"Losing ground": Japanese labour productivity and unit laboour cost manufacturing in comparison to the U.S

Robert Inklaar, Harry Wu and Bart van Ark
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Bart van Ark: Groningen University

No 200364, GGDC Research Memorandum from Groningen Growth and Development Centre, University of Groningen

Abstract: This paper looks at several measures of competitiveness for the Japanese manufacturing sector relative to the United States over the period 1980-2000. Using industry-specific unit-value ratios (UVRs) we show that labour productivity in Japanese manufacturing lags considerably behind the U.S. and that the Japanese position has worsened during the 1990s. In 2000, value added per hour worked in Japanese manufacturing stood at 72 percent of the U.S. level after peaking at 79 percent in 1991. Underneath this aggregate estimate though, there is a wide range of branch-specific labour productivity levels. Japanese manufacturing has also suffered from rising unit labour cost levels. The long-term trend of a strengthening yen has eroded Japanese cost competitiveness in nearly all branches between 1980 and 2000, although ULC levels have declined somewhat from 1995 onwards due to a more favourable exchange rate development and moderate wage growth in Japan. Still, in 2000 unit labour cost in Japanese manufacturing was still 27 percent above the U.S. level. In comparison, in 1980 Japanese unit labour cost stood at only 82 percent of the U.S. level.

Date: 2003
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