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PPPs for policy making: a visual guide to using data from the ICP - Chapter 4: Labor costs, wages, and social safety nets

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Labor costs

Labor cost data from the International Labour Organization (ILO) provide an estimate of employers’ expenditure toward the employment of their workforce, and reflect wages paid to employees, the cost of employee benefits, and payroll taxes paid by an employer. Labor costs are a crucial factor in the ability of enterprises and countries to compete at national, regional, and global levels. Furthermore, the level and structure of the cost of employing labor, and the way costs change over time, play a central role in wage negotiations and also in defining, implementing, and assessing employment, wage, and other social and fiscal policies that target the distribution and redistribution of income. Labor cost data also inform policy considerations regarding labor market flexibility, analyses of cost disparities and, when expressed in PPP terms, allow comparisons of productivity levels across countries (figure 4.1).