The combination of high output, productivity and profitability, and low unit labor costs lays a solid foundation for continued strength in the U.S. manufacturing sector. This section analyzes the positive contribution of falling labor costs to U.S. competitiveness. We argue that this continuing trend will be a major determinant of the reindustrialization momentum. This performance relative to China and Europe, for instance, must be cultivated. However, a too conservative U.S. wage policy and low labor pricing could eventually cap productivity gains and human capital accumulation, especially for niche industries.
▶ As shown in figures 12 and 13 below, comparing U.S. trends regarding manufacturing productivity and unit labor cost with the other leading industria- lized countries underscores America’s enviable posi- tion. Indeed, U.S. manufacturing has dramatically reinforced its productivity over the last decade and cut its unit labor costs by more than 10% (on U.S.$ basis). In contrast sharply with its global competitors, it should be noted that the falling U.S.$ versus the euro may have contributed to the difference. Additionally, from 2000-2010 manufacturing pro- ductivity in the U.S. has grown at an annual rate of 5.2%, greater than most industrialized nations except for the rapidly emerging economies of Taiwan, the Czech Republic, and South Korea. At the same time, the U.S. has been one of only two major countries where manufacturing unit labor costs have actually fallen. While this is a significant competitive advan- tage, it arises from the fact that productivity has grown sharply while real wages have hardly changed at all.
12. Manufacturing Labor Productivity Index basis 100 =2002
250
13. Manufacturing Labor Costs Index basis 100 =2002
200
200 150
150
100 100
50 00 01 02 US Germany 03 04 05 06 Japan Taiwan Source: Bureau of Labor Statistics, Euler Hermes 16 07 08 09 10 11(e)12(e)13 (f)
50 00 01 02 US Germany 03 04 05 06 07 08 Japan Taiwan Source: Bureau of Labor Statistics, Euler Hermes 09 1 11 e 12 e 13 f 0