U.S. workers can be placed at a competitive disadvantage because of low labor costs abroad. This disadvantage was especially severe in the early years of the 2000s when the enduring effects of earlier financial crises in many parts of the world depressed production costs in much of Asia, Brazil, Russia, and elsewhere. Since then, continued robust productivity growth in the United States, particularly in the manufacturing sector, has been reinforced by a gradual realignment of the currencies of many U.S. trading partners.
The result has been a sharp improvement in relative unit labor costs in the United States. For example, the U.S. Bureau of Labor Statistics (BLS) tracks changes over time in the unit labor cost of manufacturing in the United States and in key trading partners. U.S. hourly compensation in manufacturing has grown over the past decade, but rapid productivity growth in the United States has reduced the cost of producing a unit of manufactured output. Meanwhile, measured in U.S. dollars, the cost of producing a unit of manufactured output in key trading partners has risen, in some cases substantially. Of the 19 economies tracked by the BLS, only Taiwan managed to improve its unit labor cost position more than the United States did.