US Unit Labor Costs in Dramatic Decline

Unit labor costs (non-farm business sector) have declined sharply in the US since 2001. During the summer of 1973 (when I graduated from high school), unit labor costs stood at approximately one-quarter troy ounce of gold (0.26 troy ounces). By the end of 2011, unit labor costs had dropped to less than a tenth of an ounce of gold (0.07 troy ounces), for a total decline of approximately 73% for the period. Unit labor costs peaked at just over a third of an ounce of gold in 2001 (0.38 troy ounces), which implies an 80% decline in unit labor costs since the peak only 12 years ago.

The bottom line is that unit labor costs have declined dramatically in the US since 1973, and especially since 2001. In fact, US unit labor costs currently stand at their lowest levels since at least 1947. Why more of this labor cost savings is not finding its way into the pockets of workers is perhaps the central economic issue of our time.

According to the Bureau of Labor Statistics (BLS):

Unit labor costs can be computed by dividing employer labor costs (payments made directly to workers plus employer payments into funds for the benefit of workers) by real value added output. Unit labor costs can also be computed by dividing hourly labor costs by output per hour.

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