basis for more in-depth comparisons at the 

industry level. In this study, the manufacturing sector as 

a whole is referred to as “all manufacturing,” and the divisions within manufacturing—which are 3- and 4-digit 

NAICS manufacturing industries, in some cases analyzed 

in combination with one another—generally are referred 

to as “industries.”

Employers’ compensation costs for production workers in manufacturing increased between 1975 and 2007 

in all countries. (See tables 1 and 2.) Because the compensation cost measures discussed in this study are nominal—not adjusted for inflation—the steady increase over 

time is attributed primarily to a rise in the overall price 

level. Though nominal labor costs in U.S. dollars have risen across the board over the long term, trends in growth 

rates have varied considerably from country to country. 

According to the compensation cost levels in table 1 and 

the growth rates in table 2, the mean hourly compensation cost quadrupled in the United States, from $6.24 in 

1975 to $25.27 in 2007, an average increase of 4.5 percent per year. South Korea showed the largest percentage change in hourly compensation costs, increasing from 

$0.31 in 1975 to $16.02 in 2007—an average increase of 

approximately 13 percent per year. Conversely, compensation cost growth in Mexico was sluggish over the long 

term; the mean cost increased from $1.43 in 1975 to only 

$2.92 just over 30 years later—an average annual increase 

of 2.3 percent. 

Growth rate trends in other countries relative to the 

trend in the United States are illustrated in chart 1, in 

which the U.S. compensation cost level is set to 100 for 

all years. For any economy, a relatively flat line indicates 

that the growth rate of compensation costs was similar to 

that of the United States. A line sloping upward implies a 

larger increase or smaller decrease than that in the United 

States, and a line sloping downward indicates a smaller 

increase or larger decrease than that in the United States. 

Because of relatively high compensation cost growth rates 

in later years, labor costs in many of the European countries in chart 1 rose from relatively lower levels in the early-to-mid 1980s to levels higher than those in the United 

States during parts of the 1990s and 2000s. Compared 

with the growth of labor costs in the European economies covered, labor cost growth in Canada and Mexico 

more closely tracked that in the United States from 1975 
International Compensation Costs

36  Monthly Labor Review • June 2010

to 2007. Compensation cost growth in Japan and Taiwan 

was relatively high throughout most of the 1975–2007 

period, but growth was slower in these economies than in 

the United States from the mid-1990s to 2007. During 

the 1975–2007 timespan, compensation costs in South 

Korea generally increased at a faster rate than they did in 

the United States.

In the 1975–2007 period, compensation costs for production workers in U.S. manufacturing generally were 

higher than costs for production workers in Canada 

and Mexico, East Asia, and parts of Europe. (See chart 

1 and table 1). By contrast, manufacturing labor costs in 

the United States tended to be lower than those in Germany and Sweden. In the mid-to-late 1970s, compensation rates in the United States were among the highest 

internationally. Bolstered by a U.S. dollar that was strong 

relative to foreign currencies, this trend continued for the 

next few years, and by the mid-1980s the United States 

had the highest labor costs of all the countries covered for 

this article. During the 1985–90 period, however, compensation costs in the United States declined in relative 

terms because labor costs in almost all the economies in 

the study increased at a faster rate during that time. This 

was due, in part, to the depreciation of the dollar. From 

1990 to 1995 U.S. compensation costs grew at an average 

annual rate of approximately 3.0 percent, somewhat lower 

than compensation costs in France (which grew at a rate 

of 4.3 percent per year) and substantially lower than costs 

in Germany (7.5 percent) and Japan (13.3 percent) during 

the same period. (See table 2). As a result, U.S. manufacturing firms compensated production workers at a lower 

cost during the mid-1990s in comparison with firms in 

Japan and most of the selected economies in Europe. By 

the year 2000 this trend had changed: compensation costs 

for U.S. production workers once again were more in line 

with those of their European counterparts. Since that 

Table 1. Mean hourly compensation costs for production workers in the manufacturing sector (in nominal U.S. dollars), 

 and those costs as a percentage of corresponding costs in the United States, selected years, 1975–2007

Country 1975 1980 1985 1990 1995 2000 2005 2006 2007

United States.............................................. $6.24 $9.75 $12.87 $15.00 $17.39 $19.88 $23.81 $24.15 $25.27

100 100 100 100 100 100 100 100 100

Canada......................................................... 6.40 9.02 11.39 16.62 16.80 16.78 24.29 26.12 29.08

102 92 89 111 97 84 102 108 115

Mexico................................................................ 1.43 2.15 1.55 1.54 1.43 2.17 2.65 2.77 2.92

23 22 12 10 8 11 11 11 12

Japan.................................................................... 2.95 5.43 6.24 12.52 23.34 21.69 21.31 19.99 19.75

47 56 48 83 134 109 90 83 78

South Korea................................................ .31 .93 1.20 3.59 7.14 8.08 12.48 14.48 16.02

5 10 9 24 41 41 52 60 63

Taiwan.............................................................. .39 1.05 1.51 3.91 5.99 6.19 6.42 6.56 6.58

6 11 12 26 34 31 27 27 26

France........................................................... 4.76 9.42 7.91 16.25 20.06 15.98 24.56 25.47 28.57

76 97 62 108 115 80 103 105 113

Germany...................................................... 5.28 10.26 7.98 18.32 26.29 19.80 29.00 30.06 33.26

85 105 62 122 151 100 122 124 132

Italy.................................................................... 4.70 8.21 7.67 17.92 16.71 14.53 24.33 25.17 28.23

75 84 60 120 96 73 102 104 112

Sweden.......................................................... 7.12 12.41 9.58 20.75 21.63 20.70 30.50 31.85 36.03

114 127 74 138 124 104 128 132 143

United Kingdom....................................... 3.21 7.22 5.97 11.95 13.60 16.69 25.75 26.76 30.18

51 74 46 80 78 84 108 111 119

SOURCES: "International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry, 1992-2007," on the Internet at www.bls.

gov/ilc/flshcpwindnaics.htm; and authors' calculations made by use of "Hourly Compensation Costs for Production Workers in Manufacturing (SIC Basis),

30 Countries or Areas, 40 Manufacturing Industries, Selected Years, 1975-2002," on the Internet at www.bls.gov/ilc/flshcindsic.htm.
Monthly Labor Review • June 2010  37

time, however, labor costs in U.S. manufacturing have decreased relative to costs in Europe, a phenomenon caused 

primarily by the appreciation of the euro in relation to the 

dollar.

Compensation cost levels in the East Asian economies 

of South Korea and Taiwan remained low relative to those 

in the United States throughout the entire 1975-to-2007 

period. Nevertheless, the gap narrowed somewhat over 

time as labor costs for manufacturing production workers 

in these countries increased more rapidly than those in 

the United States. This is especially true for South Korea, 

where compensation costs grew at an average rate of 13.1 

percent per year from 1975 to 2007, compared with 4.5 

percent annually for the United States during the same 

timeframe. As a result, South Korea’s mean compensation 

cost also increased from only 5 percent of the U.S. level in 

1975 to 63 percent by 2007. Likewise, compensation costs 

in Taiwan grew from 6 percent to 26 percent of U.S. compensation costs between 1975 and 2007. As with South 

Korea, this can be attributed to Taiwan’s much faster average annual rate of growth in hourly compensation costs 

relative to that of the United States (9.2 percent versus 4.5 

percent annually from 1975 to 2007). 

Trends in hourly compensation costs in Mexico, by contrast, were far removed from the trends shared by South 

Korea and Taiwan. Mexico’s average annual rate of growth 

in compensation costs from 1975 to 2007 (2.3 percent) was 

by far the lowest of the rates of the countries addressed in 

this article and was approximately half that of the United 

States over the same period. As a result, Mexico’s mean 

compensation cost decreased from 23 percent of the U.S. 

level in 1975 to 12 percent by 2007. The devaluation of the 

Mexican peso in December 1994 contributed to this drop 

in labor costs as measured in U.S. dollars. Canada’s compensation cost growth (4.8 percent annually) tracked the 

U.S. growth fairly closely and consequently led to little 

relative change over time. 

U.S. average annual growth rates in hourly compensation costs were highest in the earlier years of the 1975–

2007 period, nearly reaching double digits during the late 

1970s (see table 2), a period with high rates of inflation. 

Despite moderate slowing, annual growth—averaged over 

5-year periods—in U.S. labor costs remained between 2.7 

percent and 5.7 percent after the 1970s.

Compensation cost growth rates in all foreign economies fluctuated significantly across time, and most reached 

negative levels in at least one period. This was due in large 

part to cyclical exchange rate variations that occurred over 

time. For example, the average cost of hourly compensation in the United Kingdom grew at an average annual 

rate of 17.6 percent during the period from 1975 to 1980; 

during the early-to-mid 1980s, however, the situation 

changed dramatically and compensation costs actually declined at a rate of 3.7 percent. Such dramatic fluctuation 

in the level of compensation cost growth between these 

two periods was common among all European countries 

in the study: virtually all currencies across the continent 

weakened, to varying degrees, against the U.S. dollar during those years. Despite the drop in compensation costs as 

measured in U.S. dollars in the late 1970s and early 1980s, 

in local currency terms, costs grew steadily in Europe. 

South Korea and Taiwan experienced strong positive 

growth in hourly compensation costs between 1975 and 

1995, on some occasions reaching annual rates of increase 

of more than 20 percent. During the 1995–2000 period, 

however, compensation cost growth in these countries 

Table 2. Nominal mean annual growth rates of hourly compensation costs for production workers in manufacturing, 

 selected periods, 1975–2007

[In percent, as calculated from costsin U.S. dollars]

Country 1975–2007 1975–80 1980–85 1985–90 1990–95 1995–2000 2000–07

United States.......................................... 4.5 9.3 5.7 3.1 3.0 2.7 3.5

Canada...................................................... 4.8 7.1 4.8 7.8 .2 .0 8.2

Mexico....................................................... 2.3 8.5 –6.3 –0.2 –1.5 8.7 4.3

Japan......................................................... 6.1 13.0 2.8 14.9 13.3 –1.5 –1.3

South Korea............................................ 13.1 24.3 5.2 24.6 14.7 2.5 10.3

Taiwan....................................................... 9.2 21.8 7.7 21.0 8.9 .7 .9

France........................................................ 5.2 14.6 –3.4 15.5 4.3 –4.4 8.7

Germany................................................... 5.9 14.2 –4.9 18.1 7.5 –5.5 7.7

Italy............................................................. 5.8 11.8 –1.4 18.5 –1.4 –2.8 10.0

Sweden..................................................... 5.2 11.8 –5.0 16.7 .8 –.9 8.2

United Kingdom.................................... 7.3 17.6 –3.7 14.9 2.6 4.2 8.8

SOURCE: Authors' calculations made by use of"International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry,

1992-2007," on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm; and 

by use of "Hourly Compensation Costs for Production Workers in Manufacturing (SIC Basis), 30 Countries or Areas, 40 Manufacturing Industries, Selected Years, 1975-2002," on the Internet at www.bls.gov/ilc/flshcindsic.htm.
International Compensation Costs

38  Monthly Labor Review • June 2010

Chart 1. Hourly compensation costs for production workers in manufacturing, measured in U.S. dollars

 and indexed to the corresponding costs in the United States, by country, 1975–2007

U.S. = 100 North America U.S. = 100

Canada

Mexico

United States

180

160

140

120

100

80

60

40

20

0

1975 1977 1979 1981 1983 1985 1

180

160

140

120

100

80

60

40

20

0

United States and Asia

1975 1977 1979 1981 1983 1985 1

180

160

140

120

100

80

60

40

20

0

180

160

140

120

100

80

60

40

20

0

U.S. = 100 U.S. = 100

United States

South Korea

Taiwan

Japan
Monthly Labor Review • June 2010  39

slowed significantly, as measured in U.S. dollars, with 

Taiwan even approaching zero percent growth in the 

late 1990s and early 2000s. For these two East Asian 

economies, the sluggish compensation cost growth rates 

can be attributed at least in part to significant changes 

in exchange rates between the currencies in South Korea and Taiwan and the U.S. dollar. For instance, Taiwan’s 

compensation cost growth averaged 4.5 percent per year 

between 1995 and 2000 when measured in local currency. 

Compensation cost growth in U.S. dollars for Taiwan, 

however, was much slower (an average of 0.7 percent annually) during this period.

Trends in all-manufacturing compensation costs are 

instructive for assessing the sector as a whole, but, depending on the economy studied, they may or may not 

be generally representative of trends in industries within 

the sector. That is, compensation costs across industries 

within manufacturing can vary considerably. The following sections of the article take an in-depth look at hourly 

compensation cost levels across the industries listed in exhibit 1.

Industry rankings and groupings

General trends in labor costs for the whole manufacturing 

sector are important, but they sometimes mask significant 

differences in compensation at the industry level. This 

section highlights these differences by ranking industries 

within manufacturing and grouping them into general 

categories according to levels of compensation costs. This 

approach reveals the general distribution of manufacturing labor costs within countries.

Table 3 shows the three highest and three lowest ranked 

industries by labor costs in the United States, Japan, and 

Germany for the years 1975, 1985, 1995, and 2007. Data 

for these countries reveal not only the variation in compensation cost levels across industries (shown in U.S. dollars), but also that industry rankings within countries have 

remained fairly stable over time. In addition, the highest 

and lowest ranked industries tended to be the same from 

one country to another. Other data (not shown in table 

3 but available upon request) indicate that this trend extends across all economies in the study.

Germany Sweden

United States

France

United Kingdom Italy

United States and Europe

Chart 1. Continued—Hourly compensation costs for production workers in manufacturing, measured

 in U.S. dollars and indexed to the corresponding costs in the United States, by country, 1975–2007

180

160

140

120

100

80

60

40

20

0

180

160

140

120

100

80

60

40

20

0

1975 1977 1979 1981 1983 1985 1

SOURCE: Authors’ calculations made by use of “International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry,

1992-2007,” on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm; and by use of“Hourly Compensation Costs for Production Workers in Manufacturing (SIC Basis), 30 Countries or Areas, 40 Manufacturing Industries, Selected Years, 1975-2002,”on the Internet at www.bls.gov/ilc/flshcindsic.htm.

U.S. = 100 U.S. = 
International Compensation Costs

40  Monthly Labor Review • June 2010

Considering the United States, Japan, and Germany, a 

large degree of stability in compensation cost rankings was 

seen over the 1975–2007 period on both the high and low 

ends of the spectrum. Table 3 suggests that the chemicals, 

primary metals, transportation equipment, motor vehicles 

and parts, and aerospace products and parts industries 

were consistently among the most highly compensated in 

manufacturing. Apparel, leather and allied products, and 

textiles and textile products firms consistently incurred 

the lowest labor costs in the manufacturing sector.

For all countries in this study, certain industries were 

consistently ranked at or near the top or at or near the 

bottom in terms of compensation costs across the period 

from 1975 to 2007. In other words, the industrial spectrum of manufacturing compensation costs was largely 

stable throughout the past 30 or so years. This observation 

can be generalized—and quantified—for the 11 countries included in this study by classifying the manufacturing industries from exhibit 1 into four groups based 

on employers’ costs for compensation: low, medium–low, 

medium–high, and high. These categories are relative to 

the national mean for the manufacturing sector. Industries with “low” levels of compensation costs are defined 

as those industries with labor costs generally 1 standard 

deviation24 or more below the all-manufacturing average, 

whereas industries with “high” levels of compensation 

costs are those with labor costs generally 1 standard deviation or more above the mean for all of manufacturing. Industries in the medium–low and medium–high categories 

are more comparable to the all-manufacturing average, 

incurring labor costs within 1 standard deviation below 

the all-manufacturing benchmark and within 1 standard 

deviation above it, respectively. Using standard deviations 

in this way allows industries to be grouped into the four 

categories, by country, without disregarding national differences in the dispersion of compensation costs. Thus, for 

each country and year, the 18 industries are classified into 

these four categories. 

The results of these groupings for 2007 are shown in 

exhibit 2. Each industry in the exhibit has a corresponding fraction in parentheses: the numerator represents the 

number of countries for which the industry fell into the 

category in question, and the denominator represents the 

total number of countries for which data for the industry 

are available. An industry’s placement within this exhibit 

thus reflects the placement of that industry for a majority 

of the countries for which data are reported.25 In 2007, 

for instance, the plastics and rubber products industry was 

classified as medium–low in 10 out of 10 economies that 

published data for that industry. Several other industries 

were grouped similarly across nearly all the economies, 

namely the following: apparel, as low; food, beverages, 

and tobacco, and fabricated metal products, as medium–

low; machinery, and computer and electronic products, as 

medium–high; and aerospace products and parts, as high. 

Some industries, however, had greater variability across 

countries, such as furniture and related products, and paper. For most countries, furniture was classified primarily 

in the low category in 2007, but, in the United States, 

Mexico, and Japan, the industry had relatively higher 

compensation costs and was therefore placed in the medium–low category. In 2007, paper manufacturing had the 

most variability across countries: the industry was classified as medium–low in Mexico, South Korea, Taiwan, 

Germany, and the United Kingdom; as medium–high in 

the United States, Canada, Japan, France, and Italy; and 

as high in Sweden. Though exhibit 2 is a generalized representation of relative industry compensation for all covered economies in 2007, it can be said that, overall, the 

exhibit most closely corresponds to the 2007 distributions 

of compensation costs in France and the United Kingdom 

and is least representative of those in Mexico and Taiwan.

This snapshot of 2007 is compelling in that it is generally representative of the industrial spectrum of manufacturing labor costs for all economies in this study throughout the period from 1975 to 2007. The industries in exhibit 2 with a footnote are those which, in a majority of 

countries, remained, on average, in the compensation cost 

grouping in question for over 30 years. Such constancy 

in compensation costs was characteristic of 11 of the 18 

industries in the exhibit. Apparel manufacturing was the 

most static industry in this sense. For all 10 countries in 

this study that reported data for apparel, the industry remained in the low compensation cost category for most 

years between 1975 and 2007. Other industries that were 

particularly consistent in their average grouping during 

the 1975–2007 period were plastics and rubber products, 

in medium–low; machinery, in medium–high; and aerospace products and parts, in high.

In contrast, some industries varied more over time in 

their categorization, including textiles and textile products, wood products, furniture and related products, and 

paper manufacturing. Paper was the most volatile industry, having moved across groupings over time for 6 out of 

11 countries. In Mexico, for example, paper moved from 

being medium–high to being medium–low in the early 

2000s, and it made the same move in the mid-2000s in 

South Korea. In Taiwan, paper was classified as having 

high compensation costs in the late 1970s and throughout 

the 1980s and as medium–high in the 1990s; it has been 
Monthly Labor Review • June 2010  41

Table 3. Manufacturing industries with the highest and lowest mean hourly compensation costs for production workers, 

 selected countries and years

Country

1975 1985

Industry

Mean hourly compensation cost

Industry

Mean hourly compensation cost

In U.S. dollars

As a percent of 

the mean hourly 

compensation 

cost in all of 

manufacturing

In U.S. dollars

As a percent of 

the mean hourly 

compensation 

cost in all of 

manufacturing

Highest ranked industries

United States Motor vehicles and parts.......... 9.69 155 Motor vehicles and parts........ 19.99 155

Transportation equipment ...... 8.78 141 Transportation equipment .... 18.73 146

Primary metals.............................. 8.52 137 Aerospace products and parts 17.51 136

Japan Primary metals.............................. 4.53 154 Chemicals..................................... 9.62 154

Chemicals....................................... 4.08 138 Primary metals............................ 9.47 152

Transportation equipment ...... 3.74 127 Transportation equipment .... 8.25 132

Germany Motor vehicles and parts.......... 6.18 117 Aerospace products and parts 9.74 122

Aerospace products and parts 6.05 115 Motor vehicles and parts........ 9.48 119

Transportation equipment ...... 5.99 113 Transportation equipment .... 9.43 118

Lowest ranked industries

United States Textiles and textile products... 4.23 68 Textiles and textile products 8.75 68

Leather and allied products..... 4.13 66 Leather and allied products... 8.07 63

Apparel............................................ 3.67 59 Apparel.......................................... 7.04 55

Japan Wood................................................ 2.21 75 Textiles and textile products 4.65 75

Textiles and textile products... 2.12 72 Leather and allied products... 4.61 74

Apparel............................................ 1.57 53 Apparel.......................................... 3.27 52

Germany Textiles and textile products... 3.88 73 Textiles and textile products 5.88 74

Apparel............................................ 3.71 70 Leather and allied products... 5.61 70

Leather and allied products..... 3.67 69 Apparel.......................................... 5.23 66

1995 2007

Highest ranked industries

United States Motor vehicles and parts.......... 26.97 155 Aerospace products and parts 42.98 170

Aerospace products and parts 26.07 150 Transportation equipment .... 34.86 138

Transportation equipment ...... 25.72 148 Motor vehicles and parts........ 33.23 131

Japan Chemicals....................................... 35.51 152 Chemicals..................................... 29.15 148

Primary metals.............................. 33.04 142 Primary metals............................ 28.84 146

Transportation equipment ...... 29.80 128 Transportation equipment .... 24.95 126

Germany Motor vehicles and parts.......... 33.09 126 Motor vehicles and parts........ 42.75 129

Transportation equipment ...... 32.27 123 Transportation equipment .... 41.93 126

Aerospace products and parts 31.51 120 Primary metals............................ 36.78 111

Lowest ranked industries

United States Textiles and textile products... 12.74 73 Textiles and textile products 18.58 74

Leather and allied products..... 11.72 67 Leather and allied products... 17.55 69

Apparel............................................ 9.62 55 Apparel.......................................... 15.29 61

Japan Textiles............................................. 18.39 79 Food, beverages, tobacco....... 14.91 75

Leather and allied products...... 16.70 72 Leather and allied products.... 14.26 72

Apparel............................................ 12.02 51 Apparel........................................... 10.33 52

Germany Textiles and textile products... 19.48 74 Textiles and textile products 24.27 73

Leather and allied products..... 17.23 66 Apparel.......................................... 22.46 68

Apparel............................................ 17.19 65 Leather and allied products... 22.25 67

SOURCE: Authors' calculations made by use of"InternationalHourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry,

1992-2007," on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm; and 

by use of "Hourly Compensation Costs for Production Workers in Manufacturing (SIC Basis), 30 Countries or Areas, 40 Manufacturing Industries, Selected Years, 1975-2002," on the Internet at www.bls.gov/ilc/flshcindsic.htm.
International Compensation Costs

42  Monthly Labor Review • June 2010

classified as medium–low since the early 2000s. Wood 

products, and furniture and related products also saw 

similar movements across compensation cost groupings. 

Between 1975 and 2007, the compensation cost category 

changed in 5 of 10 countries for wood and in 5 of 7 for 

furniture.

Germany and Sweden had the fewest occurrences of industries switching from one compensation cost category 

to another, while South Korea, Taiwan, and France had 

the most. Put another way, relative compensation costs 

across industries were most stable in Germany and Sweden and least stable in South Korea, Taiwan, and France 

during the period from 1975 to 2007. For South Korea 

and Taiwan, shifts across compensation cost categories occurred for many industries during the period. For 

France, movements of industries across these categories 

during the early 2000s indicate a trend of industries returning to the relative positions seen in the 1980s and 

1990s. Industry shifts in the United Kingdom also show a 

return to the distribution of compensation costs of earlier 

years, although not to the same degree as in France. In 

Canada, Italy, and Japan, changes in the industries’ relative 

compensation costs occurred primarily during the 1990s; 

industry positions have been relatively steady since. Most 

industry movements in Mexico occurred during the late 

1990s and early 2000s, with few changes in the most recent years. Finally, the U.S. distribution of compensation 

costs remained largely stable throughout the 1980s and 

1990s, although the industries of nonmetallic mineral 

products and primary metals did change categories. 

For all countries taken together, however, there were not 

many industry movements across compensation cost categories. Therefore, the 2007 groupings shown in exhibit 2 

give a general characterization of the industrial spectrum 

of manufacturing labor costs since 1975 for a majority of 

the countries. The categorization of industries in exhibit 2 

is especially close to the historical (1975–2007) categorization of industries in the United States, Canada, France, 

and the United Kingdom. The classification of industries 

by compensation costs as low, medium–low, medium–

high, and high highlights not only the variety of labor 

costs within manufacturing, but also the stability of relative compensation costs in manufacturing over time: the 

industries with the very highest and lowest compensation 

costs have tended to be the same across countries and to 

remain in these positions across the period studied.

Range and dispersion of compensation costs

Despite the aforementioned stability across countries of 

industry rankings based on compensation costs, the overall range and dispersion of industries’ labor costs can vary 

substantially from one country to another. The range of 

labor costs refers to the distance between the highest and 

lowest ranked industry compensation cost values, whereas 

dispersion—measured in this article by use of standard 

deviation—refers to the degree to which industry compensation costs are clustered about the mean for all manufacturing. Both the range and the dispersion of compensation costs provide additional insight into the distribution of labor costs across countries, and these topics are 

examined in the following sections.

Ranges of labor costs. One way to depict an intracountry 

Exhibit 2. Industries within manufacturing grouped by their mean hourly compensation costs for production workers, 2007

 

Low Medium–low Medium–high High

313–314 Textiles and textile products

(6/10)

311–312 Food, beverages, and

tobacco (10/11)1

322 Paper (5/11) 325 Chemicals (7/11)1

315 Apparel (8/10)1 326 Plastics and rubber products

(10/10

327 Nonmetallic mineral products 

(7/11

331 Primary metals (6/11)1

316 Leather allied products (6/10) 332 Fabricated metal products

(10/11)1

333 Machinery (9/11)1 336 Transportation equipment

(6/11

321 Wood products (6/10) 335 Electrical equipment, appliances, and components (6/10)1334 Computers and electronic

products (5/6)

3361–3363 Motor vehicles

and parts (6/

337 Furniture and related products

(4/

3364 Aerospace products and

parts (5/6

All-manufacturing average

1 In the majority of countries, this industry has remained in this compensation group for over 30 years.

NOTE: The fraction given for each industry is the ratio of the number

of countries for which the industry falls into the category in question to

the total number of countries for which data for that industry are available.

SOURCE: Authors' calculations made by use of "International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry,

1992-2007," on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm.
Monthly Labor Review • June 2010  43

China and India have emerged as important forces in the 

global market. In 2006, China replaced Mexico as the United 

States’ second-largest trading partner, behind Canada.1 In 

2009, India garnered a spot on the list of the top 15 U.S. 

trading partners, and it climbed from the 14th position to 

the 11th by April 2010.2 Acknowledging the importance 

of China and India, BLS has developed estimates of hourly 

compensation costs for workers in the Chinese3 and Indian4

manufacturing sectors. Published compensation costs for 

China and India, however, are not directly comparable with 

data for other countries covered by BLS and, therefore, are 

presented apart from the BLS all-manufacturing series. 

 Although this limitation precludes coverage of China and 

India in the multicountry analysis of this article, estimates 

of average earnings in industries within manufacturing are 

available from the Chinese and Indian statistical agencies. 

These estimates facilitate analysis of trends in the range 

and dispersion of earnings and compensation costs in each 

country. Industry earnings data for China are published by 

China’s National Bureau of Statistics.5 Unlike the BLS compensation measures presented for other countries in this article, industry earnings data from Chinese publications refer 

only to urban manufacturing units6 and do not include required employer social insurance payments or other nonwage 

labor costs. It should be noted that workers in industries with 

high earnings may receive social insurance and other nonwage payments that are disproportionately large in relation 

to their earnings, such that the dispersion of earnings could 

understate the dispersion of employers’ compensation costs. 

As for India, industry data on workers’ wages and social insurance benefits are available from the country’s Central Statistics Office.7

 The data refer to India’s organized (or formal) 

manufacturing sector only, rather than to the whole manufacturing sector,8

 and include contract workers, who typically 

are not included in BLS estimates and who generally receive 

less compensation.9

Although these challenges and others limit the ability to 

compare manufacturing compensation costs in China with 

those costs in India—and the ability to compare China and 

India with other countries in the BLS series—the data nonetheless reveal trends in the range and dispersion of earnings 

and compensation costs in these countries. National Bureau 

of Statistics data indicate that both the range and dispersion 

of Chinese manufacturing earnings declined between 2002 

and 2006. During this timespan, the dispersion of Chinese 

earnings across the spectrum of manufacturing industries 

was roughly comparable to the dispersion of compensation 

costs in the United States and Canada. Compared with compensation costs in other economies in Asia, Chinese earnings 

were more compressed than compensation costs in Japan but 

more dispersed than those in South Korea and Taiwan. For 

India, hourly compensation costs estimates were constructed 

for 1999–2005 with data primarily from the Central Statistics Office. Similar to the general trend seen in the United 

States, in India the range between the industry with the 

highest compensation costs and that with the lowest was 

larger in 2005 than in 1999, whereas dispersion decreased 

overall during that period. The overall increase in the range 

of compensation costs was driven primarily by the aerospace 

products and parts industry, in which the mean hourly compensation cost increased (nominally) by 61 percent, from 

$1.69 in 1999 to $2.72 in 2005. By contrast, the mean hourly 

compensation cost in wood product manufacturing, the industry with the lowest compensation costs throughout most 

of the 1999–2005 period, increased (nominally) by 26 percent, from $0.31 to $0.39. During this same timeframe, the 

dispersion of compensation costs in India decreased overall 

and was most comparable to, but generally greater than, that 

in Mexico. Although compensation costs in China and India 

cannot be directly compared because of certain data limitations,10 both the range and dispersion of compensation costs 

in India are substantially greater than those in China. For 

additional information, see Monthly Labor Review articles on 

compensation costs in China and India.11

Notes

1 For trade in goods only. See “Top Trading Partners - Total Trade, Exports, Imports, Year-to-Date December 2005” (U.S. Census Bureau, Foreign Trade Statistics), on the Internet at www.census.gov/foreign-trade/

statistics/highlights/top/top0512.html (visited June 21, 2010) and “Top 

Trading Partners - Total Trade, Exports, Imports, Year-to-Date December 

2006” (U.S. Census Bureau, Foreign Trade Statistics), on the Internet at 

www.census.gov/foreign-trade/statistics/highlights/top/top0612.html

(visited June 21, 2010). 

2 For trade in goods only. See “Top Trading Partners - Total Trade, Exports, Imports, Year-to-Date December 2009” (U.S. Census Bureau, Foreign Trade Statistics), on the Internet at www.census.gov/foreign-trade/

statistics/highlights/top/top0912yr.html (visited June 21, 2010) and “Top 

Trading Partners - Total Trade, Exports, Imports, For month of April 2010” 

(U.S. Census Bureau, Foreign Trade Statistics), on the Internet at 

www.census.gov/foreign-trade/statistics/highlights/top/top1004cm.

html (visited June 21, 2010).

3 International Comparisons of Hourly Compensation Costs in Manufacturing, 2007, USDL 09-0304 (Bureau of Labor Statistics), Mar. 26, 2009, on 

the Internet at www.bls.gov/news.release/pdf/ichcc.pdf (visited June 3, 

2010). See the box titled “Compensation Costs for China” on page 6.

4 Jessica R. Sincavage, “Labor costs in India’s organized manufacturing 

sector,” Monthly Labor Review, May 2010, pp. 3–22, on the Internet at www.

bls.gov/opub/mlr/2010/05/art1full.pdf (visited June 21, 2010).

What about China and India?
International Compensation Costs

44  Monthly Labor Review • June 2010

range of manufacturing labor costs is to calculate the ratio of the mean hourly compensation cost in the highest 

ranked industry to that in the lowest ranked industry. (See 

table 4.)26 In the United States, for example, the ratio of 

the highest ranked to lowest ranked industry ranged from 

2.6 to 3.0 for the years between 1975 and 2007 for which 

data are displayed in table 4. In the most extreme case 

for the United States (1980), firms in the motor vehicle 

and parts industry experienced 3.0 times the labor costs 

of firms in the apparel industry. In table 4, countries are 

placed in descending order according to the 2007 ratio 

of compensation costs in the highest ranked industry to 

those in the lowest ranked industry. There is a clear break 

between the European countries in the bottom portion 

of the table with high-to-low ratios frequently under 2.0 

and the North American and Asian economies with ratios well above this level. In 2007, for example, Mexican 

chemical manufacturers experienced 3.2 times the labor 

costs of Mexican employers in the wood products industry, whereas the compensation costs of Swedish chemical manufacturers were only 1.3 times the labor costs of 

Swedish firms in the apparel, textiles, and leather27 industry. For select periods in Mexico, Japan, the United States, 

and Taiwan, firms in the highest ranked industry spent 

nearly 3 times or above 3 times the amount on compensation as firms in the lowest ranked industry. In contrast, for 

all European countries in this study, the highest ranked 

industry had compensation costs of less than twice as 

much as the lowest ranked industry for most years. 

The relative distance between the industries with the 

highest compensation costs and those with the lowest 

compensation costs suggested by these ratios is further illustrated in chart 2. The range of compensation costs for 

each country in this study is shown for the years 1975, 

1980, 1985, 1990, 1995, 2000, and 2007. (Data for Canada and Mexico are shown beginning in 1985.)28 For each 

economy, average compensation costs for manufacturing 

as a whole are based to 100. Bold diamond markings denote the highest ranked industry in each country for a 

particular year, and bold circular markings represent the 

lowest ranked industry, with each notch along the connecting line representing an industry lying between the 

two extremes. Countries are ordered from left to right on 

the basis of the average difference between the industry 

with the lowest mean compensation cost and that with 

the highest during the period from 1975 to 2007. Thus, 

on average between 1975 and 2007, Taiwan exhibited the 

largest spread between the highest and lowest compensated industry, and Sweden had the smallest.

The chart demonstrates clearly that the overall range of 

labor costs in manufacturing varied greatly both within 

and across countries over time. For the European economies especially, the spread between the industry with the 

highest compensation costs and that with the lowest compensation costs was relatively small and stable. For others—such as Taiwan and Mexico, and to a lesser extent the 

5 China Labor Statistical Yearbook, Beijing, China Statistics Press. Figures 

for 2002 are reproduced in Judith Banister, “Manufacturing earnings and 

compensation in China,” Monthly Labor Review, August 2005, pp. 22–40, on 

the Internet at www.bls.gov/opub/mlr/2005/08/art3full.pdf (visited June 

8, 2010); see table 2 on p. 26.

6 In 2008, urban manufacturing employment constituted 35 percent of 

total manufacturing employment in China. Manufacturing activities are 

thus concentrated in rural areas where the average all-manufacturing hourly compensation cost is approximately one-third of that in urban centers. 

Earnings data for industries within rural manufacturing are currently not 

available, but the distinction between urban and rural manufacturing likely 

does not substantially affect conclusions about the range and dispersion of 

earnings in China.

7 Data are from the Central Statistics Office’s Annual Survey of Industries; some of the data are available on the Internet at http://mospi.nic.in/

mospi_asi.htm (visited June 21, 2010).

8 BLS hourly compensation costs for workers in Indian manufacturing 

refer to the organized (or formal) manufacturing sector only. Wage and benefit data on workers in the unorganized (or informal) manufacturing sector 

are not readily accessible. Unorganized-manufacturing workers account for 

approximately 80 percent of total manufacturing employment in India and 

earn substantially less than their organized-sector counterparts. For this reason, employers’ average compensation costs for workers in organized manufacturing overstate average compensation costs for all Indian manufacturing 

workers, that is, those in the organized sector taken together with those in 

the unorganized sector. For further information on the procedures for estimating hourly compensation costs for India, and the associated data limitations, see Sincavage, “Labor costs in India’s organized manufacturing sector.”

9 Typically, contract workers are excluded from BLS estimates of hourly compensation costs, but for India, contract workers are included in the 

compensation costs series because their wages are reported together with 

the earnings of other workers and cannot be separated. Because contract 

workers are included and because they receive fewer benefits than regular 

employees, hourly compensation costs for Indian manufacturing workers are 

likely lower than they otherwise would be. For further information on contract labor in India, see Sincavage, “Labor costs in India’s organized manufacturing sector.”

10 For a discussion of the limitations associated with comparing compensation costs for China and India, see Sincavage, “Labor costs in India’s organized manufacturing sector.”

11 For the most recent BLS work on China, see Erin Lett and Judith 

Banister, “China’s manufacturing employment and compensation costs: 

2002–06,” Monthly Labor Review, April 2009, pp. 30–38, on the Internet 

at www.bls.gov/opub/mlr/2009/04/art3full.pdf (visited June 8, 2010). For 

the most recent BLS work on India, see Sincavage, “Labor costs in India’s 

organized manufacturing sector.”

Continued—What about China and India?
Monthly Labor Review • June 2010  45

United States and South Korea—the range of manufacturing labor costs was typically wider and contracted and 

expanded over time. Compared with these economies, the 

ranges of compensation costs in Japan and Canada were 

much less variable, although not as compressed as labor 

costs in Europe.

Despite these differences, some general trends in the 

range of labor costs are evident across economies. In 

Taiwan, Mexico, the United States, Canada, the United 

Kingdom, Germany, Italy, and France, the range of labor 

costs generally has widened over time; for these economies, the vertical distance between the highest and lowest 

compensated industry was larger in 2007 than in 1975.29

Only in Japan, South Korea, and Sweden was the range of 

labor costs more compressed in 2007 than 32 years before. 

In most of the countries studied, fluctuations in the range 

of compensation costs were driven by movements in the 

highest ranked industries; the lower end of the spectrum 

of manufacturing compensation costs remained relatively 

stable over time, though there were some exceptions.

Dispersion of labor costs. Examining the notches along 

the connecting lines in chart 2 reveals differences among 

economies in the dispersion of compensation costs among 

industries. In Europe, and especially in Sweden, labor costs 

in the manufacturing industries covered in this study were 

closely clustered around the all-manufacturing average 

(100). For other economies, such as those of Taiwan and 

Mexico, compensation costs were very high in just a few 

industries—yielding a wide range of labor costs—while 

compensation costs in the remaining industries were relatively close to the manufacturing average. The dispersion 

of compensation costs in manufacturing thus varies across 

countries as well as over time.

To measure the dispersion of labor costs, this study uses 

the standard deviation of industries’ compensation costs 

as determined by the variation of those costs from the 

manufacturing-sector average. In general, when industries’ compensation costs are clustered tightly together, 

differentials are small and the standard deviation is small. 

Conversely, when industries’ compensation costs are 

spread apart, the standard deviation is large. Chart 3 presents standard deviations as percentages of the all-manufacturing average (set at 100)30 for each country and year 

from 1975 to 2007. In this chart, upward movements of 

a country’s bars signify increases in that country’s dispersion of labor costs, whereas downward movements denote 

a decrease. 

Some trends in the dispersion of compensation costs are 

evident across countries. Dispersion generally increased 

between 1975 and 2007 in Mexico, Canada, Germany, the 

United Kingdom, and Sweden. Of these countries, Mexico exhibited the largest overall rise in dispersion, whereas 

in the other four countries dispersion reached its highest 

level during the mid-to-late 2000s. Conversely, in South 

Korea, the United States, Taiwan, and Italy, compensation cost differentials among industries on the whole decreased from 1975 to 2007. In both South Korea and Taiwan, dispersion levels were highest during the mid-1970s 

and declined overall in subsequent years. Only in Japan 

and in France were dispersion levels in 2007 relatively 

comparable to those seen over 30 years earlier. 

All economies, however, experienced shorter term fluctuations in the dispersion of compensation costs throughout the period studied. In the United States, the standard 

deviation peaked during the early 1980s and mid-1990s 

Table 4. Ratio of the mean hourly compensation cost in the industry within the manufacturing sector with the highest compen-

 sation costs to that with the lowest compensation costs, production workers, by country, selected years, 1975–2007

Country 1975 1980 1985 1990 1995 2000 2007

Mexico.............................................................. — — 2.1 2.7 3.1 3.5 3.2

Japan................................................................. 2.9 2.8 2.9 3.1 3.0 2.7 2.8

United States.................................................. 2.6 3.0 2.8 2.8 2.8 2.6 2.8

Canada.............................................................. — — 2.3 2.4 2.6 2.4 2.8

Taiwan............................................................... 2.3 2.3 3.3 3.5 3.0 2.8 2.5

South Korea..................................................... 2.3 2.2 2.3 2.4 2.2 2.8 2.1

United Kingdom............................................ 1.8 1.7 1.8 1.9 1.9 1.9 2.1

Germany............................................................ 1.7 1.7 1.9 1.9 1.9 2.0 1.9

France................................................................. 1.7 1.7 1.6 1.6 1.6 1.7 1.8

Italy...................................................................... 1.7 1.6 1.6 1.7 2.0 1.9 1.7

Sweden.............................................................. 1.4 1.3 1.3 1.3 1.4 1.4 1.3

NOTE: Dashes indicate data not available.

SOURCE: Authors' calculations made by use of"International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry,

1992-2007," on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm; and 

by use of "Hourly Compensation Costs for Production Workers in Manufacturing (SIC Basis), 30 Countries or Areas, 40 Manufacturing Industries, Selected Years, 1975-2002," on the Internet at www.bls.gov/ilc/flshcindsic.htm.
International Compensation Costs

46  Monthly Labor Review • June 2010

 Chart 2. Range and dispersion of mean hourly compensation costs across manufacturing industries, by 

country, selected years

All manufacturing = 100

300

250

200

150

100

50

0

North America and Asia All manufacturing = 100

300

250

200

150

100

50

0

All manufacturing = 100 United States and Europe All manufacturing = 100

300

250

200

150

100

50

0

300

250

200

150

100

50

0

19751980198519901995200020071985199019952000200719751980198519901995200020071975198019851990199520002007197519801985199019952000200719851990199520002007

197519801985199019952000200719751980198519901995200020071975198019851990199520002007197519801985199019952000200719751980198519901995200020071975198019851990199520002007

Taiwan

Mexico

United 

States Japan

South

Korea

Canada

United 

States United 

Kingdom Germany Italy France Sweden

NOTE: Data are represented by notches along the linesin the chart.Thus, each notch represents one industry statistic (or multiple, overlapping statistics) forthe economy in question.The U.S. Government does notrecognizeTaiwan as a country, butTaiwan isstillregarded as an economy in this article.

SOURCE: Authors’ calculations made by use of“International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing

Industry, 1992-2007,”on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm; and by use of“Hourly Compensation Costs for Production

Workers in Manufacturing (SIC Basis), 30 Countries or Areas, 40 Manufacturing Industries, Selected Years, 1975-2002,”on the Internet at

www.bls.gov/ilc/flshcindsic.htm.
Monthly Labor Review • June 2010  47

Chart 3. Dispersion of mean hourly compensation costs for production workers in manufacturing,

 selected years

Standard deviation as a

percent of the allmanufacturing average

Standard deviation as a

percent of the allmanufacturing average

Standard deviation as a

percent of the allmanufacturing average

Standard deviation as a

percent of the allmanufacturing average

North America and Asia

0

5

10

15

20

25

30

35

40

0

5

10

15

20

25

30

35

40

Mexico Japan South Korea Canada United States Taiwan

Standard deviation as a 

percent of all manufacturing 

average

Chart 3. Trend in the dispersion of hourly compensation costs for production workers in manufacturing, 1975-2007

North America and Asia

Standard deviation as a 

percent of all manufacturing 

average

40

35

30

25

20

15

10

5

0

40

35

30

25

20

15

10

5

0

1985–2007 1975–2007 

Mexico

Japan South Korea

Canada United States

Taiwan

United States and Europe

40

35

30

25

20

15

10

5

0

40

35

30

25

20

15

10

5

0

United States

Germany United Kingdom

Italy

France

Sweden

1975–2007 1975–2007 

SOURCE: Authors’calculations made by use of“International Hourly Compensation Costsfor Production Workers, by Sub-Manufacturing Industry, 1992-2007,”

on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm; and by use of“Hourly Compensation Costs for Production Workers in Manufacturing (SIC Basis), 30

Countries or Areas, 40 Manufacturing Industries, SelectedYears, 1975-2002,”on the Internet at www.bls.gov/ilc/flshcindsic.htm.
International Compensation Costs

48  Monthly Labor Review • June 2010

and reached lows during the late 1980s and late 1990s. 

In 2007, the United States exhibited the lowest dispersion in manufacturing compensation costs of the whole 

1975–2007 period. As can be seen in chart 2, the volatility 

with regard to labor cost dispersion in the United States 

can be attributed mostly to changes in the higher cost 

industries—because lower cost industries have remained 

more stable over time relative to the all-manufacturing 

average. For example, the peak in dispersion in the early 

1980s was due primarily to a significant rise in primary 

metal manufacturing labor costs relative to the all-manufacturing average, and the low seen in 2007 was due to 

the overall effect of relatively lower compensation costs in 

paper, chemical, primary metal, and transportation equipment manufacturing—all industries with medium–high 

or high compensation costs in the United States in 2007. 

Thus, despite an overall increase in the range of labor costs 

during the 1975–2007 period (as shown in chart 2), the 

dispersion of U.S. manufacturing compensation costs in 

the new millennium was at levels lower than those in the 

1970s. That is, while the highest and lowest compensated 

industries in the United States generally spread further 

apart over time, labor costs in other manufacturing industries came closer together such that the overall degree of 

dispersion in recent years reached historic lows. As seen in 

charts 2 and 3, a similar phenomenon occurred in Taiwan: 

the range between the industry with the highest compensation costs and that with the lowest was larger in 2007 

than in 1975, whereas dispersion decreased overall during that period. The opposite trend occurred in Sweden, 

where the range of labor costs decreased overall between 

1975 and 2007 while the dispersion of compensation 

costs on the whole increased.

As seen in chart 3, dispersion levels and trends in Europe largely differed from those in North America and 

Asia. Overall, manufacturing labor cost differentials in 

Table 5. Mean hourly compensation costs for production workers in industries within manufacturing, in U.S. dollars, 2007

NAICS

code(s) Industry United

States Canada Mexico Japan South 

Korea Taiwan France Germany Italy Sweden United Kingdom

31–33 (All) Manufacturing......... 25.27 29.08 2.92 19.75 16.02 6.58 28.57 33.26 28.23 36.03 30.18

311–312 Food, beverages, and

tobacco............................. 20.31 24.12 2.40 14.91 13.91 6.21 25.86 27.23 29.10 32.75 27.65

313–314 Textiles and textile

products........................... 18.58 19.54 2.58 16.52 10.51 5.51 23.00 24.27 26.46 — 24.48

315 Apparel................................ 15.29 15.17 1.88 10.33 10.98 5.16 22.31 22.46 21.76 — 21.94

316 Leather and allied 

products............................. 17.55 15.16 2.09 14.26 12.80 5.60 25.44 22.25 23.03 — 22.42

321 Wood products.................. 19.20 27.16 1.85 15.59 12.61 4.97 24.22 26.18 — 32.57 21.36

322 Paper...................................... 27.50 33.87 2.61 19.92 14.62 5.95 31.13 32.03 29.84 41.17 27.75

325 Chemicals............................ 29.21 30.54 5.84 29.15 21.43 9.49 34.28 34.64 38.02 41.28 33.51

326 Plastics and rubber

products............................ 22.59 — 2.68 19.10 13.45 5.42 27.61 28.02 25.34 33.42 28.40

327 Nonmetallic mineral

products............................ 24.33 30.99 3.14 19.83 16.38 6.15 30.03 28.93 28.62 35.09 31.11

331 Primary metals.................. 28.92 41.74 4.25 28.84 20.16 9.75 34.24 36.78 30.81 39.78 30.53

332 Fabricated metal

products............................ 23.74 27.85 2.67 18.15 12.78 5.34 27.67 29.55 28.85 32.41 28.19

333 Machinery............................ 26.10 32.21 3.38 22.89 16.20 6.42 30.31 34.82 30.02 34.81 31.82

334 Computer and electronic products............. 30.60 — 3.35 — 15.79 6.91 28.92 — — — 30.35

335 Electrical equipment,

appliances, and

components..................... 23.80 29.78 3.50 21.70 12.94 6.14 28.91 32.48 25.75 — 27.09

336 Transportation

equipment........................ 34.86 38.42 3.95 24.95 22.54 7.23 34.28 41.93 29.46 38.48 38.68

3361–3363 Motor vehicles and

parts.................................... 33.23 40.38 3.95 — 21.10 7.48 32.89 42.75 28.78 — 35.79

3364 Aerospace products and

parts.................................... 42.98 36.64 4.82 — — 11.82 40.50 — — — 44.

337 Furniture and related

products............................. 20.90 20.44 2.14 15.06 — 4.77 24.23 — — — 23.72

NOTE: Dashes indicate data not available. by Sub-Manufacturing Industry, 1992-2007," on the Internet at www.bls.gov/

SOURCE: “International Hourly Compensation Costsfor ProductionWorkers, ilc/flshcpwindnaics.htm.
Monthly Labor Review • June 2010  49

Germany, the United Kingdom, Italy, France, and Sweden were lower and more stable than cost differentials in 

the North American and Asian economies. Germany displayed the overall highest degree of dispersion among the 

European economies in chart 3, and Sweden showed the 

lowest both among this group of countries and overall. 

For both Germany and Sweden, the overall rise in dispersion was mostly smooth and continuous throughout the 

period. Increasing labor costs (relative to labor costs in the 

national manufacturing sector) in transportation equipment manufacturing in Germany and in chemical product 

manufacturing in Sweden were the main contributors to 

this upward trend. Italy and the United Kingdom experienced the most variability in compensation cost differentials among the European countries. In Italy, the sharp 

rise in dispersion during the late 1990s was largely the 

result of labor cost increases in chemical manufacturing.

In South Korea and Taiwan, the degree of dispersion 

among industries was much more volatile than in any 

European country. In South Korea, for example, dispersion reached a low in 1997, then peaked only 3 years later. 

Sudden relative decreases and increases in primary metal 

and chemical manufacturing labor costs played a key role 

in this trend. Similarly, because of relatively increasing 

compensation costs in chemicals, differentials in Mexican 

manufacturing grew substantially throughout the 1980s 

and 1990s, reaching the highest levels of dispersion exhibited by any country in this study. For both Mexico and 

South Korea, however, high volatility was driven primarily by the Mexican peso crisis of the mid-1990s and the 

Asian financial crisis of the late 1990s.

Unlike industry rankings and groupings, which tend 

to be similar from one country to another, trends in the 

dispersion of compensation costs vary substantially across 

countries. The foreign economies studied here also differ 

in the degree to which the distributions of their compensation costs among industries are comparable to that of 

the United States, and these comparisons are the topic of 

the following section.

The industry–sector relationship

This article has discussed the intracountry relationships 

between manufacturing industries’ compensation costs 

and the all-manufacturing average. It has also touched 

on the relationships between foreign manufacturing labor costs and U.S. manufacturing labor costs. Connecting 

all these relationships provides some clues as to whether 

the domestic positioning of industries in other countries 

is similar or dissimilar to that in the United States. Ultimately, structural similarities and dissimilarities can be 

identified and measured by addressing two basic questions. 

First, in regard to hourly compensation costs, to what 

degree are the relationships between foreign manufacturing sectors and the U.S. sector indicative of the relationships between foreign manufacturing industries and the 

corresponding U.S. industries? For example, if all-manufacturing hourly compensation costs in Germany were 32 

percent greater than those in the United States in 2007, 

does that mean that labor costs in each of Germany’s 

manufacturing industries were around 32 percent greater 

than their U.S. counterparts? This can be determined by 

dividing the 2007 compensation cost levels for each foreign industry listed in table 5 by the corresponding industry in the United States. The resulting ratios are displayed 

in table 6, which shows how labor costs in foreign manufacturing industries compared with those in the same industries in the United States in 2007.

Second, to what extent is the industry-to-sector compensation cost relationship in other countries consistent 

with that of the United States? For example, if compensation costs in the U.S. chemicals industry were approximately 16 percent greater than the all-manufacturing 

average in 2007, was the corresponding ratio roughly 

equivalent in the other countries covered? Table 7 shows 

the compensation cost levels for each industry listed in 

table 5 divided by the all-manufacturing average in the 

country in question. 

The degree of structural similarity with U.S. manufacturing across the countries covered can be gauged by dividing the foreign ratios from table 7 by the corresponding ratios in the United States. The resulting values are 

listed in table 8, which measures the magnitude of difference between foreign industry–sector relationships and 

the U.S. industry–sector relationship.31 

For each datum, a value above 1.0 signifies that the ratio 

of the mean compensation cost in a particular industry to 

the all-manufacturing average is higher in the country in 

question than it is in the United States. A value below 1.0 

means that the industry–sector compensation cost ratio is 

lower in the country in question than in the United States. 

A value close to 1.0 indicates a relationship between an 

industry and the manufacturing sector as a whole that is 

similar to the corresponding relationship in United States, 

whereas a value further away from 1.0 indicates relative 

positioning dissimilar to that of the United States. 

Most of the ratios in table 8 cluster around the 1.0 

benchmark in Germany, the United Kingdom, and South 

Korea, indicating that industries’ labor costs relative to 
International Compensation Costs

50  Monthly Labor Review • June 2010

Table 6. Mean hourly compensation costs for production workers in industries within manufacturing, measured in U.S. dollars

 and indexed to the corresponding mean cost in the United States, 2007

NAICS 

code(s) Industry United

States Canada Mexico Japan

South

Korea

Taiwan France Germany Italy Sweden United 

Kingdom

31–33 (All) Manufacturing................. 1.00 1.15 0.12 0.78 0.63 0.26 1.13 1.32 1.12 1.43 1.19

311–312 Food, beverages, and

tobacco..................................... 1.00 1.19 .12 .73 .68 .31 1.27 1.34 1.43 1.61 1.36

313–314 Textiles and textile

products.................................. 1.00 1.05 .14 .89 .57 .30 1.24 1.31 1.42 — 1.32

315 Apparel........................................ 1.00 .99 .12 .68 .72 .34 1.46 1.47 1.42 — 1.43

316 Leather and allied 

products................................... 1.00 .86 .12 .81 .73 .32 1.45 1.27 1.31 — 1.28

321 Wood products........................ 1.00 1.41 .10 .81 .66 .26 1.26 1.36 — 1.70 1.11

322 Paper............................................ 1.00 1.23 .09 .72 .53 .22 1.13 1.16 1.09 1.50 1.01

325 Chemicals................................... 1.00 1.05 .20 1.00 .73 .32 1.17 1.19 1.30 1.41 1.15

326 Plastics and rubber

products................................... 1.00 — .12 .85 .60 .24 1.22 1.24 1.12 1.48 1.26

327 Nonmetallic mineral

products................................... 1.00 1.27 .13 .82 .67 .25 1.23 1.19 1.18 1.44 1.28

331 Primary metals 1.00 1.44 .15 1.00 .70 .34 1.18 1.27 1.07 1.38 1.06

332 Fabricated metal products... 1.00 1.17 .11 .76 .54 .22 1.17 1.24 1.22 1.37 1.19

333 Machinery.................................. 1.00 1.23 .13 .88 .62 .25 1.16 1.33 1.15 1.33 1.22

334 Computer and electronic

products................................... 1.00 — .11 — .52 .23 .95 — — — .99

335 Electrical equipment,

appliances, and

components............................. 1.00 1.25 .15 .91 .54 .26 1.21 1.36 1.08 — 1.14

336 Transportation

equipment............................... 1.00 1.10 .11 .72 .65 .21 .98 1.20 .85 1.10 1.11

3361–3363 Motor vehicles and parts...... 1.00 1.22 .12 — .63 .23 .99 1.29 .87 — 1.08

3364 Aerospace products and

parts........................................... 1.00 .85 .11 — — .28 .94 — — — 1.04

337 Furniture and related

products.................................... 1.00 .98 .10 .72 — .23 1.16 — — — 1.13

NOTE: Dashesindicate data not available.

SOURCE: Authors' calculations made by use of "International Hourly CompensationCostsfor ProductionWorkers,by Sub-ManufacturingIndustry, 1992-

2007," on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm.

labor costs in manufacturing as a whole in these countries 

are fairly closely aligned with corresponding data from 

the United States. For example, in Germany only one of 

the industries has a value greater than 1.1 and only one 

has a value less than 0.9. This means that most German 

industries have compensation costs that relate to costs in 

all of German manufacturing similarly to the way that 

U.S. industries’ compensation costs relate to costs in all 

of U.S. manufacturing. Conversely, Mexico, Taiwan, and 

Italy each contain multiple industries with very high and 

low values, which suggests less similarity between these 

countries and the United States as regards the ratio in 

question.

Table 8 also provides some insight as to which foreign 

industries are most and least similar to their counterparts 

in the United States—in terms of how their compensation costs relate to the all-manufacturing average. The 

foreign industry–sector ratios for some industries, including plastics and rubber products, machinery, fabricated metal products, and nonmetallic mineral products, 

are consistently more similar to the corresponding ratios 

in the United States than those ratios are for most industries. This can be seen by the prevalence of values for 

these industries tightly clustered around the 1.0 benchmark in table 8. In contrast, foreign industries relatively 

less similar to their counterparts in the United States in 

this respect include chemicals, apparel, and primary metals, which is indicated by the greater number of relatively 

high and low values across these rows in table 8. 

This analysis suggests that in comparing compensation costs internationally it is important to be aware that 

compensation costs relative to those in the United States 

can show considerable variation in certain countries and 

industries. All manufacturing is an excellent indicator of 

relative costs in manufacturing industries for Germany, 

the United Kingdom, and South Korea, but a poor in-
Monthly Labor Review • June 2010  51

Table 7. Mean hourly compensation costs for production workers in industries within manufacturing, indexed to the mean 

 cost in all manufacturing, 2007

NAICS 

code(s) Industry United 

States Canada Mexico Japan

South

Korea

Taiwan France Germany Italy Sweden United

Kingdom

31–33 (All)Manufacturing................ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

311–312 Food, beverages, and

tobacco.................................. .80 .83 .82 .75 .87 .94 .91 .82 1.03 .91 .92

313–314 Textiles and textile

products................................ .74 .67 .88 .84 .66 .84 .81 .73 .94 — .81

315 Apparel..................................... .61 .52 .64 .52 .69 .78 .78 .68 .77 — .73

316 Leather and allied 

products................................ .69 .52 .72 .72 .80 .85 .89 .67 .82 — .74

321 Wood products..................... .76 .93 .63 .79 .79 .76 .85 .79 — .90 .71

322 Paper......................................... 1.09 1.16 .89 1.01 .91 .90 1.09 .96 1.06 1.14 .92

325 Chemicals............................... 1.16 1.05 2.00 1.48 1.34 1.44 1.20 1.04 1.35 1.15 1.11

326 Plastics and rubber

products............................... .89 — .92 .97 .84 .82 .97 .84 .90 .93 .94

327 Nonmetallic mineral

products............................... .96 1.07 1.08 1.00 1.02 .93 1.05 .87 1.01 .97 1.03

331 Primary metals...................... 1.14 1.44 1.46 1.46 1.26 1.48 1.20 1.11 1.09 1.10 1.01

332 Fabricated metal

products............................... .94 .96 .91 .92 .80 .81 .97 .89 1.02 .90 .93

333 Machinery............................... 1.03 1.11 1.16 1.16 1.01 .98 1.06 1.05 1.06 .97 1.05

334 Computer and electronic

products................................ 1.21 — 1.15 — .99 1.05 1.01 — — — 1.01

335 Electrical equipment,

appliances, and

components........................ .94 1.02 1.20 1.10 .81 .93 1.01 .98 .91 — .90

336 Transportation

equipment.......................... 1.38 1.32 1.35 1.26 1.41 1.10 1.20 1.26 1.04 1.07 1.

3361–3363 Motor vehicles and parts.. 1.31 1.39 1.35 — 1.32 1.14 1.15 1.29 1.02 — 1.19

3364 Aerospace products and

parts....................................... 1.70 1.26 1.65 — — 1.80 1.42 — — — 1.48

337 Furniture and related

products............................... .83 .70 .73 .76 — .72 .85 — — — .79

NOTE: Dashes indicate data not available.

SOURCE: Authors' calculations made by use of "International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry,1992-2007," on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm.

dicator for Mexico, Taiwan, and Italy. Also, it can be assumed that, for some industries, like plastics and rubber, 

the relationship between compensation costs in those 

industries in foreign countries and compensation costs 

in all manufacturing in those countries is similar to the 

corresponding relationship in the United States. However, more caution is necessary when one looks at other 

industries, such as chemicals and apparel.

MEASURED IN U.S. DOLLARS, GROWTH RATES of compensation costs in other countries fluctuated greatly over 

time—due in large part to exchange rate variations—but 

industries exhibited little movement from one category of 

hourly compensation costs to another, and thus, their relative rankings remained fairly stable from 1975 to 2007. 

Put another way, most of the industries within manufacturing with relatively very low compensation costs 

in 1975 still have relatively very low costs today. Some 

of the countries with the lowest compensation costs in 

manufacturing in 1975, however, have seen their relative 

position change significantly over time. These findings 

indicate that, although labor costs within countries have 

changed and the countries’ relative international positions 

have shifted over time, the basic hierarchy of industries 

has remained fairly stable and has not tended to deviate 

much from country to country or from period to period. It 

is difficult, however, to predict future labor cost rankings 

by country with any confidence. The experience of South 

Korea and Mexico demonstrates this: aspects of manufacturing compensation costs have changed dramatically in 

these countries since the 1970s. 

Employers’ compensation costs for production workers 
International Compensation Costs

52  Monthly Labor Review • June 2010

Table 8. Hourly compensation costs for production workers, industry-to-sector relationship in foreign economies relative 

 to the United States, 2007

[Mean cost in each respective country’s manufacturing sector = 1.00, and mean cost in each respective U.S. industry = 1.00]

NAICS 

code(s) Industry United 

States Canada Mexico Japan SouthKorea Taiwan France Germany Italy Sweden UnitedKingdom

31–33 (All) Manufacturing....... 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

311–312 Food, beverages, and

tobacco.............................. 1.00 1.03 1.02 .94 1.08 1.17 1.02 1.02 1.28 1.13 1.14

313–314 Textiles and textile

products.............................. 1.00 .91 1.20 1.14 .89 1.14 .99 .99 1.27 — 1.10

315 Apparel.............................. 1.00 .86 1.06 .86 1.13 1.30 1.12 1.12 1.27 — 1.20

316 Leather and allied .........

products.......................... 1.00 .75 1.03 1.04 1.15 1.23 1.28 .96 1.17 — 1.07

321 Wood products............... 1.00 1.23 .83 1.04 1.04 .99 1.12 1.04 — 1.19 .93

322 Paper................................... 1.00 1.07 .82 .93 .84 .83 1.00 .88 .97 1.05 .84

325 Chemicals......................... 1.00 .91 1.73 1.28 1.16 1.25 1.04 .90 1.17 .99 .96

326 Plastics and rubber

products.......................... 1.00 — 1.03 1.08 .94 .92 1.08 .94 1.00 1.04 1.05

327 Nonmetallic mineral

products......................... 1.00 1.11 1.12 1.04 1.06 .97 1.09 .90 1.05 1.01 1.07

331 Primary metals................ 1.00 1.25 1.27 1.28 1.10 1.29 1.05 .97 .95 .96 .88

332 Fabricated metal

products......................... 1.00 1.02 .97 .98 .85 .86 1.03 .95 1.09 .96 .99

333 Machinery......................... 1.00 1.07 1.12 1.12 .98 .94 1.03 1.01 1.03 .94 1.02

334 Computer and

electronic products.... 1.00 — .95 — .81 .87 .84 — — — .83

335 Electrical equipment,

appliances, and

components.................. 1.00 1.09 1.27 1.17 .86 .99 1.07 1.04 .97 — .95

336 Transportation

equipment.................... 1.00 .96 .98 .92 1.02 .80 .87 .91 .76 .77 .

3361–3363 Motor vehicles and

parts................................. 1.00 1.06 1.03 — 1.00 .86 .88 .98 .78 — .90

3364 Aerospace products

and parts....................... 1.00 .74 .97 — — 1.06 .83 — — — .

337 Furniture and related

products......................... 1.00 .85 .89 .92 — .88 1.03 — — — .95

NOTE: Dashes indicate data not available.

SOURCE: Authors' calculations made by use of "International Hourly Compensation Costs for Production Workers, by Sub-Manufacturing Industry,

1992-2007," on the Internet at www.bls.gov/ilc/flshcpwindnaics.htm.

in manufacturing are only one measure of international 

competitiveness in the global economy, but they serve as 

very useful data. Because the manufacture of goods can 

differ so much from one industry within manufacturing to 

another, focusing the analysis at the industry level helps to 

build a stronger understanding of relative costs and international competitiveness. With increasingly global labor 

markets and interconnected manufacturing operations, 

the task of understanding compensation costs becomes 

both more complex and more important over time. 

Notes

ACKNOWLEDGMENTS: The authors wish to thank Chris Sparks and 

Connie Sorrentino of BLS for their expertise, comments, and support 

throughout several drafts of this article; George Cook of BLS for his 

assistance in maintaining the extensive database and in updating tables 

and charts; and Robert Bednarzik of the Georgetown Public Policy 

Institute, Maury Gittleman and Peter Meyer of BLS, and Bernhard 

Weber of Switzerland’s State Secretariat for Economic Affairs, for 

their helpful comments.

1 See chart 3.6, “Manufacturing output as a percent of world manufacturing output, 2008,” on p. 29 of Charting International Labor Comparisons (Bureau of Labor Statistics, 2010), on the Internet at www.bls.

gov/ilc/chartbook.htm (visited June 3, 2010).

2 About one-fourth of U.S. manufacturing productivity gains are 

due to increased importing of intermediate inputs (that is, increased 

offshoring). See Lucy P. Eldridge and Michael J. Harper, “Effects of 
Monthly Labor Review • June 2010  53

imported intermediate inputs on productivity,” Monthly Labor Review, 

this issue, pp. 3–15. 

3 Recent declines in U.S. manufacturing employment are also the 

result of slowing growth in the demand for manufactured goods in the 

United States, weakened demand for U.S. goods in other countries’ 

markets, and manufacturers’ increasing use of contract or temporary 

workers, among other reasons. For further information, see Factors Underlying the Decline in Manufacturing Employment Since 2000 (Congressional Budget Office, 2008), on the Internet at http://digitalcommons.

ilr.cornell.edu/cgi/viewcontent.cgi?article=1590&context=key_

workplace (visited June 3, 2010). 

4 In addition to employers’ compensation costs, there are other important labor-related indicators of competitiveness, such as labor productivity and unit labor costs. Furthermore, businesses face non-labor 

related costs—such as the costs of materials, fuel, capital equipment, 

and transport of goods—that can be substantial factors in international 

competitiveness. For more information on international competitiveness, including comparisons of labor productivity and trends in unit 

labor costs, see section 3 in Charting International Labor Comparisons. 

5 The analysis in this article follows the North American Industry 

Classification System (NAICS). The United States, Canada, and Mexico report data for manufacturing and other sectors of the economy 

according to NAICS. Information about NAICS, including industry 

definitions and descriptions, is available on the Internet through the 

U.S. Bureau of Labor Statistics and the U.S. Census Bureau at www.

bls.gov/bls/naics.htm and www.census.gov/epcd/www/naics.html, 

respectively. Most of the 18 industries analyzed in this article are NAICS subsectors. The article also analyzes the manufacturing sector as a 

whole. 

6 This article presents compensation cost differentials by industry 

but does not analyze the factors affecting them, though some causal 

factors that have emerged from other studies are mentioned in the literature review.

7 See International Comparisons of Hourly Compensation Costs in 

Manufacturing, 2007, USDL 09-0304 (Bureau of Labor Statistics), 

Mar. 26, 2009, on the Internet at www.bls.gov/news.release/pdf/

ichcc.pdf (visited June 3, 2010). BLS publishes comparative hourly 

compensation cost statistics for all employees and production workers in manufacturing for the United States and 35 foreign economies. 

Hourly compensation cost data are prepared by BLS in order to assess 

international differences in labor costs paid by employers. For several 

reasons, comparisons based on the more readily available average earnings statistics published by many countries can be misleading. For example, national definitions of average earnings differ considerably. In 

addition, average earnings do not include all components of labor compensation costs, and the omitted components of compensation costs 

frequently represent a large proportion of total compensation costs.

8 Production workers generally include those employees who are 

engaged in fabricating, assembly, and related activities; material handling, warehousing, and shipping; maintenance and repair; janitorial 

and guard services; auxiliary production (for example, power plants); or 

other services closely related to the above activities. Working supervisors generally are included; apprentices and other trainees generally 

are excluded.

9 Hourly compensation cost data for production workers by industry 

(within manufacturing) are available on the Internet at www.bls.gov/

ilc/flshcpwindnaics.htm and www.bls.gov/ilc/flshcindsic.htm (both 

visited June 3, 2010). 

10 Hourly compensation cost data for all employees by industry 

(within manufacturing) are available on the Internet at www.bls.gov/

ilc/flshcaeindnaics.htm (visited June 3, 2010).

11 Jelle Visser, “Union membership statistics in 24 countries,” 

Monthly Labor Review, January 2006, pp. 38–49, on the Internet at 

www.bls.gov/opub/mlr/2006/01/art3full.pdf (visited June 3, 2010). 

12 The petroleum and coal products manufacturing industry (NAICS

324) also is classified in the manufacturing sector under NAICS, but 

is not one of the 18 manufacturing industries evaluated in this article. 

This is because data for petroleum and coal are not available for all 

countries and because, in countries that do report data on this industry, 

it is a highly compensated outlier that significantly skews the distribution of industry compensation costs. Thus, removing petroleum and 

coal from consideration allows for a more meaningful and comparative 

analysis of compensation costs across countries.

13 To address differences in industrial classification systems among 

countries, BLS uses published industry definitions to identify the 

specific manufacturing activities classified under a given industry. BLS 

then adjusts source data accordingly in order to construct compensation 

cost estimates for similar manufacturing activities. Also, industry data 

for specific components of labor costs often are not available for all 

years. To address this, BLS estimates missing labor cost components 

by use of data for similar industries or for the manufacturing sector 

as a whole. If source data for a particular industry are derived from a 

small sample size, unusual and unexpected events occurring at large 

companies within the industry can have an extremely large effect on the 

reported data. In some instances this has been addressed by calculating 

a moving average of compensation costs, thereby smoothing out trends 

to reduce the effects of statistical anomalies.

14 For Sweden, the other missing industries are computers and electronic products (NAICS 334); electrical equipment, appliances, and 

components (NAICS 335); and furniture and related products (NAICS 

337). 

15 More formally, hourly compensation costs comprise (1) hourly direct pay, (2) employer social insurance expenditures, and (3) other labor 

taxes. Hourly direct pay is defined as all payments made directly to the 

worker, before payroll deductions of any kind, consisting of (a) pay 

for time worked (basic wages; pay for piecework; overtime premiums; 

shift, holiday, or night work premiums; cost-of-living adjustments; and 

bonuses and premiums paid each pay period) and (b) other direct pay 

(pay for time not worked, comprising vacations, holidays, and other 

leave except sick leave; seasonal and irregular bonuses; allowances for 

family events, commuting expenses, etc.; the cash value of payments 

in kind; and severance pay, in cases in which it is explicitly not linked 

to a collective agreement). Social insurance expenditures refer to the 

value of social contributions incurred by employers in order to secure 

entitlement to social benefits for their employees; these contributions 

often provide delayed (future) income and benefits to employees. Social insurance expenditures comprise employer expenditures for legally 

required insurance programs and for contractual and private benefit 

plans. The category of other labor taxes refers to taxes on payrolls or 

employment (or reductions to reflect subsidies), even if they do not 

finance programs that directly benefit workers. 

16 The rates used are prevailing commercial market exchange rates as 

published by either the U.S. Federal Reserve Board or the International 

Monetary Fund.

17 The compensation cost data published by BLS are not adjusted 

with purchasing power parity exchange-rate calculations because the 
International Compensation Costs

54  Monthly Labor Review • June 2010

measures focus on employer costs, not worker welfare. The hourly compensation cost figures in U.S. dollars analyzed in this article allow for 

comparisons of employers’ labor costs; they do not provide intercountry comparisons of the purchasing power of workers’ incomes. Prices 

of goods and services vary greatly among countries, and the commercial market exchange rates used to compare employers’ labor costs do 

not reliably indicate relative differences in prices. A purchasing power 

parity exchange rate, that is, the number of currency units from one 

country required to buy goods and services equivalent to what can be 

purchased with one unit of currency from another country, must be 

used for meaningful international comparisons of the relative purchasing power of worker incomes. 

18 For example, see Stanley Lebergott, “Wage Structures,” Review 

of Economics and Statistics, November 1947, pp. 274–85. Also see J. 

T. Dunlop and M. Rothbaum, “International Comparisons of Wage 

Structures,” International Labour Review, April 1955, pp. 347–63.

19 Ibid.

20 Alan B. Krueger and Lawrence H. Summers, Reflections on the 

Inter-Industry Wage Structure (Cambridge, Mass., National Bureau of 

Economic Research, June 1986), on the Internet at www.nber.org/papers/W1968.pdf (visited June 3, 2010).

21 Josef Zweimüller and Erling Barth, Bargaining Structure, Wage 

Determination, and Wage Dispersion in 6 OECD-Countries (University 

of California, Berkeley, August 1992), on the Internet at 

http://repositories.cdlib.org/iir/iirwps/iirwps-047-92/ (visited June 

3, 2010). 

22 Maury Gittleman and Edward N. Wolff, “International Comparisons of Inter-Industry Wage Differentials,” Review of Income and 

Wealth, September 1993, pp. 295–312, on the Internet at www.roiw.

org/1993/295.pdf (visited June 3, 2010).

23 Employment in Europe 2003 (Brussels, Belgium, European 

Commission) on the Internet at http://ec.europa.eu/social/main.

jsp?catId=119&langId=en (visited June 3, 2010). 

24 A standard deviation is understood as a measurement of the dispersion of a set of numbers around their arithmetic mean. The standard 

deviation measure used to determine the results in exhibit 2, however, 

is calculated on the basis of the average hourly compensation cost for 

all manufacturing, which is technically a weighted average, not the 

mean of all industries within manufacturing. The difference between 

the weighted average and the mean is negligible. 

25 The exception to this rule is paper manufacturing. As explained in 

greater detail later, in 2007 the industry was classified as medium–low 

in 5 of the 11 economies that reported data for paper, as medium–high 

in another 5 of the 11 economies, and as high in the remaining economy. Because of this one entry in the high category, paper is classified 

as medium–high in table 4 even though the industry was not placed in 

this compensation cost category for a majority of the economies.

26 The analysis of the range—and later on of the dispersion—of 

compensation costs is greatly influenced by the specific set of industries covered for each country. There are gaps in the annual data coverage for certain countries and industries. Despite these exceptions, most 

comparisons are made for an identical set of industries for all countries, 

which allows the the presented compensation cost data to be relevant 

and meaningful. 

27 For Sweden, textiles and textile product mills (NAICS 313–314), 

apparel manufacturing (NAICS 315), and leather and allied products 

manufacturing (NAICS 316) are not reported separately but are combined into textiles, apparel, and leather manufacturing (NAICS 313–

316).

28 For Canada and Mexico, data are shown for the years 1985, 1990, 

1995, 2000, and 2007 only. For these countries, source data on labor 

costs in industries within manufacturing are unavailable for the years 

1975 and 1980.

29 For Mexico, the overall increase in the range of compensation 

costs occurred between 1985 and 2007. Source data on manufacturing 

labor costs for the country are available starting with 1985.

30 Technically, a standard deviation is defined as a measurement of 

the dispersion of a set of numbers around their arithmetic mean. In 

chart 3, however, the standard deviation measure is calculated around 

the all-manufacturing benchmark of 100—which is not an arithmetic 

mean—so it would be more accurately described as a square root of the 

sum of squares around 100. The term “standard deviation” is used as a 

substitute for this mathematical expression and is meant to convey a 

sense of the dispersion of these industry compensation costs. 

31 It is also possible to measure the degree of structural similarity 

between manufacturing in other countries and U.S. manufacturing—

and arrive at the exact same values as those in table 8—by dividing the 

ratios for the industries within manufacturing in table 6 by the corresponding all-manufacturing ratio for each country.