For a U.S. employer who measures his labor cost in dollars, Mexico was the cheapest country last year and Norway the most expensive, according a Labor Department report.

The report released this week takes into account the decrease in the price of the dollar and of changes in local pay rates. The cost of social insurance and other benefits are also figured in, but not the relative efficiency of workers in different countries.In dollar terms, costs in Mexico dropped to $1.37 an hour from $1.49 in 1986. Though wages more than doubled in Mexican pesos, the price of the peso dropped so fast on foreign exchange markets that the cost of labor in dollars declined.

Wages and other benefits for workers also rose in terms of Brazilian cruzados, but in dollar terms there was a decline to $1.49 from $1.60 an hour

because of the low value of the cruzado.

Brazil and Mexico are two biggest debtors among developing nations, a situation that tends to drive down the price of their currencies. They were the only two where the costs were reported to have dropped in the year.

Norway's average compensation of 118.52 kroner ($17.58) an hour was nearly 13 times that of Mexico, measured in dollars. The U.S. average of $13.46 was almost 10 times Mexico's.

Low wage costs in other countries have long been used by U.S. politicians as the reason for protecting U.S. industry from imports. In recent years labor unions have argued that low labor costs in other countries encourage U.S. employers to set up production there rather than at home.

Congressional leaders have agreed on a trade bill that would curb some imports, but their version has not yet been approved by either House, and there is a threat of a veto from President Reagan.

One provision would authorize the president to consider denial of internationally recognized labor rights, such as the right to organize labor unions, as an unfair trade practice for which he could reduce a country's exports to the United States.

Labor in the industrializing countries of Asia and Latin America remained less than a fifth as costly as in the United States. Costs in Hong Kong, South Korea, Singapore and Taiwan rose by only 1 to 4 percentage points relative to those in the United States.

Of 22 countries, seven had costs higher than the $13.46 an hour in the United States. They were, in addition to Norway: Switzerland, 25.46 Swiss francs ($17.06); West Germany, 30.26 deutsche marks ($16.83); Sweden, 96.07

kronor ($15.14); Netherlands, 30.61 guilders ($15.11); Belgium, 563.37 Belgian francs ($15.08), and Denmark, 99.20 kroner ($14.49).

All 23 countries for which the Labor Department had statistics showed an increase of compensation in terms of their own currency, including the United States.

Japan's relative cost level in 1987 (of 84 percent) greatly exceeded the previous peak of 72 percent reached in 1986, said the report from the Bureau of Labor Statistics.

It noted that Japan's level was now close to Canada's. The increase was due largely to the rise of the yen against the dollar.

This was also the reason for most of the rise in European costs, though they were also raised by cuts in working hours by Norway and Denmark, the report said.