A COMPARATIVE ANALYSIS OF THE IMPACT ON SOCIAL FACTORS ON PRODUCTION COSTS AND PRODUCTIVITY IN THE NETHERLANDS, MEXICO, AND THE UNITED STATES

RAYMOND GRANT TATE, Pace University

Abstract

The escalation of social programs and their subsequent impact on manufacturing costs and productivity has become a matter of increasing concern to companies operating in Europe. Legislated and voluntary benefits have become a growing factor in product cost, especially in countries who have extensive social welfare programs such as the Netherlands.^ Social costs have also added to the tax burden on individuals in those countries. The differential between take home pay and the benefits from social programs has diminished; thus lowering the incentive to work.^ This paper is a micro-economic analysis of the impact of social programs on manufacturing cost and productivity in three countries: The Netherlands, Mexico, and the United States. These countries represent examples of a highly socialistic country, a rapidly developing country, and a large industrial country. A common electromechanical product which was manufactured in three plants located in the countries was used as the vehicle for comparison. The three plants were part of a selected multinational corporation headquartered in the United States.^ An index method is used to present the data Index charts are employed to compare product cost, landed cost, productivity, wage rates, and social costs. Social costs are displayed by type of programs in the three countries. The base year for the data is 1979. Other factors which had an indirect impact on manufacturing costs or productivity are also discussed. These include industrial democracy, tax rates, absenteeism, and worker attitudes.^ The study concludes that Dutch social benefits and labor costs were significantly higher than the United States, while direct worker productivity was significantly lower. As expected, Mexican labor rates were significantly lower than the U.S. or the Netherlands. However, benefits costs formed a higher proportion of total payroll costs in Mexico than in the U.S. or the Netherlands. Mexican benefits costs were also growing faster. Absenteeism in the Mexican plant was the lowest of the three plants studied. The nationally legislated profit sharing plan in Mexico provided a powerful economic incentive for good attendance on the part of low level workers in a profitable company.^ Social programs had a significant bearing on product cost and productivity in all three countries. A company should consider these factors in its investment decisions. ^

Subject Area

Economics, Commerce-Business

Recommended Citation

RAYMOND GRANT TATE, "A COMPARATIVE ANALYSIS OF THE IMPACT ON SOCIAL FACTORS ON PRODUCTION COSTS AND PRODUCTIVITY IN THE NETHERLANDS, MEXICO, AND THE UNITED STATES" (January 1, 1981). ETD Collection for Pace University. Paper AAI8123134.
http://digitalcommons.pace.edu/dissertations/AAI8123134

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