Sliding scales

Sliding scales

WHOM would you rather employ: one German worker, two Americans, five Taiwanese or 128 Chinamen? According to new figures calculated by Morgan Stanley, an American investment bank, the hourly wage bill (including benefits such as holidays and sick pay) for each of these four groups of workers turns out to be more or less the same.

In 1995 a German manufacturing worker cost his employer $32 an hour, making him the most expensive in the world. His Japanese equivalent cost a more modest $24 an. hour, while an American worker was a bargain at only $17.

Everybody knows that Germany and Japan are high-cost economies, but few remember that just ten years ago America had the "highest labour costs in the world. Back then, America's workers were twice as costly as Japan's and a third pricier than Germany's. Since 1985, moderate, wage rises and a sharp fall in the dollar have left American industry looking super-competitive.

However, some of this competitive edge has been nibbled away this year as the American currency has climbed to a 3.5 year high against the yen (see previous story). The table is based on average 1995 exchange rates; if the latest rates are used instead, then American hourly wage costs are now only 12% less than Japan's.

The table also shows that the wage-cost advantage of the four Asian tigers (Hong Kong, South Korea, Singapore and Taiwan) has been eroded somewhat over the past decade. For example, in 1985 Taiwan's labour costs were about one-tenth of America's; by last year the ratio had risen to about one-third—an average of $5.82 an hour. This mainly reflects the fact that Taiwan's productivity growth has outpaced America's. In contrast, Mexican wage costs have fallen relative to America's over the past decade.

Americans and Europeans have long worried about stiffer competition from low-wage Asian producers. Now the Asian tigers themselves are feeling the heat from emerging economies such as India and China, where labour costs in manufacturing still average a paltry 25 cents an hour.