Manufacturing hourly compensation costs in the United States in 2009 were lower than in 12 European countries and Australia, but higher than in 20 other countries covered by the Bureau of Labor Statistics (see chart 1). U.S. hourly compensation costs rose about 4 percent from the previous year to $33.53.

The 8 countries with the highest costs in Europe were 30-60 percent higher than the U.S. level, but costs in Canada and Japan were about 10 percent lower than the United States.

Changes in a country’s compensation costs in U.S. dollars are roughly equivalent to the change in compensation costs in a country’s national currency plus the change in the value of the country’s currency relative to the U.S. dollar. This relationship is illustrated in chart 2, where the bars in the right panel for each country can be summed to equal the bars in the left panel. In 2009, modest increases or declines in hourly compensation costs in national currency combined with depreciations in national currency relative to the U.S. dollar produced declines in U.S. dollar-denominated hourly compensation costs for 27 out of 33 foreign countries.

BLS has developed estimates of hourly compensation costs for employees in the Chinese and Indian manufacturing sectors. Due to various data gaps and methodological issues, compensation costs for China and India are not directly comparable to each other or with the data for other countries found in this release, and therefore are presented separately.

For China, BLS approximates average hourly compensation costs in manufacturing by filling important data gaps for hours worked per year and for benefit components of labor compensation. Further, the concepts and coverage of Chinese statistics on manufacturing employment and wages often do not follow international standards and can be difficult to understand. Largely because of these data gaps and challenges, BLS estimates for China cannot be considered as robust as the manufacturing statistics for the other countries in this news release.

For India, BLS estimates of compensation costs refer to organized (or formal) manufacturing only, rather than to total manufacturing in the country. Unorganized sector 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 in organized manufacturing overstate average compensation costs for Indian manufacturing as a whole.

Economies are ordered based on social insurance expenditures as a percent of total compensation. In countries with the highest ratio of social insurance costs, such as Brazil, Sweden, and France, social insurance makes up approximately one-third of total compensation costs. In the United States, social insurance costs account for about 24 percent of total compensation, while in the Asian countries social insurance is less than 20 percent.

Directly-paid benefits comprise pay for leave time, bonuses, and pay in kind. The percentage of compensation that is directly-paid benefits tends to be higher in many European countries (due in large part to leave pay) and in Japan (where seasonal bonuses are a large portion of costs). Directly-paid benefits are a relatively smaller portion of costs in countries such as the United States, Australia, Canada, and the United Kingdom.

The total benefits portion of compensation costs can be seen by combining social insurance with directly-paid benefits. Total benefits surpass 40 percent in 15 countries. In contrast, the ratio of benefit costs in the United States is about 31 percent.