Japan, U.S. Are Leaders at Cutting Labor Costs in 1987

WASHINGTON —  Only Japan among the world’s industrial powers bested the United States in reducing manufacturing labor costs in absolute terms last year, the government said Wednesday.

But measured in devalued U.S. dollars, labor costs in Japan soared 13.5%, compared to a 1.5% decline in the United States, which had lower hourly increases in wages and benefits than any of its nine largest industrial competitors, the Labor Department said.

“Our competitiveness vis-a-vis our foreign trading partners is definitely improving, especially after taking into account the changes in exchange rates,” said Allen Sinai, chief economist for Boston Co., a New York consulting house. “It’s a step in the right direction but we still have a long way to go.”

U.S. manufacturers held hourly wage and benefit increases last year to just 1.3%, compared to boosts of 1.4% in Japan, 4.5% in Canada, 3.4% in France, 4% in West Germany and 8.2% in Great Britain.

But Japan improved its manufacturing productivity--its efficiency in churning out goods--by 4.1% last year, compared to a 2.8% improvement in the United States, the department’s Bureau of Labor Statistics said.

The higher Japanese productivity improvements combined with relatively the same wage gains as in the United States reduced Japanese labor costs for each product 2.5%, compared to the 1.5% decline in U.S. labor costs.

Labor Costs Surge

France was the only other nation to reduce those labor costs in absolute terms, by 0.2%. Unit labor costs all climbed in Canada, South Korea, Denmark, West Germany, Italy, Norway, Sweden and Great Britain.

But after taking into account the 4.8% to 20.5% increase in the value of foreign currencies against the dollar, the contrast in labor costs between the United States and its competitors was much more dramatic.

“Adjusted for the sharp 1987 appreciations in foreign currency values relative to the U.S. dollar, Japanese and European labor costs rose about 13% to 25%,” the Labor Department said.