February 28, 2012    Volume 19, No. 3

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On The Chopping Block: BLS's International Wage Data Comparison Program


By Richard A. McCormack
editor@manufacturingnews.com

Once again, President Obama has proposed killing the only government data program that compares wages of workers in the United States to those in foreign countries. The Bureau of Labor Statistics' (BLS) International Labor Comparisons program is on the fiscal year 2013 list of government programs that Obama wants to eliminate. The savings: $2 million.

The program provides international comparisons of total hourly worker compensation costs "that are not widely used," says the president's budget request to Congress.

That's news to many thousands of people who use the data (including this reporter). In a globalized economy, the International Labor Comparisons (ILC) program's reports are truly staggering in terms of their depth and importance. ILC is the only program in the world that has studied total hourly manufacturing compensation costs in China ($1.36 in 2008), India ($0.91), Mexico ($6.23,) Germany ($43.36) and the United States ($34.74).

The lack of use cited by the budget request as the reason to kill the program is also news to the 1.9 million people who visited the ILC website in 2011. An analysis of total BLS web traffic found that the ILC program received more visitors than many BLS programs with larger budgets. (The American Time-Use Survey logged one million users; the Mass Layoff Statistics logged 400,000; and the International Price Program had 300,000.)

"This program provides the only data available that ensures comparisons are 'apples to apples' and not 'apples to oranges' -- that is, they permit valid comparisons of the U.S. labor market with labor markets abroad and reliable assessments of U.S. manufacturing competitiveness," according to a petition created to save the program in 2010 by Robert Bednarzik of Georgetown University. The petition was signed by 288 people. Even the budget line item that would eliminate funding for the program, states that the program "must make unique and often complex adjustments to each foreign country's data." As many as 100 different datasets and spreadsheets are used for each country in order to develop true labor cost comparisons.

The program looks not only at foreign wages measured in U.S. dollars, but international employment levels, productivity and unit labor costs in manufacturing, GDP per capita and per hour, foreign consumer prices, employment by sector, growth rates of the U.S. and foreign labor forces, women's share of the workforce and other international comparisons. In a fully globalized economy, not having international economic and labor wage comparison data would mean the United States would have no idea of how it competes with foreign countries, according to those who use the data and signed the 2010 petition.

It is also the only program in the federal government that has studied China's and India's manufacturing sector workforces and their total pay levels, including all wages, benefits, insurance and social costs; as well as the total number of manufacturing employees in those countries.

Without the ILC program, the recent claims being made that labor costs in China are skyrocketing could never be verified. And while wages are going up in China, they still only amount to a tiny fraction (4.2 percent) of what they are in the United States, according to most recent ILC analysis, which is currently being updated. There is a very long way to go before China's workers make anything close to an American worker, or even a Mexican worker.

The money saved from killing the program would be used to support the Census Bureau's "supplemental statistical poverty measure," says the 2013 Obama budget document. But those who have been involved with the ILC program wonder why it should be up to the BLS to fund a data set for the Census Bureau, especially since the Census Bureau has received more than adequate budget support.

Last year when the ILC program was slated for elimination, Manufacturing & Technology News submitted a Freedom of Information Act request seeking the administration's justification for killing the program. The government refused to provide any internal correspondence regarding the decision making process, basing its denial on "executive privilege."

For those who have worked with the program, the reasons are still ambiguous, though they say there was no evidence of malevolence, as has been suggested (i.e., the idea that U. S. multinational companies don't want Americans to know how much they are paying their U.S. replacement workers in China and Mexico.)

The Labor Department, which runs BLS, was simply looking for savings that it could publicize in an era of fiscal constraint. Those who were involved say the Labor Department's political appointees put together a list of possible programs to cut. On the list was the Mass Layoff series. But people who were at the agency in 2003 when President Bush proposed killing the series advised against it, since the proposal (and subsequent short term de-funding of the series) created a political firestorm.

Next on the possible hit list was the Job Openings and Labor Turnover (JOLT) survey. Again, too controversial. Next was the Time Use Survey, which chronicles the amount of time people spend doing housework, watching TV, volunteering and socializing. Nope. Couldn't cut that.

When the Labor Department managers got to the lowly $2-million ILC program, researchers in the chief economist's office said that they could get the data from the OECD (though people involved with the program can't find any such data on the OECD website).

"It was like throwing darts at the board the way the decision was made," says one person familiar with it.

Once the OMB put the ILC on the chopping block, it needed a justification for doing so. OMB gave the political appointees at the Labor Department a choice: either say the program's data was not reliable or that it was not heavily used. The Labor Department could not substantiate a claim that the data was flawed, so it went with the "of little use" option. But that was before anyone had done an analysis of BLS web traffic, which disproved the rationale.

"It was a dumb decision, but once a dumb decision is made, it's perpetuated," says one government source. Poor leadership at BLS contributed to the program's malaise.

For 2011, 2012 and now for 2013 the ILC has struggled to survive, relying on a few friends in Congress (particularly Iowa Dem. Sen. Tom Harkin) to restore funding. Supporters who use the data or know its value are again gearing up a political drive to save the ILC (www.ipetitions.com/petition/saveilc).


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