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Technical Notes

The comparisons in this release are based on data available to the 
Bureau of Labor Statistics as of the end of August 2008 from the 
national statistical offices of the 16 economies compared.

Definitions. Labor productivity is defined as real output per hour 
worked. Although the labor productivity measure presented in this 
release relates output to the hours worked of persons employed in 
manufacturing, it does not measure the specific contributions of labor 
as a single factor of production. Rather, it reflects the joint effects 
of many influences, including new technology, capital investment, 
capacity utilization, energy use, and managerial skills, as well as the 
skills and efforts of the workforce.

Unit labor costs are defined as the cost of labor input required to 
produce one unit of output. They are computed as compensation in 
nominal terms divided by real output.  Unit labor costs can also be 
computed by dividing hourly compensation by output per hour, that is, 
by labor productivity.  

Methodology. BLS constructs trends of manufacturing labor productivity 
and unit labor costs from three basic aggregate measures: output, total 
labor hours, and total compensation. The hours and compensation 
measures, as well as the employment measures, refer to employees (wage 
and salary earners) in Belgium and Taiwan.  For all other economies, 
the measures refer to all employed persons, including employees, self-
employed persons, and unpaid family workers.  

In general, the measures relate to total manufacturing as defined by 
the International Standard Industrial Classification (ISIC). However, 
the measures for France include parts of mining. Data for the United 
States are in accordance with the North American Industry 
Classification System (NAICS 97), except compensation data before 1987.  
Canadian data are in accordance with NAICS 97 starting in 1961.

The data for the most recent years are based on the United Nations 
System of National Accounts 1993 (SNA 93).  For earlier years, data 
were compiled according to previously used systems.

To obtain historical time series, BLS may link together data series 
which were compiled according to different accounting systems by 
national statistical offices.

Output. For most of the economies, the output measures are real value 
added in manufacturing, based on national accounts. However, output for 
Japan prior to 1970 and for the Netherlands prior to 1960 are indexes 
of industrial production. The manufacturing value added measures for 
the United Kingdom are essentially identical to their indexes of 
industrial production.

Most economies now estimate manufacturing real output using moving 
price weights, as recommended by SNA 93.  However, many earlier time 
periods within the historical real output series have been estimated 
using fixed price weights, with the weights updated periodically (for 
example, every 5 or 10 years). Taiwan and Korea still use fixed price 
weights to estimate real output.

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Measures of real output also may differ among economies because of 
different approaches to quality adjustments.

For the United States, the output measure for the manufacturing sector 
is a chain-weighted index of real gross product originating (deflated 
value added) produced by the Bureau of Economic Analysis (BEA) of the 
U.S. Department of Commerce. For more information on the U.S. measure, 
see "Improved Estimates of Gross Product by Industry for 1947-98," 
Survey of Current Business, June 2000, pp. 24-38 and "Gross Domestic 
Product by Industry for 1947-86. New Estimates Based on the North 
American Industry Classification System," Survey of Current Business, 
December 2005, pp. 70-84.

The U.S. manufacturing output series used for international comparisons 
differs from the manufacturing output series that BLS publishes as part 
of its major sector productivity and costs measures for the United 
States.  The international comparisons program uses a value added 
output concept, while the major sector series is on a sectoral output 
basis. Sectoral output is gross output less intra-sector sales and 
transfers. The U.S. major sector productivity and costs measures can be 
found at http://www.bls.gov/lpc/home.htm. For information on sectoral 
output, see "Measurement of productivity growth in U.S. manufacturing," 
Monthly Labor Review, July 1995, pp. 13-28.

Value added measures have been used for the international comparisons 
series because the data are more readily available from the economies' 
national accounts, whereas sectoral output would require a complex 
estimation procedure.  Even though BLS has determined that sectoral 
output is the correct concept for U.S. measures of productivity, there 
are other considerations that may make value added a better concept for 
international comparisons of labor productivity, such as differences 
among economies in the extent of vertical integration of industries.

Labor Input. For the most recent years, the term "hours" refers to 
hours worked.  For some earlier years, BLS uses other hours measures.  

For the United States, the employment and hours data series beginning 
with 1987 are taken from the NAICS-based manufacturing all-employed 
series published by BLS as part of the major sector productivity and 
cost measures.  For the period before 1987, these series are linked to 
NAICS-based, employees-only data from the Current Employment Statistics 
(CES) program. 

For most other economies, recent years' aggregate hours series are 
obtained from national statistical offices, usually from national 
accounts.  However, for some earlier years, BLS calculates the 
aggregate hours series using employment figures published with the 
national accounts, or other comprehensive employment series, and data 
on average hours worked.

Compensation (Labor Cost).  The compensation measures are from national 
accounts. Compensation includes employer expenditures for legally 
required insurance programs and contractual and private benefit plans, 
in addition to all payments made in cash or in kind directly to 
employees. When data for the self-employed are not available, total 
compensation is estimated by assuming the same average compensation for 
the self-employed as for employees.

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Labor cost is defined as compensation plus employment taxes minus 
employment subsidies, i.e. the cost to employers of using labor. For 
most economies, labor cost is the same as compensation. However, for 
Australia, Canada, France, and Sweden, compensation is increased to 
account for important taxes on payroll or employment. For the United 
Kingdom, compensation is reduced between 1967 and 1991 to account for 
subsidies.

Data for Germany. German data prior to 1991 pertain to the former West 
Germany. The data series are linked in 1991.

Data for Australia. Australian data are published by fiscal years, 
which run from July 1 through June 30. The Australian Bureau of 
Statistics provides unpublished calendar-year data for real value 
added, employment, and hours worked. For compensation, BLS estimates 
calendar-year series using two-year moving averages of the data for 
fiscal years. Manufacturing compensation data are not available for 
years prior to 1990.

Data for Recent Years. The measures for recent years may be estimates 
based on various current indicators until national accounts and other 
preferred statistics become available.

Trade-Weighted Measures. The trade weights used to calculate the 
relative unit labor cost indexes of the United States and the other 
economies are based on the relative dollar value of U.S. trade in 
manufactured commodities (exports plus imports) with each economy in 
2007.  The trade data are compiled by the U.S. Census Bureau.

The following weights were used for the entire period for which trade-
weighted unit labor cost measures are produced:


		Weight                  	Weight

Canada		36.12		Germany		10.64
Japan		16.00		Italy		3.54
Korea		6.09		Netherlands	3.67
Taiwan		4.84		Norway		0.54
Belgium		3.02		Spain		1.36
Denmark		0.65		Sweden   	1.42
France		4.82		United Kingdom	7.29


Level Comparisons. The BLS measures are limited to trend comparisons. 
BLS does not prepare level comparisons of manufacturing productivity 
and unit labor costs because of data limitations and technical problems 
in comparing the levels of manufacturing output among economies. Each 
economy measures manufacturing output in its own currency units. To 
compare outputs among economies, a common unit of measure is needed. 
Market exchange rates are not suitable as a basis for comparing output 
levels. What is needed are purchasing power parities, which are the 
number of foreign currency units required to buy goods and services 
equivalent to what can be bought with one unit of U.S. currency.

Purchasing power parities, for most economies, are available for total 
gross domestic product (GDP) from the Organization for Economic 
Cooperation and Development 

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(OECD).  However, these parities are derived for expenditures made by 
consumers, business, and government for goods and services - not for 
value added by industry. Therefore, they do not provide purchasing power 
parities by industry. The parities developed for total GDP are not 
suitable for each component industry, such as manufacturing.

European exchange rates. On Jan. 1, 1999, 11 European countries joined 
the European Monetary Union (EMU). In subsequent years they were joined 
by Greece and Slovenia. The euro, the official currency of the EMU, was 
established at fixed conversion rates to the previous national 
currencies of EMU members. Data on manufacturing value added and labor 
compensation for euro-area countries are now reported in euros. 

In order to maintain historical continuity of data series, data for 
euro-area countries for years before 1999 have been converted to euros 
by applying the fixed euro/national currency conversion rates. For 
countries and years where output, compensation, and exchange rates are 
converted from national currency units into euros, the following fixed 
conversion rates are used:

1 euro equals:    40.3399 Belgian francs         1936.27 Italian lire
                  6.55957 French francs          2.20371 Netherlands guilders
                  1.95583 German marks        	 166.386 Spanish pesetas

The currency exchange rates cited in this publication are annual 
averages of daily buying rates in New York City.