Article · February 005 Source: RePEc citations 35 reads 4,815 authors

Figure 2
shows the average comparative performance of three of the ten new member states 
of the European Union (Czech Republic, Hungary, and Poland). Relative levels of productivity and 
labour compensation are much lower than in the U.S. and the EU-15. As the comparative wage levels 
are even lower than comparative productivity levels, the new member states show a significant 
advantage in terms of ULC levels at approximately 70% of the U.S. level. The depreciation of the 
currencies of these countries relative to the US dollar has further benefited the competitive position of 
these countries, but the latter trend has reversed somewhat since 2000. 
Figure 3
compares the Japanese performance relative to the U.S. manufacturing sector. 
Strikingly the manufacturing ULC level in Japan is not only high relative to the U.S., but also in 
comparison with the EU-15 (Figure 1). Productivity levels in Japanese manufacturing have been 
considerably lower than in Europe for the whole period. During the early 1990s the ULC gap between 
Japan and the rest of the advanced world strongly increased as a result of a rise in relative labour cost, 
which was partly aggravated by an appreciation of the Japanese yen relative to the U.S. dollar. Since 
the mid-1990s the manufacturing ULC gap has fallen considerably due to a moderation in wage 
growth in Japan and an improvement in the comparative productivity performance of Japanese 
manufacturing. 
15 As all measures presented here are in terms of levels relative to the United States, keeping the U.S. level 
constant over time, the growth performance of the U.S. itself is hidden from these charts. Figure A1 in the 
appendix shows that unit labour cost in U.S. manufacturing has only slightly risen by about 10% between 1980 
and 2003 (with a peak around 1990), which is the combined result of an increase in nominal labour cost in 
manufacturing by about 275% and an increase in manufacturing labour productivity of 250%. Hence in most 
cases the declines in labour cost and productivity of other countries relative to the U.S. do not represent absolute 
declines but only accelerations or decelerations relative to the U.S. performance in manufacturing. 

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11
The estimates in 
Figure 4
focus on the comparative performance of two OECD member 
states which are not part of the European Union, namely Australia and Canada. The average 
performance of these two countries is much closer to that of the U.S., although unit labour cost levels 
have remained somewhat below the U.S. level for most of the period. 
Figures 5 and 6 show the results for two countries which have only recently become members 
of the OECD. Both Korea (