Economic Gains
NSF 95-309

Economic Gains

Economic Growth
Labor Compensation

Asian industries' apparent success in the U.S. market provides convincing evidence that Asian products meet the challenge of the international marketplace. But have the region's citizens shared in this market success? To what extent has the market success discussed above helped to maintain or expand real income for Asia's people? This section examines evidence of an improved standard of living in the region using information on patterns of economic growth and earnings of manufacturing workers.

Economic Growth

The economies that comprise the Asian region have enjoyed a pattern of sustained growth over the past three decades.[25] The newly industrialized economies grew at twice the rate of the Japanese economy during the 1970s and 1980s (their collective average annual rate was 9.3-percent growth versus 4.7 for Japan). South Korea and Taiwan led the NIEs in growth throughout most of this time period. (See appendix table 20.)

The emerging Asian economies grew more slowly than the NIEs during the 20-year span from 1970 to 1990, but their rate was still generally faster than Japan's. The Indonesian and Malaysian economies grew at an impressive pace during the seventies, and China led all EAEs during the eighties. In the 1990s, China and Malaysia ranked with South Korea and Taiwan as the fastest growing economies in the region. (See figure 16.) In comparison, the U.S. real gross domestic product (GDP) grew at a 2.8-percent annual rate during the 1970s and a 2.6-percent rate during the 1980s.

Figure 16

GDP growth, when normalized by the wide-ranging size of populations in the region, is highest for Hong Kong; it overtook Japan's per capita GDP in 1986. (See figure 17 and appendix table 21.) Singapore also records a relatively high per capita GDP.

Figure 17

Labor Compensation

Trends in compensation to Asia's manufacturing workers provide two separate insights on the region's competitiveness position. First, they highlight the sizable cost advantage enjoyed by Asian corporations resulting from what are still significantly lower labor costs when compared with Asia's global competitors in the United States and Europe.[26] Second, the sharp rise in labor costs over the 1975-90 period suggests that Asia's manufacturing workers are beginning to share in the economic rewards of the market successes achieved over the last two decades.

Within the Asian region, compensation paid (earnings and benefits) to workers varies widely.[27] (See figure 18 and appendix tables 22 and 23.) In 1990, Japan's manufacturing workers earned approximately three times that paid to workers in the NIEs. Japanese workers' earnings nearly doubled since 1985 and are now very near that earned by U.S. workers.

Figure 18

Manufacturing workers in NIEs saw their wages and benefits increase somewhat faster than did their Japanese counterparts. Since 1975, hourly compensation for the NIEs increased by a factor of seven compared to a fourfold increase in Japan. Growth in compensation paid to workers in South Korea and Taiwan outpaced the growth in the other NIEs (Hong Kong and Singapore). Limited data reported for China and India yield a more erratic trend, but the labor compensation rates in these countries remain extremely low by regional and international standards. Indonesian and Malaysian labor costs fall between those of the NIEs and those of China - Malaysia is closer to the NIEs; Indonesia is closer to China. (See Schlossstein 1991, p. 312.)

In the near future, earnings for workers in the emerging Asian economies should follow the rapid growth experienced by the other nations in the region. As labor costs rise, Asian industry will incorporate more labor saving capital equipment and other manufacturing technology in their production processes, thereby encouraging further indigenous technology development.

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25. Growth is measured as increases in real gross domestic product (GDP) based on 1985 U.S. dollars.
26. In Asia, only Japanese workers are compensated at a level comparable to workers in the United States and Europe.
27. The compensation data presented here are designed to compare international labor costs and to gauge trends in worker income. The compensation and other pay measures were computed in national currency units and subsequently converted into U.S. dollars at prevailing commercial market currency exchange rates. These data do not account for differences in purchasing power and therefore cannot compare living standards for workers in these countries.

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