Program’s elimination short-sighted

Posted Feb. 24, 2010, at 6:51 p.m.

The Obama administration wants to eliminate a program that produces information critical to improving U.S. global competitiveness. If Congress concurs with this short-sighted proposal, it will handicap us in the struggle to become more competitive.

What is the program? And why is it so valuable?

The International Labor Comparisons program is a very small part of the highly respected U. S. Bureau of Labor Statistics. It produces internationally comparable data on manufacturing workers’ compensation — data needed to determine which countries are poised to capture global market share from our manufacturers. It produces data on manufacturing productivity and unit labor costs — needed for comparing efficiency and costs in the U.S. and competing countries. And it produces comparable employment and unemployment statistics — enabling a broad analysis of other countries’ labor markets.

Further, the program has pioneered the development of data for emerging economies, including China and Brazil. Its analysts are now developing comparable labor statistics for India and other emerging countries. (Full disclosure: I worked on this program for two years in the 1980s and managed the ILC, along with several other BLS programs, in the 1990s.)

It’s easy to illustrate the great value of these data. Suppose a U.S. soft drink producer is trying to decide which country would be the best location for a new European plant. Certainly countries’ wage rates will play a big role in this decision. Using ILC data, the company can learn that German beverage workers are paid about $34 an hour while Polish workers are paid only $7. You can see these data at ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/aeind3112naics.txt.

Union leaders who believe that China has unfair export advantages were keenly interested when the ILC published the first careful study ever done of Chinese manufacturing workers’ pay. In 2006, their pay was 81 cents an hour. See http://www.bls.gov/news.release/pdf/ichcc.pdf.

Policy analysts and research scholars also find the ILC data useful, both for making good policy and for understanding foreign countries’ economies. For example, many economists are now interested in Italy’s poor economic performance; thanks to the ILC data, they can readily find out that between 2000 and 2008, Italy’s manufacturing productivity did not grow at all, while U.S. productivity grew almost 5 percent a year. See http://www.bls.gov/news.release/pdf/prod4.pdf.

And in 2007 — before the recession caused havoc in labor markets worldwide — unemployment in Italy was 6.2 percent, while in the U.S., Japan, and Norway, it was between 3 and 5 percent. Italy performed worse than the average of 15 European countries in the growth rate of total employment and in the proportion of the unemployed who were jobless for a year or more. And surely Italy’s poor performance is partly explained by the fact that 48 percent of Italy’s adult population has not completed high school, compared with less than 18 percent in Germany, Britain, and Sweden. See http://www.bls.gov/fls/

chartbook2009.pdf.

The ILC data have a strong presence on the Internet, indicating great interest. I recently ran Google searches on “international unemployment,” “international compensation statistics,” “China’s compensation costs” and “international productivity.” I found that ILC publications ranked number one in all four searches. In three of the searches, ILC publications ranked number two as well as number one.

The ILC analysts produce these international statistical comparisons, and others, without conducting any costly surveys. Instead, the analysts use data already prepared by foreign governments and international agencies. To ensure that the final statistics compare oranges to oranges, the program’s analysts adjust the data to a single set of concepts and definitions. This strategic approach is cost effective; the program’s total budget is a modest $2 million annually, including the pay of its 16 experienced analysts.

To save $2 million a year the administration is prepared to seriously hobble the efforts of business leaders, union officials, scholars and government analysts who use these data to analyze our current international economic challenges. Total Labor Department spending is 7,000 times as high as the ILC’s $2 million budget.

The ILC data are very useful for improving our international competitiveness and for other purposes; they are very popular; and they are produced very cheaply. What in the world was the administration thinking when it proposed to terminate this program?

So much damage, for such small savings.

Edwin Dean, an economist and seasonal resident of Vinalhaven, writes monthly about economic issues.

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