United States Government Accountability Office

GAO Report to Congressional Requesters

EMPLOYEE 

COMPENSATION 

Employer Spending on 

Benefits Has Grown 

Faster Than Wages, 

Due Largely to Rising 

Costs for Health 

Insurance and 

Retirement Benefits 

February 2006 

 

GAO-06-285 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2006

EMPLOYEE COMPENSATION 

Employer Spending on Benefits Has 

Grown Faster Than Wages, Due Largely 

to Rising Costs for Health Insurance and 

Retirement Benefits 

Highlights of GAO-06-285, a report to 

congressional requesters 

Because most workers rely 

primarily on their employers to

provide both wages and benefits as 

part of a total compensation

package, the trends in the costs 

and availability of employersponsored compensation have a 

significant bearing on workers’ 

well-being. 

Through tax preferences and

payroll taxes, federal government 

policy also has a bearing on 

employees’ access to benefits and 

on the costs carried by employers. 

The federal government provides

significant tax subsidies for both 

health insurance plans and

qualified retirement plans. In 

addition, workers and employers 

are required to pay taxes that fund 

Social Security and Medicare,

programs intended to help provide 

for workers’ economic security and 

peace of mind in retirement. 

In this report, GAO examined 

federal data on private employers’ 

costs for active workers and sought 

perspectives from 17 experts to

identify (1) recent trends in

employers’ total compensation 

costs; (2) composition of the

trends; (3) whether employees’

costs, participation, or access to 

benefits changed; and (4) possible 

implications of the changes for

private systems. 

GAO received technical comments 

from the Departments of Labor and

Health and Human Services and 

from some of the experts GAO 

consulted. These comments were 

incorporated as appropriate. 

Private employers’ average real cost of total compensation (comprising 

wages and benefits) for current workers grew by 12 percent between 1991

and 2005. The real costs of benefits grew by close to 18 percent, while real

wages grew by 10 percent. Wages and benefits increased by about the same 

percentage for most of the period until 2002, after which time real wages

began to stagnate and real benefit costs continued to grow. 

Growth in Real Employer Costs for Employee Total Compensation, Wages, and Total 

Benefits for All Workers, 1991 to 2005 

The increase in the cost of a total benefits package from 1991 to 2005 was 

largely composed of increases in health insurance and retirement income 

costs. Paid leave had been the most costly benefit to employers, but by 2005, 

the cost of health insurance equaled that of paid leave. In comparison to paid 

leave and health insurance, retirement income was the least costly, but it 

grew by an estimated 47 percent. 

During the time under review, employees’ access to most benefits remained 

stable, but participation rates declined for health benefits as the real dollar 

amount of the premiums increased. Between 1991 and 2003, roughly half of 

all workers participated in employer-provided retirement plans. Holidays 

and vacations were generally available to most workers, but a smaller 

percentage of workers had access to personal and sick leave. 

A panel of experts from a variety of backgrounds agreed that rising benefit 

costs are forcing private employers and their employees to make

increasingly difficult trade-offs between wages and benefits. They noted that 

the employer-sponsored system of benefits in its current form may be 

unsustainable, largely because productivity growth is unlikely to support the 

rising costs of some benefits, especially escalating health insurance costs. 

www.gao.gov/cgi-bin/getrpt?GAO-06-285.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Sigurd R. 

Nilsen at (202) 512-7003 or nilsens@gao.gov. 
Contents 

Letter 1

Results in Brief 3

Background 5

Average Compensation Costs Grew by 12 Percent between 1991

and 2005, with Benefits Outgrowing Wages by 8 Percentage

Points 8

The Increase in Employers’ Cost of Benefits Was Largely 

Composed of Increases in the Cost of Health Insurance and

Retirement Benefits 12 

Employees’ Access to Benefits Remained Generally Stable, but 

Employees Face Greater Costs and Assume More Investment 

Risk 17

Experts Agreed That Rising Benefit Costs Are Forcing Private 

Employers and Their Employees to Make Trade-Offs between 

Wages and Benefits 24 

Concluding Observations 26 

Agency Comments 27 

Appendix I Scope and Methodology 28 

Appendix II Employers’ Real Hourly Costs for Employee Total 

Compensation, Wages, and Total Benefits 35 

Appendix III Employers’ Real Hourly Costs for Employee Paid 

Leave, Retirement Income, and Health Insurance 49 

Appendix IV GAO Contacts and Acknowledgments 54 

Tables 

Table 1: Employers’ Real Average Hourly Costs for Employee Total 

Compensation, Wages, and Total Benefits for All Workers, 

1991 to 2005 8 

Page i GAO-06-285 Employee Compensation 
Table 2: Growth in Employers’ Real Hourly Costs for Employee 

Total Compensation, Wages, and Total Benefits by 

Employer Type, 1991 to 2005 11 

Table 3: Employers’ Real Hourly Costs for Employee Paid Leave, 

Retirement Income, and Health Insurance, 1991 to 2005 13 

Table 4: Percentage Changes in Employers’ Hourly Costs of 

Employee Paid Leave, Retirement Income, and Health 

Insurance for All Workers by Employer Type, 1991 to 2005 16 

Table 5: Participation in Employer-Provided Defined Benefit and 

Defined Contribution Retirement Plans for All Workers 

and Full-time Workers, 1990 to 2003 22 

Table 6: Percent of Workers Offered Employer-Provided Paid

Leave, 1990 to 2003 23 

Table 7: Private Industry Sectors and the Industries within those 

Sectors 30

Table 8: Employers’ Real Hourly Costs for Employee Total 

Compensation, Wages, and Total Benefits for All Workers, 

1991 to 2005 35 

Table 9: Employers’ Real Hourly Costs of Employee Total 

Compensation for All Workers by Establishment Size, 1991 

to 2005 36 

Table 10: Employers’ Real Hourly Costs of Employee Total 

Compensation for All Workers by Full- and Part-time 

Status, 1991 to 2005 37 

Table 11: Employers’ Real Hourly Costs of Employee Total 

Compensation for All Workers by Union Status, 1991 to 

2005 38 

Table 12: Employers’ Real Hourly Costs of Employee Total 

Compensation for All Workers by Industry Sector, 1991 to 

2003 39 

Table 13: Employers’ Real Hourly Costs for Employee Paid Leave, 

Retirement Income, and Health Insurance for All workers, 

1991 to 2005 49 

Table 14: Employers’ Real Hourly Costs for Employee Paid Leave, 

Retirement Income, and Health Insurance by

Establishment Size, 1991 to 2005 50 

Table 15: Employers’ Real Hourly Costs for Employee Paid Leave, 

Retirement Income, and Health Insurance by Full-time and 

Part-time Status, 1991 to 2005 51 

Table 16: Employers’ Real Hourly Costs for Employee Paid Leave, 

Retirement Income, and Health Insurance by Union and 

Nonunion Status, 1991 to 2005 52 

Page ii GAO-06-285 Employee Compensation 
Table 17: Employers’ Real Hourly Costs for Employee Paid Leave, 

Retirement Income, and Health Insurance by Industry 

Sector, 1991 to 2003 53 

Figures 

Figure 1: Growth in Real Employer Hourly Costs for Employee 

Total Compensation, Wages, and Total Benefits for All 

Workers, 1991 to 2005 10 

Figure 2: Growth in Real Hourly Employer Costs of Employee Paid 

Leave, Retirement Income, and Health Insurance for All 

Workers, 1991-2005 14 

Figure 3: Eligibility and Participation in Employer-Provided Health 

Insurance for All Employees by Employer Characteristics, 

1996 to 2003 19 

Figure 4: Average Annual Real Premium for Employer-Provided 

Health Insurance of a Single Worker and Share Paid by 

Employees by Employer Characteristics, 1996 to 2003 20 

Figure 5: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for all Workers by Small Establishment 

Size, 1991 to 2005 40 

Figure 6: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for all Workers by Medium Establishment 

Size, 1991 to 2005 41 

Figure 7: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for all Workers by Large Establishment 

Size, 1991 to 2005 42 

Figure 8: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for Full-time Workers, 1991 to 2005 43 

Figure 9: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for Part-time Workers, 1991 to 2005 44 

Figure 10: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for Union Workers, 1991 to 2005 45 

Figure 11: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for Nonunion Workers, 1991 to 2005 46 

Figure 12: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for Workers in the Service Providing 

Sector, 1991 to 2003 47 

Figure 13: Growth in Real Employer Costs of Employee Wages and 

Total Benefits for Workers in the Goods Producing 

Sector, 1991 to 2003 48 

Page iii GAO-06-285 Employee Compensation 
Abbreviations 

AHRQ Agency for Healthcare Research and Quality 

BLS Bureau of Labor Statistics 

CPI-U-RS Consumer Price Index Research Series 

ECEC Employer Costs for Employee Compensation 

ECI Employment Cost Index 

MEPS Medical Expenditure Panel Survey 

MEPS IC Medical Expenditure Panel Survey-Insurance Component 

NAICS North American Industry Classification System 

NCS National Compensation Survey 

RSE relative standard error 

SIC Standard Industrial Classification 

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Page iv GAO-06-285 Employee Compensation 
United States Government Accountability Office

Washington, DC 20548 

February 24, 2006 

The Honorable Edward M. Kennedy 

Ranking Minority Member 

Committee on Health, Education, Labor 

 and Pensions 

United States Senate 

The Honorable Patty Murray 

Ranking Minority Member 

Subcommittee on Employment and 

 Workplace Safety 

Committee on Health, Education, Labor 

 and Pensions 

United States Senate 

Trends in the costs and availability of employer-sponsored 

compensation—wages, health insurance, retirement income, and paid 

leave—have a significant bearing on U.S. workers and U.S. industry. 

Traditionally, employers used robust compensation packages to attract 

and retain talented workers in order to maintain their competitiveness. 

However, in today’s changing global environment, some employers are 

citing compensation costs as an obstacle to competing against foreign 

businesses where the cost of doing business is lower. As a result, 

employers, in the absence of sufficient growth in productivity, may alter 

compensation packages or ask workers to accept a greater responsibility 

for such costs in the future. 

Through tax subsidies and payroll taxes, federal government policy also 

has a bearing on employees’ access to benefits and on the costs carried by 

employers. The federal government provides significant tax subsidies for 

both health insurance plans and qualified retirement plans. In offering 

these subsidies, the federal government seeks to promote health care and 

retirement income for individuals and families. In addition, workers and

employers are required to pay taxes that fund various programs. These 

include Social Security and Medicare, programs intended to provide 

financial security in retirement, as well as contributions to the 

Unemployment Insurance program, which partially replaces income for 

workers who are involuntarily unemployed. In this way the private system

of employer sponsored benefits works in tandem with social insurance 

programs to promote the well-being of workers and retirees. 

Page 1 GAO-06-285 Employee Compensation 
Given the significance of employer-sponsored compensation for the U.S. 

workforce and the economy, we have examined federal data on employee 

compensation for current workers in private industries to identify 

(1) recent trends in employers’ total compensation costs—including both

wages and benefits; (2) the composition of these trends; (3) whether 

employees’ costs, participation, or access to benefits have changed; and 

(4) the possible implications of those changes for private systems. 

Specifically, we examined data from two federal surveys: the Bureau of 

Labor Statistics’ (BLS) National Compensation Survey (NCS) and the 

Agency for Healthcare Research and Quality’s Medical Expenditure Panel 

Survey (MEPS). We used NCS data to determine trends in private 

employer costs for wages and salaries, total benefits (including those that

employers are legally required to contribute to, such as Social Security), 

and specific employer-provided benefits—retirement income, health

insurance, and paid leave—for 1991 through 2005. All data are from the 

first quarter of each year. Although employers spend funds on benefits and 

may change the benefit package based on cost increases to control 

spending, BLS characterizes its survey data as “costs” to employers. As 

such, we refer to costs to employers in our analysis. The NCS data reflect 

employers’ costs for active employees and do not include costs for 

benefits employers may provide to retirees. We also used NCS data to 

examine trends in current employee participation in retirement plans and 

paid leave between 1990 and 2003. 

We used MEPS data to determine for 1996 through 2003 the trends in 

current employees’ access to and participation in health insurance 

benefits, and the premium cost to private employers and their employees. 

We examined cost and participation data in the aggregate and whenever 

possible by industry sector (goods-producing and service-providing), 

industry type (such as manufacturing), establishment size, workers’ fulltime and part-time status, and workers’ union and nonunion status. The 

NCS measures costs per employee hour worked, and MEPS measures 

costs as an annual average. We report the data as they were measured. 

Because the data are for multiple years, we report all costs in 2004 dollars 

to adjust for inflation. In reviewing both NCS and MEPS data, we 

determined that they were reliable for our purposes. 

In addition to examining data, we convened a panel of 17 experts 

representing the human resources field, industries, unions, and academia 

to discuss the trends in the cost and availability of worker benefits. We 

completed our work between May 2005 and December 2005 in accordance

Page 2 GAO-06-285 Employee Compensation 
with generally accepted government auditing standards. For additional 

discussion of our scope and methodology, see appendix I. 

After controlling for inflation, the average cost of total compensation 

(comprising wages and benefits) for employers grew by 12 percent 

between 1991 and 2005, but increases in benefit costs outpaced wages in 

the most recent years. The real costs (inflation-adjusted) of total benefits, 

which represented roughly a quarter of total compensation, grew by 

approximately 18 percent, while real wages grew by 10 percent. Wages and

benefits increased by about the same percentage from 1991 to 2002, after 

which time wages began to stagnate and benefit costs continued to grow. 

In addition, since 2002, increases in benefit costs outpaced wages among 

all types of employers. For example, increases in benefits surpassed those 

for wages for employers of both union and nonunion workers. However, 

regarding total compensation increases in costs varied by types of 

employers. Specifically, the increases in average total compensation costs 

were greater for employers with medium and large establishments, fulltime workers, and union workers, as opposed to those with small 

establishments, part-time workers, and nonunion workers. 

Results in Brief 

The increase in the cost of a total benefits package from 1991 to 2005 was 

largely composed of increases in the cost of providing health insurance 

and retirement income. In combination with paid leave, these benefits 

comprised almost 60 percent of benefit packages. Paid leave had 

traditionally been the most costly benefit to employers, but by 2005, the 

cost of health insurance equaled that of paid leave. This occurred, in part,

because health insurance costs, adjusted for inflation, grew by 28 percent

since 1991 while the costs for paid leave grew by only 5 percent. Of the 

three benefits, retirement income was the least costly, even though it grew 

by an estimated 47 percent during the period, largely between 2003 and 

2005. In part, this rapid growth occurred because the stock market, bonds, 

and other investments were not delivering returns that allowed employers 

to maintain funding levels for defined benefits plans—those that guarantee 

a payout. Some benefit cost increases were greater for certain types of 

employers and employees. For example, while large establishments saw a 

34 percent increase in health insurance costs between 1991 and 2005, 

medium-sized establishments saw an increase of 45 percent. 

During the time under review, employees’ access to benefits remained 

stable, but participation rates declined for health benefits, some costs have 

been shifted to employees, and they have assumed greater investment risk. 

Between 1996 and 2003, the percentage of employees at establishments 

that offered health insurance did not change and employers continued to 

Page 3 GAO-06-285 Employee Compensation 
pay approximately the same share of the premium for employee health 

insurance, but a smaller percentage of employees participated as the real 

dollar amount of the premiums increased. Some employees also saw 

increases in their deductibles and co-payments during this time, according 

to the expert panelists we convened. With regard to retirement, half of all

workers participated in employer-provided retirement plans between 1991

and 2003, but the types of plans shifted more toward defined contribution 

plans, under which employees assume the investment risk. With regard to

paid leave, holidays and vacations were generally available to most 

workers between 1991 and 2003, but a smaller percentage of workers had 

access to personal leave and sick leave. 

A panel of experts from a variety of backgrounds (including human 

resources, industry, unions and academia) reviewed the trends we found 

in employee compensation and noted that rising benefit costs—increases 

in the cost of health insurance and retirement income—are forcing private

employers and their employees to make trade-offs between wages and 

benefits. Maintaining health care and pensions is the main priority for 

workers, according to union representatives, who said that workers are 

foregoing wage increases in order to maintain benefits. Panelists discussed 

changes occurring in the types of employer-sponsored retirement and 

health care benefits offered and noted that trends in worker benefits are 

shifting toward increasing responsibility and risk to the employee. It was 

noted that these shifts will require increased education in order for 

employees to make informed decisions. Panelists discussed implications 

for increasing benefit costs for both employers and employees, noting that

employers may try to remain competitive in a global environment by 

limiting increases in compensation, by locating some or all of their 

production activity overseas, and by using more contingent workers. It 

was also noted that businesses have concerns about their ability to take on

long-term liabilities associated with certain benefit packages. The expert 

panelists noted that productivity growth is unlikely to support recent 

rising costs of benefits, and in the absence of any major changes, rising 

benefit costs are challenging employers’ ability to offer health insurance 

and retirement income.

We requested comments on a draft of this report from the departments of 

Labor and Health and Human Services. We received technical comments 

from the Bureau of Labor Statistics and the Employee Benefits Security 

Administration at the Department of Labor and from the Agency for 

Healthcare Research and Quality at the Department of Health and Human 

Services. We also provided experts with the section of the draft that 

Page 4 GAO-06-285 Employee Compensation 
characterized the exchange at the expert panel. We incorporated 

comments where appropriate. 

Currently, U.S. workers rely primarily on their employers to provide both 

wages and benefits (such as paid leave, retirement, and health insurance) 

as part of a total compensation package, with wages comprising 

approximately 70 percent of total compensation. Of the benefits package 

employers provide to employees, almost one-third is mandated by law, and 

includes contributions to programs such as Social Security, Medicare, 

workers’ compensation, and unemployment insurance, and other 

programs. The remaining portion of the benefits package is discretionary 

and typically includes paid leave, retirement income, and health 

insurance—some of the more costly benefits. 

Background 

Over the last century, employer-sponsored benefits have become an 

increasingly important part of compensating workers. Prior to the turn of

the 20th century, workers relied primarily on their own, their families’, or 

the communities’ resources in the event of a health or economic 

emergency. With the advent of the industrial revolution in the United 

States, unions began to offer disability and death coverage to workers in 

order to protect them against workplace risks of factory work. The tight 

labor market of World War II, along with Supreme Court rulings and 

federal legislation, helped make benefits a legitimate part of collective 

bargaining and, in part, fueled the offering of employer-sponsored 

benefits. 

Outside the benefits that are legally required, those benefits that 

employers choose to provide serve a number of purposes. From a business 

perspective voluntary benefits assist employers to attract and retain highly

skilled workers. For example, pension plans can be a means of attracting 

workers, reducing turnover, and encouraging productivity. Defined benefit

pension plans, which are typically offered as periodic payments over a 

specified period beginning at retirement age, can be used to foster a 

worker’s long-term commitment to his or her employer. Defined 

contribution pension plans, which are individual accounts to which 

employers and/or employees make contributions, may be attractive to 

employees who desire more portable benefits. In deciding to offer 

benefits, companies must assess the nature of their particular workforce 

to determine if offering benefits is a necessary employment inducement.

Page 5 GAO-06-285 Employee Compensation 
Employers may also choose to sponsor benefit plans because of favorable 

federal tax treatment for certain forms of compensation.1

 To encourage 

them to establish and maintain pension plans, the federal government 

provides preferential tax treatment under the Internal Revenue Code for 

plans that meet certain requirements. A purpose of tax preferences for 

employer-sponsored pensions is to encourage savings for workers’ 

retirement.2

 Pension tax preferences are structured to strike a balance 

between providing incentives for employers to start and maintain 

voluntary, tax-qualified pension plans and ensuring participants receive an 

equitable share of the tax-favored benefits. In fiscal year 2004, the federal 

government was expected to forgo an estimated $95 billion in federal 

income tax revenue due to the tax exclusion for employer-sponsored 

pension plans.3

 Tax policies also contain significant tax benefits for 

employer-sponsored health insurance and medical care. Most notable, the 

tax exclusion for health care permits the value of employer-paid health

insurance premiums to be excluded from employees’ taxable earnings for 

income taxes. It also excludes the value of the premiums from the 

calculation of Social Security and Medicare payroll taxes for both 

employers and employees. The tax exclusion is credited with increasing 

health coverage for employees. The risk pooling under group health 

insurance allows employees to obtain insurance at lower costs than the 

individual insurance market.4

 The federal government was expected to 

 1

Employees in higher tax brackets have greater incentive to seek compensation through tax

preferred benefits. See GAO, Government Performance and Accountability: Tax

Expenditures Represent a Substantial Federal Commitment and Need to Be Reexamined, 

GAO-05-690 (Washington, D.C.: Sept. 23, 2005). 

2

While workers’ cash earnings are taxed immediately, pension plan participants typically do

not include their employer’s or their own contributions (and the investment earnings on

these contributions) to a qualified plan in determining their income tax liability until they

receive benefits. The employer is also entitled to a current deduction (within certain limits) 

for contributions to a tax-qualified plan even though contributions are not currently

included in an employee’s income. See GAO, Answers to Key Questions about Private

Pension Plans, GAO-02-745SP (Washington, D.C.: Sept. 18, 2002). 

3

This reflects the U.S. Department of the Treasury’s estimates for defined benefit and 

defined contribution plans sponsored by all employers (including federal, state, and local 

governments). These estimates measure the income tax revenue loss from exempting 

employer contributions and pension investment earnings offset by taxes paid on current 

pension benefits. Employer pension contributions are also exempt from Social Security 

and Medicare payroll taxes. 

4

Some researchers believe that the unlimited availability of the exclusion for employerprovided health insurance has led to excessive use of health care services, which has

helped to drive up health care prices faster than the overall price level. 

Page 6 GAO-06-285 Employee Compensation 
forgo an estimated $153 billion in taxes in fiscal year 2004 due to the 

exclusion of employer contributions for health care.5

Recent developments are leading employers to make decisions about the 

provision of the employer-based benefits system. An aging population with 

longer life expectancies increases the long-term obligations of companies 

that provide defined benefit pension plans. Some companies have cited 

this obligation as a contributing reason for declaring bankruptcy, 

reorganizing, and terminating large plans of this type. Advances in 

expensive medical technology, increased use of high-cost services and 

procedures, and an aging population have contributed to escalating health 

care costs. Advances in other technologies have stepped up competition 

from foreign firms by increasing global competition. In response to such 

competition, U.S. firms have continued to look for ways to reduce their 

costs, such as offshoring and using contingent workers (many of whom 

are not offered benefits).

In addition to employer-sponsored benefits, multiple federal programs 

supplement workers’ and retirees’ benefits. For example, Social Security 

pays monthly cash benefits to more than 36 million eligible retired or 

disabled workers.6

 Intended to complement retirement incomes, in many 

cases Social Security may provide the only source of such retirement 

income. In addition, the federal-state Medicaid program provides health 

insurance to certain low-income individuals including older Americans in 

need of long-term care who meet financial eligibility and other 

requirements. Most recent figures show Medicare provides health 

insurance to 35 million individuals age 65 years and more than six million 

disabled individuals under age 65.7

 5

This assumes payroll tax revenue losses amount to half of the $102 billion in income tax 

revenue losses estimated by the U.S. Department of the Treasury. 

6

Recipients as of June 2005. Social Security also provides benefits to dependent survivors.

7

See also GAO, 21st Century Challenges: Reexamining the Base of the Federal

Government, GAO-05-325SP (Washington, D.C.: February 15, 2005) and Older 

Workers: Demographic Trends Pose Challenges for Employers and Workers, GAO-02-85 

(Washington, D.C.: Nov. 16, 2001). 

Page 7 GAO-06-285 Employee Compensation 
Private employers’ average cost of total compensation (comprised of 

wages and benefits) for current workers grew by 12 percent between 1991 

and 2005, but benefit costs outpaced wages in the most recent years after 

controlling for inflation. The increases in average total compensation costs 

were greater for employers with medium and large establishments, fulltime workers, and union workers, than for those with small 

establishments, part-time workers, and nonunion workers. The overall real 

costs of benefits grew by 18 percent, while real wages grew by 10 percent. 

Benefits represented more than a quarter of total compensation costs. 

Average 

Compensation Costs 

Grew by 12 Percent 

between 1991 and 

2005, with Benefits 

Outgrowing Wages by 

8 Percentage Points 

While Growth in 

Compensation Costs 

Fluctuated between 1991 

and 2005, Average Benefit 

Cost Increases Had 

Outgrown Average Wage 

Increases by the End of the 

Period 

On average, overall employers’ inflation-adjusted cost for total 

compensation rose about 12 percent between 1991 and 2005. Both 

components of total compensation—wages and benefits—had also grown 

after adjusting for inflation, but at different rates. By the end of the period, 

the cost of total benefits grew by approximately 18 percent and wages had 

increased by 10 percent (see table 1). By 2005, benefits accounted for 

29 percent of total compensation while wages made up 71 percent of the 

workers’ compensation package. 

Table 1: Employers’ Real Average Hourly Costs for Employee Total Compensation,

Wages, and Total Benefits for All Workers, 1991 to 2005

1991 2005 Percentage change

Total compensation $20.83 $23.39 12

Wages and salaries $15.07 $16.60 10

Total benefitsa$5.77 $6.79 18

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series.

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

Wages and total benefits may not add up to equal total compensation due to rounding. 

a

The calculation of benefits includes total benefits tracked by BLS. These benefits include those to 

which employers are legally required to make contributions (Social Security, Medicare, federal and 

state unemployment, and workers compensation), and voluntary benefits (paid leave, supplemental 

pay, insurance plans—life and health, retirement and savings, and other benefits).

Page 8 GAO-06-285 Employee Compensation 
Across the 15 years under examination, the cost of wages and benefits 

generally grew in tandem, albeit at different rates (see fig. 1). The 

noteworthy exception was after 2002 when benefit costs continued in a 

steep ascent and wages began to flatten, resulting in an almost 

8 percentage point difference between the growth rates of the two. The 

recent divergence between benefits and wages is not unprecedented; there 

was a 6 percentage point difference between wage increases and benefit

cost increases in 1994. However, what makes the divergence between the

growth of wages and benefits after 2002 compelling is that it is preceded 

by a steady increase for both. The result, therefore, has been a 

significantly larger real dollar cost to employers—roughly $1,000 more per 

year in benefit costs for each full-time employee—when comparing 1994 to 

2005. 

Page 9 GAO-06-285 Employee Compensation 
Figure 1: Growth in Real Employer Hourly Costs for Employee Total Compensation,

Wages, and Total Benefits for All Workers, 1991 to 2005

90

95

100

105

110

115

120

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Total compensation

Wages and salaries

Total benefits

Notes: Growth in each category between 1991 and 2005 is statistically significant at the 95 percent 

confidence level. 

Data represent costs to private employers only. 

The calculation of benefits includes total benefits tracked by BLS. These benefits include those to 

which employers are legally required to make contributions (Social Security, Medicare, federal and 

state unemployment, and workers compensation), and voluntary benefits (paid leave, supplemental 

pay, insurance plans—life and health, retirement and savings, and other benefits). 

Page 10 GAO-06-285 Employee Compensation 
Increases in the Costs of 

Benefits Outpaced Wage 

Growth among All Types of 

Employers, Although 

Average Cost Increases 

Varied

As was the case in the aggregate, by 2005, growth in the real cost of 

benefits outpaced the increase in wages for each type of employer (see 

table 2). For employers of union workers this effect was even more 

pronounced; these employers experienced benefit cost increases greater 

than wage increases over most of the time period and saw several years of 

no growth in wages. This pattern of benefit growth outpacing wage growth 

rates was least pronounced for employers of part-time workers, but still 

true.8

 (See app. II, fig. 5 to 13 for all employers.) 

Table 2: Growth in Employers’ Real Hourly Costs for Employee Total Compensation, Wages, and Total Benefits by Employer 

Type, 1991 to 2005 

In percent 

 

Total compensation

growth, 1991-2005 

Wages growth, 

1991-2005 

Total benefit cost

growth, 1991-2005 

Benefits as a 

proportion of total 

compensation, 2005

Aggregate compensation 12 10 18 29

Type of employer 

Small establishments 

(1-99 workers) 8 7 12 26

Medium establishments 

(100-499 workers) 22 19 31 30

Large establishments 

(500+ workers) 21 17 31 33

Full-time workers 16 14 24 30

Part-time workers 13 12 15 21

Unionized workers 21 14 32 37

Nonunionized workers 13 11 20 28

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

 8

BLS began using new codes to classify industries with the 2004 data. Therefore, data 

comparable to 1991 to 2003 were not available by industry. Although we could not look at

the data across the complete time period, for industry sectors, the trends appear to follow a 

similar pattern. For example, for employers in the service-providing sector, growth in 

wages flattened in 2002 while an increase in the cost of benefits continued (see app. II, fig. 

12 and 13). Under the old industry codes, the goods-producing sector included the 

following industries: mining, construction, and manufacturing. The service-providing sector 

included the following industries: transportation and utilities; wholesale trade; retail trade;

finance, insurance, and real estate; and services. Within the industry sectors the following 

industries showed statistically significant increases in wages: manufacturing (7 percent), 

retail trade (7 percent), and services (17 percent). The following industries showed 

statistically significant increases in total benefits: manufacturing (12 percent); wholesale 

trade 

(15 percent); finance, insurance, and real estate (34 percent); and services (18 percent). 

Page 11 GAO-06-285 Employee Compensation 
Notes: Bold signifies that percentage changes between 1991 and 2005 are statistically significant at 

the 95 percent confidence level. 

Data represent costs to private employers only. 

The growth rates for certain groups of employers may be higher than the aggregated average growth 

rate due to changes in employment composition and compensation cost levels overtime. 

While employers uniformly saw average real benefit costs grow more than 

average real wages, the overall increase in total compensation varied by

employer type. Employers at medium (100 to 499 workers) and large 

establishments (500 or more workers) experienced increases in total 

compensation costs of roughly 20 percent. In contrast, small 

establishments did not experience statistically significant increases in total 

compensation costs. Employers’ total compensation costs for full-time 

workers increased by 16 percent as compared with the 13 percent increase 

for part-time workers. Employers of unionized workers saw their total 

compensation costs grow by 21 percent as compared to the 13 percent 

increase experienced by employers of nonunion workers.9

 (See app. II,

tables 8 to 12 for all employers.) 

The increase in the cost of a total benefits package from 1991 to 2005 was 

largely composed of increases in the cost of providing health insurance 

and retirement income. Paid leave had traditionally been the most costly 

benefit to employers, but by 2005, the cost of health insurance equaled that 

of paid leave. Of the three benefits, retirement income was the least costly, 

even though it grew by an estimated 47 percent in real terms during the 

period, largely between 2004 and 2005. 

The Increase in 

Employers’ Cost of 

Benefits Was Largely 

Composed of 

Increases in the Cost 

of Health Insurance 

and Retirement 

Benefits

 9

Although 2004-2005 data for industry sectors are not comparable with earlier years, we did

find that from 1991 to 2003 employers in the service-providing sector saw total 

compensation costs increase by 13 percent. This compares with an 8 percent increase in 

the goods producing sector. Only the manufacturing (8 percent); finance, insurance, and 

real estate (20 percent); and services (17 percent) industries showed statistically significant 

changes in total compensation. 

Page 12 GAO-06-285 Employee Compensation 
The increase in the real cost of a total benefits package from 1991 to 2005

was largely composed of increases in the real cost of providing health

insurance and retirement income. (See table 3 and fig. 2.) Paid leave had 

traditionally been the most costly benefit to employers, but by 2005, the 

cost of health insurance equaled that of paid leave.10 This occurred, in part,

because health insurance costs grew by 28 percent while the costs for paid 

leave did not show significant growth during the period under study. Of 

the three benefits, retirement income was the least costly, even though it

grew by an estimated 47 percent during the period, largely between 2004 

and 2005. In combination with paid leave, these three benefits represented 

on average almost 60 percent of an employee’s total benefit package and

over 80 percent of employers’ costs for voluntary benefits.11

Employers’ Costs for 

Health Insurance and 

Retirement Income

Increased over 27 Percent 

between 1991 and 2005 

Table 3: Employers’ Real Hourly Costs for Employee Paid Leave, Retirement 

Income, and Health Insurance, 1991 to 2005 

1991 2005

Percentage

change

Paid leave $1.42 $1.49 5

Retirement income $0.59 $0.87 47

Health insurance $1.24 $1.59 28

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

 10There was no statistically significant difference between the costs of paid leave and 

health insurance at the 95 percent confidence level. Paid leave costs are tied to wages and 

salaries since employees are generally paid at the same wage rate when using paid leave. 

11Other voluntary benefits included in the National Compensation Survey include 

supplemental pay, life insurance, short-term and long-term disability, and other benefits, 

such as severance pay.

Page 13 GAO-06-285 Employee Compensation 
Figure 2: Growth in Real Hourly Employer Costs of Employee Paid Leave, 

Retirement Income, and Health Insurance for All Workers, 1991-2005

90

100

110

120

130

140

150

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Paid leave

Retirement and savings

Health insurance

Notes: Growth in retirement income and health insurance between 1991 and 2005 are statistically 

significant at the 95 percent confidence level while the growth in paid leave is not. 

Data represent costs to private employers only. 

Expert panelists discussed underlying factors driving trends in real costs 

for employer-sponsored benefits from 1991 to 2003. Regarding trends in 

retirement income, an expert noted that employers decreased their 

contributions to funds for defined benefit plans during the 1990s, which 

was reflected in a decrease in employer spending for retirement income. 

According to the Bureau of Labor Statistics,12 defined-benefit pension plan 

assets grew rapidly in the middle to late 1990s as the stock market 

continued to rise, so employers often did not need to contribute funds to 

defined-benefit pension plans. Stock prices generally fell from April 2000

 12See Joseph R. Meisenheimer II, “Real Compensation, 1979 to 2003: analysis from several 

data sources,” Monthly Labor Review, Volume 128, Number 5 (Washington, D.C.: Bureau of 

Labor Statistics, Department of Labor; May 2005). 

Page 14 GAO-06-285 Employee Compensation 
to February 2003,

13 and interest rates on bonds and other investments 

remained low, requiring employers to contribute more funding to definedbenefit plans beginning in 2003 to meet minimum funding requirements.14

Recent increases in employer costs for retirement benefits can be 

attributed to a similar phenomenon. Legislation enacted in 2004—the 

Pension Funding Equity Act—provided 2-year relief for businesses, 

allowing contributions to be reduced compared to what would have 

otherwise been required. 

In the case of health care benefits, in addition to increases in the cost of 

providing medical services, several factors were noted to drive trends in 

employer costs. These include the health insurance underwriting cycle, the 

emergence of managed care, competition, and consolidation in the health

care industry. In the underwriting cycle, health insurance companies 

forecast premium costs and then set their prices either higher to maximize 

profitability or lower to maximize market share. In the early 1990s, 

managed care plans lowered their premium prices in order to increase 

market share, fueling price competition among health insurance 

companies. However, later in the decade, many plans moved away from 

tightly managed health care plans. As one expert noted, in the late 1990s, 

insurer consolidation and mergers led to a more concentrated industry. 

Research in this area suggests that many of the remaining plans shifted 

their strategies from gaining market share to improving profitability, 

stimulating premium increases and spurring the upward trend in costs for 

employers.15

For Most Employers, 

Retirement Income

Showed the Greatest 

Percentage Increase 

Most types of employers experienced the largest percentage increases in 

costs for retirement income compared to the growth in costs for health 

insurance and paid leave between 1991 and 2005 (see table 4). This was 

true for employers whether they had union or nonunion employees, or 

whether they employed part-time or full-time workers. Small 

establishments were the one exception; health insurance represented their 

greatest cost increase. Nevertheless, the real dollar costs for health 

 13In commenting on this report, BLS reported that an additional reason for the change in 

retirement costs may be the way in which benefit cost levels are collected and calculated. 

14Defined benefit plans are required to make an actuarial evaluation annually to determine 

their minimum funding requirements. 

15See Joy M. Grossman and Paul B. Ginsburg, “As The Health Insurance Underwriting Cycle 

Turns: What Next?” Health Affairs, Volume 23, Number 6, (November/December 2004). 

Page 15 GAO-06-285 Employee Compensation 
insurance and paid leave remained larger than retirement income costs for 

all employers.16 Appendix III, tables 13 to 17 provide real costs for paid 

leave, retirement income, and health insurance for each employer 

characteristics between 1991 and 2005.17

Table 4: Percentage Changes in Employers’ Hourly Costs of Employee Paid Leave, 

Retirement Income, and Health Insurance for All Workers by Employer Type, 1991 

to 2005 

Paid 

leave

Retirement 

income

Health

insurance

Aggregate 5 47 28

Type of employer 

Small establishment 

(1-99 workers) 1 12 25

Medium establishment 

(100-499 workers) 20 61 45

Large establishment 

(500+ workers) 16 99 34

Full-time workers 12 55 34

Part-time workers -1 48 32

Union workers 13 97 50

Non-Union workers 7 45 30

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Bold signifies that percentage changes between 1991 and 2005 are statistically significant at 

the 95 percent confidence level. 

Data represent costs to private employers only. 

 16The one exception to this trend was for employers of union workers in 2005. For that

year, the cost of retirement income was higher than paid leave. However, the cost of health 

insurance remained higher than both paid leave and retirement income. 

17While comparable data covering the 2004-2005 period are not available for industry

sectors, from 1991 to 2003 available data show the largest percentage increase in benefits 

costs for the goods-producing sectors was in health insurance. The growth in retirement 

income was largest for employers in the service-providing sector during this period. 

Page 16 GAO-06-285 Employee Compensation 
During the time under review, employees’ access to benefits has remained 

stable, but participation rates declined for health benefits, some costs have 

shifted to employees, and they have assumed more investment risk. 

Between 1996 and 2003, the percentage of employees at establishments 

that offered health insurance did not change. Also, employers continued to 

pay approximately the same share of the premium for employee health 

insurance, but a smaller percentage of employees participated as the real 

dollar amount of the premiums increased. Some employees also saw 

increases in their deductibles and co-payments during this time, according 

to the expert panelists we convened. With regard to retirement income, 

half of all workers participated in employer-provided retirement plans 

between 1991 and 2003, but the types of plans shifted more toward defined 

contribution plans, under which employees assume the investment risk. 

With regard to paid leave, holidays and vacations were generally available

to all workers between 1990 and 2003, but a smaller percentage of workers 

had access to personal leave and sick leave. 

Employees’ Access to 

Benefits Remained 

Generally Stable, but 

Employees Face 

Greater Costs and 

Assume More 

Investment Risk 

The Share of Health Care 

Premiums Paid by 

Employees and Employers 

Remained Relatively 

Stable, but Employee 

Participation Declined 

Between 1996 and 2003, the percentage of employees who worked at 

establishments offering health insurance to their employees remained at 

about 87 percent. However, the percentage of those employees eligible 

for the benefit decreased to 79 percent in 2003 (see fig. 3). Moreover, of 

those who were eligible, the percentage who participated in their 

companies’ plans decreased from 86 to 80 percent. During this period, real

premiums for health insurance for single workers increased by 

34 percent—from an annual average of $2,706 to $3,633. Employees’ 

share of these premiums showed no statistically significant increase over

18

19

the time period under review and ranged between 16 and 18 percent. 

However, their real dollar contribution increased from an annual average 

of $465 to $633, after adjusting for inflation. Some experts have noted that

 18Data presented on premiums, the percentage of workers at establishments offering health 

insurance, the percentage of workers eligible for health insurance at firms offering the

benefit, and the percentage of eligible workers who enroll in the benefit are from the

Medical Expenditure Panel Survey-Insurance Component (MEPS IC) and represent the 

years 1996 to 2003. The data used for this analysis did not allow us to assess the adequacy

of coverage, or any change in quality. (See app. I for more details.) 

19Premium costs presented here are for single workers coverage. Family coverage 

premiums increased by 43 percent between 1996 and 2003—from an annual average of 

$6,732 to $9,654. The real premium included both the employee’s and employer’s share. To

control for the effect of inflation in health insurance premiums, dollars are reported in 2004

terms by using the BLS Consumer Price Index for Medical Care. Inflation in medical care

has been great, and using an all items CPI would overstate the growth in premium costs. 

Page 17 GAO-06-285 Employee Compensation 
some employees’ deductibles and co-payments also increased during this 

period. 

The percentage of establishments offering insurance, the percentage of 

employees eligible, and the percentage of eligible employees enrolled 

ranged across all types of employers. This suggests that some employees 

were more likely to receive employer-sponsored health insurance than 

others (see fig. 3). For example, the percentage of employees who worked 

at small firms (1 to 9 employees) offering health insurance was 46 percent 

compared with 99 percent for those in firms of 1,000 or more employees. 

The same was true for the percentage of employees eligible to participate 

in the health insurance plans offered by companies. For example, of those 

employed part-time, 32 percent were eligible while 89 percent of those 

who worked full-time were eligible. This was also the case for 

participation among those eligible. For most types of employers, over 

75 percent of eligible employees enrolled in the company’s health plan. 

This trend was true across firm sizes, for most industries, and union 

status. The exception to this trend was in retail where the enrollment rate 

was 67 percent and for part-time workers at 48 percent. 

Page 18 GAO-06-285 Employee Compensation 
Figure 3: Eligibility and Participation in Employer-Provided Health Insurance for All Employees by Employer Characteristics,

1996 to 2003

Note: Bold signifies that percentage changes between 1996 and 2003 are statistically significant at 

the 95 percent confidence level. 

The health insurance premium increases seen overall were true for every

type of employer regardless of characteristics, such as firm size or 

industry. For each type, the average annual single worker premiums 

increased between 1996 and 2003 by at least 24 percent (see fig. 4). By 

2003, the average premium ranged between $3,445 and $4,278, after 

adjusting for inflation. The mining industry experienced the largest 

increase over the time period, while premiums for employers and workers 

in the transportation and utilities industry increased the least. Employees’ 

Page 19 GAO-06-285 Employee Compensation 
shares of these premiums ranged between 12 percent and 21 percent. At 

the high end of the range were employees in the retail industry, which also

had one of the largest declines in enrollment across the period examined.

Figure 4: Average Annual Real Premium for Employer-Provided Health Insurance of 

a Single Worker and Share Paid by Employees by Employer Characteristics, 1996 to

2003

4,002

3,633 34

32

36

39

39

31

34

34

43

35

42

24

37

39

33

30

35

26

3,724

3,622

3,580

3,580

3,782

3,588

3,921

3,594

4,278

3,662

3,558

3,464

3,554

3,445

3,733

3,765

Firm size

Aggregate

Total premiums in 2003 (in dollars)

Percentage of change

in annual average premium

(1996-2003)

Less than 10 employees

10 to 24 employees

25 to 99 employees

100 to 999 employees

1000 or more employees

Less than 50 employees

50 or more employees

Source: GAO analysis of Agency for Healthcare Research and Quality (AHRQ) data from the Medical Expenditure Panel Survey (MEPS).

Union status

Union employees

Non-union employees

Industries

Mining

Construction

Manufacturing

Transportation

and utilities

Wholesale trade

Retail trade

Finance, insurance,

and real estate

Services

17

12

15

18

18

18

15

18

18

13

15

16

17

16

18

21

16

17

Percentage

of employee

contribution (2003)

Notes: Bold signifies that percentage changes between 1996 and 2003 are statistically significant at 

the 95 percent confidence level. 

Page 20 GAO-06-285 Employee Compensation 
Premiums are measured as the annual average cost for employers and employees for single 

workers. To control for the effect of inflation, dollars are reported in 2004 terms by using the BLS 

Consumer Price Index for Medical Care. Data on premium amounts are not available by full- or parttime status. 

About Half of Employees 

Had Access to Retirement 

Income Plans, with a Trend 

Toward Defined 

Contribution Plans 

Employee participation in retirement plans did not change significantly 

between 1990 and 2003.

20 Roughly half of all workers participated in an 

employer-sponsored retirement plan, and closer to 60 percent of those 

who were full-time employees did so. However, there was a noticeable

shift that occurred from defined benefit retirement plans to defined 

contribution plans (see table 5).21 Employers who sponsor defined benefit

retirement plans agree to make future payments during the employee’s 

retirement. To meet this obligation employers are responsible for making 

contributions sufficient to fund promised benefits, investing and managing

plan assets, and bearing the investment risk. Under defined contribution 

retirement plans, employers may make contributions but have no 

obligations regarding the future sufficiency of those funds. Thus, this shift 

from defined benefit to defined contribution plans shifts the responsibility 

for providing for one’s retirement income to the employee. In addition, 

while participation in most defined benefit plans is automatic (depending 

on one’s position), many defined contribution plans require employee 

contributions before the employer makes a contribution.22

 20Data on the availability of retirement and paid leave benefits to employees are from the

BLS’ National Compensation Survey. Available data did not allow us to assess the adequacy 

of the retirement income available to plan participants. 

21For this analysis, we relied on previous analysis issued by BLS that did not include trends

across time by industry, for union or nonunion workers, or part-time workers. See William 

J. Wiatrowski, “Documenting Benefits Coverage for all Workers,” originally posted May 26, 

2004, revision posted December 21, 2005; U.S. Department of Labor, Bureau of Labor 

Statistics, http://www.bls.gov/opub/cwc/print/cm20040518ar01p1.htm (last accessed Jan. 

24, 2006). 

22See GAO, Private Pensions: Issues of Coverage and Increasing Contribution Limits for 

Defined Contribution Plans, GAO-01-846 (Washington, D.C.: Sept. 17, 2001). 

Page 21 GAO-06-285 Employee Compensation 
Table 5: Participation in Employer-Provided Defined Benefit and Defined Contribution Retirement Plans for All Workers and

Full-time Workers, 1990 to 2003

Workers participating in a 

retirement plan regardless of

type of plan Defined benefit Defined contribution 

Year 

All 

workers 

Full-time 

workers

All 

workers

Full-time 

workers 

All

workers

Full-time 

workers

1990-1991 53% 60% 35% 39% 34% 39%

1991-1992 54% 61% 34% 39% 35% 40%

1992-1993 53% a 32% a 35% a

1993-1994 50% 58% 28% 33% 34% 40%

1994-1995 51% 60% 28% 33% 37% 44%

1995-1996 a61% a32% a46%

1996-1997 53% 62% 27% 32% 40% 47%

1998 a a a a a a

1999 48% 56% 21% 25% 36% 42%

2000 48% 55% 19% 22% 36% 42%

2001 a a a a a a

2002 a a a a a a

2003 49% 58% 20% 24% 40% 48%

Source: GAO presentation of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

a

Data were not collected or not tabulated in a given year. The entire private sector economy was not 

surveyed at the same time until 1999, which results in data that span multiple and overlapping 

periods prior to then. 

Note: Percentages do not add up to 100 because workers might be enrolled in both defined benefit 

and defined contribution plans. 

Paid Leave Was Generally 

Available to All Workers, 

but Certain Types of Leave 

Were Less Available to 

Part-Time Workers 

The percentage of employees offered paid leave was relatively stable 

between 1990 and 2003. Across the period, three-quarters or more of all 

workers were eligible for paid holidays and vacations. Full-time workers 

were more likely than part-time workers to be offered employer-sponsored 

paid leave (see table 6).23

 23For this analysis, we relied on previous analysis issued by BLS that did not include trends

across time by industry, for union or nonunion workers, or part-time workers. See William 

J. Wiatrowski, “Documenting Benefits Coverage for all Workers,” originally posted May 26, 

2004, revision posted December 21, 2005; U.S. Department of Labor, Bureau of Labor 

Statistics, http://www.bls.gov/opub/cwc/print/cm20040518ar01p1.htm (last accessed 

Jan. 24, 2006). 

Page 22 GAO-06-285 Employee Compensation 
Table 6: Percent of Workers Offered Employer-Provided Paid Leave, 1990 to 2003

Year Holidays Vacations

Personal 

leave

Funeral 

leave

Jury duty 

leave 

Military 

leave

Sick 

leave

1990-1991 All workers 79% 83% 14% 56% 62% 32% 50%

 Full-time workers 88% 92% 16% 63% 70% 37% 57%

1991-1992 All workers 77% 82% 14% 57% 63% 31% 52%

 Full-time workers 87% 92% 16% 65% 71% 37% 60%

1992-1993 All workers 77% 82% 15% 57% 64% 30% 50%

 Full-time workers a a a a a a a

1993-1994 All workers 75% 80% 14% 56% 63% 27% 47%

 Full-time workers 86% 92% 16% 65% 72% 33% 57%

1994-1995 All workers 74% 80% 15% 55% 62% 25% 44%

 Full-time workers 85% 92% 17% 65% 71% 30% 52%

1995-1996 All workers a a a a a a a

 Full-time workers 84% 91% 18% 64% 71% 30% 54%

1996-1997 All workers 73% 79% 15% 56% 63% 27% 44%

 Full-time workers 85% 91% 17% 66% 73% 32% 53%

1998 All workers a a a a a a a

 Full-time workers a a a a a a a

1999 All workers 75% 79% a a a a53%

 Full-time workers 87% 90% a a a a63%

2000 All workers 77% 80% a a a a a

 Full-time workers 87% 91% a a a a a

2001 All workers a a a a a a a

 Full-time workers a a a a a a a

2002 All workers a a a a a a a

 Full-time workers a a a a a a a

2003 All workers 79% 79% a a70% 50% a

 Full-time workers 91% 91% a a77% 56% a

Source: GAO presentation of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

a

Data were not collected or not tabulated in a given year. The entire private sector economy was not 

surveyed at the same time until 1999, which results in data that span multiple and overlapping 

periods prior to then. 

Page 23 GAO-06-285 Employee Compensation 
Experts who reviewed our data found it reflected their experience and

asserted that rising benefit costs have been leading employers and 

employees to make increasingly difficult trade-offs between wages and 

benefits. Maintaining health care and pensions is the main priority for 

workers, according to union representatives who said that workers are 

trading wage increases in order to maintain benefits. A panelist noted that

workers consistently choose to preserve health care benefits over 

increases in cash compensation. On the other hand, it was noted by a 

small business leader that in his experience some employees, particularly 

younger people, prefer to increase wages rather than preserve benefits. A

panelist explained that it is the rise in the actual dollar costs of benefits 

that is driving both employer’s and employee’s decisions. 

Experts Agreed That 

Rising Benefit Costs 

Are Forcing Private 

Employers and Their 

Employees to Make 

Trade-Offs between 

Wages and Benefits 

Additionally, our compensation data for the past decade provoked a 

number of observations from the panelists regarding the likelihood of 

shifting risk to the individual employee. Experts discussed the continuing

shift in employer-sponsored retirement income from defined benefit to 

defined contribution plans. One expert predicted the eventual termination 

of defined benefit plans, a freeze or decrease in hybrid plans (those that 

combine features of defined benefit and defined contribution plans), and a 

shift towards 401(k) savings plans (which are a type of defined 

contribution plan).24 Panelists also observed that with regard to health 

benefits, employers are experimenting with consumer-directed health care 

plans, which may also shift more responsibility and risk to the individual 

employee.25 In addition, employers are considering changing the way they

offer compensation. Experts agreed that there has been a movement from 

fixed to incentive compensation, wherein employers tie cash 

compensation to productivity. It was noted that some employers are 

turning to stock options in lieu of wage increases. Given the risks implied 

for the individual in such private sector plans, for both retirement and 

 24GAO has found similar trends. See GAO, Private Pensions: Issues of Coverage and

Increasing Contribution Limits for Defined Contribution Plans, GAO-01-846 

(Washington, D.C.: Sept. 17, 2001); GAO, Private Pensions: Improving Worker Coverage 

and Benefits, GAO-02-225 (Washington, D.C.: Apr. 9, 2002); and GAO, Pension Benefit

Guaranty Corporation: Single-Employer Pension Insurance Program Faces Significant 

Long-Term Risks, GAO-04-90 (Washington, D.C.: Oct. 29, 2003). 

25Consumer-directed health plans are a relatively new health care plan design. While many

variants exist, such plans generally include three basic precepts: an insurance plan with a 

high deductible, a savings account to pay for services under the deductible, and decision 

support tools. See GAO, Federal Employees Health Benefits Program: Early Experience

with a Consumer-Directed Health Plan, GAO-06-143 (Washington, D.C: Nov. 21, 2005). 

Page 24 GAO-06-285 Employee Compensation 
health care, a panelist emphasized that employees will need adequate 

education to make informed decisions.26

Panelists also made observations about the rise in compensation costs and

their current and future implications for business and for employees. One 

benefits expert stated that if an employer is locked into paying

compensation costs that the productivity of their workers cannot support, 

jobs will go elsewhere. A union representative noted that the garment 

industry has faced international competitors with lower compensation 

costs, which has led to lowered compensation for U.S. workers and a loss 

of domestic jobs. It was noted that employers may attempt to remain 

competitive by cutting wages and benefits for workers, offshoring jobs, 

and increasing the use of contingent workers, who may not be provided 

benefits. It was also noted that businesses have concerns about their 

ability to sustain long-term liabilities associated with certain benefit 

packages. 

Experts disagreed on whether or how much of the responsibility for 

addressing the rise in benefit costs should rest with the public sector. In 

the view of a union spokesperson, such benefits amount to a social good,

something that supports the well-being and overall productivity of society. 

A union representative noted that employees who have dropped out of 

health insurance plans, especially employees in lower wage industries, 

have subsequently relied on public programs in which taxpayers ultimately 

bear the cost. Other panelists expressed belief in the marketplace as an 

arbiter of resources and said that government or public benefit models are 

not a solution to employers’ rising costs for compensation. These panelists

suggested competition would eventually resolve the distribution of 

benefits by winnowing out companies that could not attract the kind of 

employees needed with the type of compensation they provide. One 

panelist emphasized that government, therefore, should have limited 

involvement in the provision of employer-sponsored benefits. A human 

resources representative suggested that businesses should be allowed to 

experiment with different means of providing benefits. On the other hand, 

it was also suggested that future solutions to benefit costs would require 

both public and private initiative and collaboration. A union representative 

 26See also GAO, Private Pensions: Participants Need Information on Risks They Face in 

Managing Pension Assets at and during Retirement. GAO-03-810 (Washington, D.C.: 

July 29, 2003). 

Page 25 GAO-06-285 Employee Compensation 
noted that partnerships among employers, workers, and government could 

begin to address the problem of rising benefit costs. 

Aside from such different viewpoints, most panelists noted that the 

employer-sponsored system of benefits in its current form may not be 

sustainable, largely because productivity growth is unlikely to support 

rising benefit costs.27 Given the potential for this unsustainability, they 

noted that employers and employees will be forced to continue making 

trade-offs between wages and benefits. 

While public policy has focused on the rise of health care costs as it affects 

today’s retirees, it is apparent that these expenses are also having an effect

on current workers and their employers. The growth in real costs is 

significant, especially given the decrease in participation among those 

eligible. While a number of factors could influence an employee’s decision 

not to participate in employer-sponsored benefits, cost is certainly one of

them. 

Concluding 

Observations 

In the United States, retirement income rests on a proverbial “three-legged

stool.” This is income derived from Social Security, employer-sponsored 

pension plans, and personal savings—all requiring investment over the 

working life of the employee. For pensions, the ongoing shift to defined 

contribution plans will require that Americans become far more educated 

and resourceful to successfully manage the associated risk. With regard to

defined benefit plans, it will be imperative that they are not underfunded 

so that current and future retirees are not put at risk or that taxpayers are 

not asked to pay when companies default on their obligations. 

Rising health care and retirement costs affect both employers and 

employees. Employers may turn to using more contingent workers to 

whom they may not need to pay benefits and to a workforce overseas. 

From the employees’ perspectives, as the cost of benefits rises, they will 

be confronted with continued trade-offs in their compensation packages. 

For the nation itself, health care and retirement are part of a large and 

growing fiscal challenge. As policy makers deliberate over public policy 

 27Over the last two decades, the average level of productivity—which affects the level of

compensation employers may choose to offer—has increased. Between 1980 and 1995, the

average annual growth in labor productivity per hour was 1.6 percent. Between 1996 and 

1999, this average annual growth increased to 2.7 percent. Between 2000 and 2004, the 

average annual growth was 3.3 percent. 

Page 26 GAO-06-285 Employee Compensation 
support for retirees, they will want to be cognizant of the related challenge 

posed by the trends in the cost and availability of employer-sponsored 

compensation. 

We requested comments on a draft of this report from the departments of 

Labor and Health and Human Services. We received technical comments 

from the Bureau of Labor Statistics and the Employee Benefits Security 

Administration at the Department of Labor and from the Agency for 

Healthcare Research and Quality at the Department of Health and Human 

Services. We also provided experts with the section of the draft that 

characterized the exchange at the expert panel. We incorporated 

comments where appropriate. 

Agency Comments 

We are sending copies of this report to the Secretaries of Health and 

Human Services and Labor, relevant congressional committees, and other 

interested parties. Copies will be made available to others upon request. In

addition, the report will be available at no charge on GAO’s Web site at 

http://www.gao.gov. Please contact me at (202) 512-7003 if you or your 

staff have any questions about this report. Other major contributors to this 

report are listed in appendix IV. 

Sigurd R. Nilsen 

Director, Education, Workforce, 

 and Income Security Issues 

Page 27 GAO-06-285 Employee Compensation 
Appendix I: Scope and Methodology 

Page 28 GAO-06-285 Employee Compensation 

Appendix I: Scope and Methodology 

To determine recent trends in employers’ total compensation costs and the

factors contributing to the trends, we obtained data from the Department 

of Labor’s Bureau of Labor Statistics (BLS). We used the BLS’ Employer 

Costs for Employee Compensation (ECEC), which is derived from data 

collected in the BLS’ National Compensation Survey (NCS).1

 Although 

employers spend funds on benefits and may change the benefit package 

based on cost increases to control spending, BLS characterizes its survey 

data as “costs” to employers. As such, we report on costs to employers. 

NCS data are collected from a sample of establishments and include 

information about the hourly costs of the components of total 

compensation for a number of establishments and employee 

characteristics. Samples are selected using a methodology called 

probability proportional to employment size, which means that 

establishments with larger employment have a greater chance of selection. 

Weights are then applied to establish the estimates. Survey coverage

includes private sector establishments with one or more workers and state 

and local governments with one or more workers. Agricultural, private 

households, and the federal government are not included in the survey. 

Our analysis focuses on private sector employers’ hourly costs for total 

compensation, wages and salaries, and total benefits. Within total benefits, 

we focus on the three most costly discretionary benefits—paid leave, 

health insurance, and retirement benefits. Costs are calculated for active

workers and do not include costs for retiree benefits. We analyzed data for 

the period 1991 to 2005.2

 All data are from the first quarter of each year. 

Those data that were not available from BLS’s on-line resources were 

obtained directly from BLS. 

In the ECEC, costs are measured as the average employer costs per 

employee hour worked for wages and salaries and total benefits. To 

control for the effect of inflation, we adjusted all dollars to 2004 terms by 

using the BLS’s Consumer Price Index Research Series (CPI-U-RS) for 

2004. The CPI-U-RS presents an estimate of the CPI for all urban 

consumers from 1978 to 2004 that incorporates most of the improvements 

in the CPI calculations made by BLS over that time period. 

 1

The NCS data is also used to produce the Employment Cost Index (ECI), which measures

the change in employer costs for wages and benefits. Both the ECI and the ECEC are

published quarterly. The NCS survey also provides data on benefit plans, which was 

previously collected in the Employee Benefits Survey. See 

http://www.bls.gov/ncs/home.htm for more detailed information about the NCS. 

2

While BLS has been collecting data on employee benefits since the 1950s, these years 

represent the most comprehensive data available. 
Appendix I: Scope and Methodology 

We used a z-test to test whether the costs in 2005 were statistically 

significantly different from the costs in 1991. BLS provided us with the 

relative standard errors (RSE) for the years 2000 to 2003, which BLS 

officials contend provide reasonable estimates of what the RSEs are for 

the earlier data. To ensure the greatest level of confidence, we used the 

highest RSE between 2000 and 2003 to ensure a conservative measure of 

statistical significance. 

Our analysis included the following data elements: 

• Total compensation consists of the sum of costs for wages and salaries 

and total benefits. 

• Wages and salaries are defined as the hourly straight-time wage rate, or 

for workers not on an hourly basis, straight-time earnings divided by the 

corresponding hours. Straight-time wages and salary rates are total 

earnings before payroll deductions and include production bonuses, 

incentive earnings, commission payments, and cost-of-living adjustments. 

• Total benefits include legally required benefits (Social Security, 

Medicare, federal and state unemployment, and workers’ compensation). 

Voluntary benefits reflected in the total benefits calculation are paid leave; 

supplemental pay (overtime and premium pay, shift differentials, and 

nonproduction bonuses); insurance benefits (life, health, short-term 

disability, and long-term disability); retirement and savings benefits; and 

other benefits (severance pay and supplemental unemployment plans). 

• Paid Leave includes vacation, holidays, sick leave, and other leave

such as personal leave, military leave, and funeral leave. 

• Retirement and Savings includes savings and thrift plans, defined 

benefit, and defined contribution plans. Due to a change in the way 

BLS classifies retirement plans, we report on the broader category of 

“retirement and savings” in this report. Beginning in 1996, pension and 

savings plans within existing sampling units were examined to

determine which were defined benefits or defined contributions and 

were reclassified as such. Although the old divisions cannot be 

compared with the new divisions, the overall category of retirement 

and savings remains comparable. 

• Health insurance includes medical, stand-alone dental, and standalone vision.

Page 29 GAO-06-285 Employee Compensation 
Appendix I: Scope and Methodology 

• Establishments are defined as single physical locations, such as a factory 

or a retail store, and may be part of a larger firm. The break-outs for 

establishment size were provided to us from BLS as small (1 to 99 

employees), medium (100 to 499 employees), and large (500 or more 

employees). 

• Union status is determined separately for each occupation in an 

establishment. An occupation is considered union if all of the following 

conditions are met: a labor organization is recognized as the bargaining 

agent for workers in the occupation; wage and salary rates are determined

through collective bargaining or negotiations; and settlement terms, which 

must include wage provisions and may include benefit provisions, are 

embodied in a signed mutually binding collective bargaining agreement. 

Not all employees need to belong to the union for the occupation to be 

classified as such. 

• Full-time and part-time status is defined by the establishment reporting 

the data. 

• Industry sectors and industries are based on the Standard Industrial 

Classification System (SIC). The industries within each sector are in table 

7. The industry definitions in the NCS changed in 2004, making data prior 

to 2004 not comparable to the newer data. Therefore, we only present 

industry data for the period 1991 to 2003. 

Table 7: Private Industry Sectors and the Industries within those Sectors

Sector and industries Examples 

Goods-producing

Construction General contractors, plumbing, electrical work, carpentry 

Manufacturing Durable and nondurable goods 

Mining Metal mining, coal mining, gas extraction 

Service-providing

Transportation and Public Utilities Transportation; public utilities, communications; and electric, gas, and sanitary 

services 

Wholesale trade Durable and nondurable products 

Retail trade Food stores, car dealers, eating and drinking places 

Finance, insurance, and real estate Banking and other credit agencies, and insurance agents and brokers, real estate 

agents 

Services Business services, health services, hotels, personal services 

Source: Bureau of Labor Statistics, U.S. Department of Labor.

Page 30 GAO-06-285 Employee Compensation 
Appendix I: Scope and Methodology 

We assessed the reliability of the ECEC data by reviewing BLS 

documentation, interviewing BLS staff, and performing electronic tests to 

check for outliers or other potential data problems. Based upon these 

checks, we determined that the data were sufficiently reliable for the 

purposes of our work. 

To determine whether employees’ costs, participation, or access to 

benefits have changed, we relied on data from two sources: (1) the BLS’ 

National Compensation Survey (NCS) and (2) the Medical Expenditure 

Panel Survey-Insurance Component (MEPS IC) administered by the 

Agency for Healthcare Research and Quality (AHRQ) at the Department of 

Health and Human Services. 

The BLS uses the NCS to measure the incidence and provisions of selected 

employer provided benefit plans.3

 We focused on employee coverage by 

retirement and savings plans, including defined contribution and defined 

benefit plans, and the provision of paid leave benefits.4

 Coverage is not 

necessarily the same as participation. For example, NCS produces data on

the availability of sick leave, but not on employees’ use of such benefit.

5

 In 

addition, benefits data were not published every year. Data were available 

between 1991 and 2003. Despite these issues, we felt the data were reliable 

and useful in understanding whether and how employers’ provision of 

retirement and paid leave has changed over time. We collected these data

from various BLS publications. We assessed the reliability of the data by 

reviewing BLS documentation and interviewing BLS staff. Based upon 

these checks, we determined that the data were sufficiently reliable for the 

purposes of our work. 

We used the MEPS IC to provide a detailed analysis of employee access 

and participation in employer provided health insurance. The MEPS IC is 

an annual survey of establishments that collects information about 

employer-sponsored health insurance offerings in the United States. MEPS 

IC data are tabulated by the AHRQ and tables are available for the period

1996 through 2003.6

 MEPS tables include standard errors, which we used 

 3

This was formerly called the Employee Benefits Survey (EBS). 

4

We used the MEPS IC data for information on access and participation in employerprovided health insurance plans.

5

This lack of detail is the reason we used MEPS data. 

6

See http://www.meps.ahrq.gov/ for more detailed information on MEPS. 

Page 31 GAO-06-285 Employee Compensation 
Appendix I: Scope and Methodology 

to determine statistical significance in percentage changes over time. We

received electronic copies of the MEPS IC tables directly from the AHRQ. 

The MEPS IC is derived from a random sample of private-sector business 

establishments with at least one employee and a sample of state and local

government employers. We focused our analysis on the private-sector 

only. The sample contains businesses that existed at the beginning of the 

sample year and is supplemented with business births through the third 

quarter of that year. The MEPS IC tables are reported both nationally and 

for individual states. For our purposes, we focused on the national data 

only. 

We analyzed MEPS IC data to determine the trends in the percentage of 

employees at establishments that offer health insurance, the percentage of 

employees eligible for health insurance at these firms, the percentage of 

eligible employees who enroll in the health insurance plans, and the 

average annual premium for employer-provided health insurance for single

workers and the employees’ share of these premiums. To control for the 

effect of inflation, all premium costs are reported in 2004 terms by using 

the BLS’s Consumer Price Index for Medical Care. Inflation for medical 

care has been great, and using an all items CPI (such as the CPI-U-RS) 

would overstate the growth in premium costs. 

Our analysis included the following data elements. 

• Offer health insurance—whether an establishment makes available or 

contributes to the cost of any health insurance plan for current employees. 

• Health insurance plan—an insurance contract that provides hospital 

and/or physician coverage to an employee or retiree for an agreed-upon 

fee for a defined benefit period, usually a year. 

• Single coverage—health insurance that covers the employee only. Also 

known as employee-only coverage. 

• Employee—a person on the actual payroll. Excludes temporary and 

contract workers, but includes the owner or manager if that person works 

at the firm. 

• Firm—a business entity consisting of one or more business 

establishments under common ownership or control. Also known as an 

enterprise. A firm represents the entire organization, including the 

company headquarters and all divisions, subsidiaries and branches. A firm 

Page 32 GAO-06-285 Employee Compensation 
Appendix I: Scope and Methodology 

may consist of a single-location establishment or multiple establishments. 

In the case of a single-location firm, the firm and establishment are 

identical. 

• Firm size—the total number of employees for the entire firm as reported 

on the sample frame. The data were made available in the following breakouts: 1 to 9 employees, 10 to 24 employees, 25 to 99 employees, 100 to 999

employees, and 1000 or more employees. 

• Union status—employers are asked to identify if they have union or non 

union employees. 

• Full-time and part-time employee—full-time is defined by the 

respondent and generally includes employees that work 35 to 40 hours per 

week. Part-time status is considered an employee not defined as full-time 

by the respondent. 

• Industry categories—the primary business activity as reported by the 

respondent. The industry categories that we report are based on the 

Standard Industrial Classification (SIC) codes.7

 These definitions match 

those used in the ECEC (see table 7). The data were not readily available 

by industry sector (goods-producing and service-providing). 

We assessed the reliability of the MEPS IC data by reviewing AHRQ 

documentation, interviewing AHRQ staff, and performing electronic tests 

to check for outliers or other potential data problems. Based upon these 

checks, we determined that the data were sufficiently reliable for the 

purposes of our work. 

To determine the possible implications of changes for private systems, we 

convened a panel of 17 experts representing the human resources field, 

industries, unions, and academia. Prior to the panel, we provided the 

experts with a list of discussion questions and the completed data analysis. 

During the half-day discussion, panelists provided their unique 

perspectives on the trends we identified and offered comments on the 

implications of these trends. We identified the panelists through 

consultation with internal and external parties who work on the issues 

 7

Beginning in 2000, the MEPS used the North American Industry Classification System 

(NAICS), which is not directly comparable to the SIC codes. AHRQ re-estimated their

analysis using the older SIC definitions for us to facilitate comparisons of the industry data 

over time. 

Page 33 GAO-06-285 Employee Compensation 
Appendix I: Scope and Methodology 

covered in this report. We selected individuals who represent a wide 

variety of entities that address the issue of workers’ benefits and provide a 

balance of perspectives to help us understand the breadth of opinions on 

the topic. The panel included the following list of experts. 

John Burton, Professor Emeritus, School of Management and Labor 

 Relations, Rutgers University 

Kate Sullivan Hare, Executive Director, Health Care Policy, U.S. 

 Chamber of Commerce

Michael Hirsch, Executive Vice President, Amalgamated Life, America’s 

 Labor Insurance Company 

Tim Kane, Bradley Fellow in Labor Policy, Center for Data Analysis, The 

 Heritage Foundation 

Andrew Klein, Senior Consultant, Mercer Human Resource Consulting 

Kathryn Kobe, Director of Price, Wage, and Productivity Analysis, 

 Economic Consulting Services 

Hank Leland, Employee Benefits Analyst, Service Employees 

 International Union 

Daniel Meckstroth, Chief Economist and Council Director,

 Manufacturers Alliance/MAPI 

Gordon Pavy, Collective Bargaining Coordinator, AFL-CIO 

Bruce Phillips, Senior Fellow in Regulatory Studies, National Federation

 of Independent Business Research Foundation

Dallas Salisbury, President and CEO, Employee Benefit Research 

 Institute 

Tom Saquella, President, Maryland Retailers Association 

Sylvester Schieber, Vice President-U.S. Director of Benefits Consulting, 

 Watson Wyatt Worldwide 

Norma Sharara, Partner, Luse Gorman Pomerenk & Schick, P.C. 

Stephen Sleigh, Director of Strategic Resources, International 

 Association of Machinists and Aerospace Workers 

Wayne Wendling, Senior Director of Research, International Foundation

 of Employee Benefit Plans 

Steve Williams, Director of Research, Society for Human Resource 

 Management 

Page 34 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Page 35 GAO-06-285 Employee Compensation 

Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Table 8: Employers’ Real Hourly Costs for Employee Total Compensation, Wages, 

and Total Benefits for All Workers, 1991 to 2005 

Year 

Total

compensation

Wages and

salaries

Total

benefitsa

1991 $20.83 $15.07 $5.77

1992 $21.26 $15.26 $6.00

1993 $21.42 $15.27 $6.15

1994 $21.52 $15.30 $6.22

1995 $20.98 $15.03 $5.95

1996 $20.95 $15.08 $5.87

1997 $21.14 $15.34 $5.80

1998 $21.41 $15.60 $5.81

1999 $21.54 $15.72 $5.82

2000 $21.77 $15.89 $5.88

2001 $22.20 $16.20 $6.01

2002 $22.80 $16.60 $6.20

2003 $22.97 $16.58 $6.39

2004 $23.29 $16.64 $6.65

2005 $23.39 $16.60 $6.79

Percentage change 

1991-2005 12 10 18

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 95 

percent confidence level. 

a

The calculation of benefits includes total benefits tracked by BLS. These benefits include those to 

which employers are legally required to make contributions (Social Security, Medicare, federal and 

state unemployment, and workers compensation), and voluntary benefits (paid leave, supplemental 

pay, insurance plans—life and health, retirement and savings, and other benefits). 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Table 9: Employers’ Real Hourly Costs of Employee Total Compensation for All 

Workers by Establishment Size, 1991 to 2005 

Year 

Small (1-99 

workers)

Medium (100-499 

workers) 

Large (500+

workers)

1991 $18.09 $19.33 $27.65

1992 $18.34 $19.70 $28.00

1993 $18.66 $19.54 $28.20

1994 $18.38 $19.98 $29.41

1995 $17.85 $20.07 $28.20

1996 $17.86 $19.94 $28.91

1997 $18.07 $19.90 $29.32

1998 $18.42 $20.27 $29.58

1999 $18.44 $20.56 $29.89

2000 $18.82 $21.17 $29.54

2001 $19.06 $22.38 $30.06

2002 $19.44 $23.10 $31.29

2003 $19.44 $23.23 $31.77

2004 $19.47 $23.91 $32.54

2005 $19.57 $23.65 $33.48

Percentage change 

1991-2005 8 22 21

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

Page 36 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Table 10: Employers’ Real Hourly Costs of Employee Total Compensation for All 

Workers by Full- and Part-time Status, 1991 to 2005 

Year Full-time workers Part-time workers

1991 $22.92 $11.30

1992 $23.49 $11.62

1993 $23.78 $11.55

1994 $24.30 $11.08

1995 $23.84 $11.07

1996 $23.97 $11.02

1997 $23.97 $11.27

1998 $24.25 $11.58

1999 $24.43 $11.57

2000 $24.81 $11.79

2001 $25.13 $12.43

2002 $25.80 $12.75

2003 $26.05 $12.74

2004 $26.50 $12.63

2005 $26.69 $12.75

Percentage change 1991-

2005 

16 13

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 95 

percent confidence level. 

The growth rates for certain groups of employers may be higher than the aggregated average growth 

rate due to changes in employment composition and compensation cost levels overtime. 

Page 37 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Table 11: Employers’ Real Hourly Costs of Employee Total Compensation for All 

Workers by Union Status, 1991 to 2005 

Year Union Nonunion

1991 $26.65 $19.72

1992 $27.76 $20.06

1993 $28.13 $20.21

1994 $29.32 $20.21

1995 $27.64 $19.94

1996 $27.98 $19.90

1997 $27.89 $20.20

1998 $27.31 $20.60

1999 $28.05 $20.63

2000 $28.39 $20.92

2001 $29.67 $21.33

2002 $30.91 $21.84

2003 $31.50 $21.93

2004 $31.94 $22.28

2005 $32.10 $22.35

Percentage change 

1991-2005 21 13

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series.

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 95 

percent confidence level. 

The growth rates for certain groups of employers may be higher than the aggregated average growth 

rate due to changes in employment composition and compensation cost levels overtime. 

Page 38 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Table 12: Employers’ Real Hourly Costs of Employee Total Compensation for All 

Workers by Industry Sector, 1991 to 2003

Year Service providers Goods producers

1991 $19.34 $25.02

1992 $19.73 $25.59

1993 $19.89 $25.96

1994 $19.93 $26.30

1995 $19.49 $25.45

1996 $19.50 $25.49

1997 $19.70 $25.65

1998 $20.03 $25.77

1999 $20.19 $25.92

2000 $20.53 $25.84

2001 $21.06 $26.04

2002 $21.70 $26.72

2003 $21.87 $26.96

Percentage change 1991 - 

2003 

13 8

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series.

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

BLS began using new codes to classify industries with the 2004 data. Therefore, 2004 and 2005 data 

were not comparable to 1991-2003 by industry. 

Page 39 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 5: Growth in Real Employer Costs of Employee Wages and Total Benefits for 

all Workers by Small Establishment Size, 1991 to 2005 

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

The growth in wages and salaries for small establishments is not statistically significant at the 95 

percent confidence level while the growth in total benefits was. 

Wages and Total Benefits 

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 40 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 6: Growth in Real Employer Costs of Employee Wages and Total Benefits for 

all Workers by Medium Establishment Size, 1991 to 2005 

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for medium establishments are statistically significant 

at the 95 percent confidence level.

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 41 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 7: Growth in Real Employer Costs of Employee Wages and Total Benefits for 

all Workers by Large Establishment Size, 1991 to 2005 

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series.

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for large establishments are statistically significant at 

the 95 percent confidence level. 

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 42 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 8: Growth in Real Employer Costs of Employee Wages and Total Benefits for 

Full-time Workers, 1991 to 2005 

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series.

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for employers of full-time workers is statistically 

significant at the 95 percent confidence level. 

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 43 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 9: Growth in Real Employer Costs of Employee Wages and Total Benefits for 

Part-time Workers, 1991 to 2005 

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for employers of part-time workers is statistically 

significant at the 95 percent confidence level. 

90

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 44 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 10: Growth in Real Employer Costs of Employee Wages and Total Benefits 

for Union Workers, 1991 to 2005 

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for employers of union workers is statistically 

significant at the 95 percent confidence level. 

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 45 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 11: Growth in Real Employer Costs of Employee Wages and Total Benefits 

for Nonunion Workers, 1991 to 2005 

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for employers of nonunion workers is statistically 

significantly different from zero at the 95 percent confidence level. 

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

2004

2005

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 46 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 12: Growth in Real Employer Costs of Employee Wages and Total Benefits 

for Workers in the Service Providing Sector, 1991 to 2003

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for employers in the service providing sector is 

statistically significant at the 95 percent confidence level. 

BLS began using new codes to classify industries with the 2004 data. Therefore, 2004 and 2005 data 

were not comparable to 1991 to 2003 by industry. 

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 47 GAO-06-285 Employee Compensation 
Appendix II: Employers’ Real Hourly Costs 

for Employee Total Compensation, Wages, 

and Total Benefits 

Figure 13: Growth in Real Employer Costs of Employee Wages and Total Benefits 

for Workers in the Goods Producing Sector, 1991 to 2003

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Growth in wages and salaries and total benefits for employers in the goods producing sector is 

statistically significant at the 95 percent confidence level. 

BLS began using new codes to classify industries with the 2004 data. Therefore, 2005 and 2006 data 

were not comparable to 1991 to 2003 by industry. 

95

100

105

110

115

120

125

130

135

199

1999

2000

2001

2002

2003

8

1991

1992

1993

1994

1995

1996

1997

Growth in employer costs (1991=100)

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Year

Wages and salaries

Total benefits

Page 48 GAO-06-285 Employee Compensation 
Appendix III: Employers’ Real Hourly Costs 

for Employee Paid Leave, Retirement Income, 

and Health Insurance 

Page 49 GAO-06-285 Employee Compensation 

Appendix III: Employers’ Real Hourly Costs 

for Employee Paid Leave, Retirement 

Income, and Health Insurance 

Table 13: Employers’ Real Hourly Costs for Employee Paid Leave, Retirement 

Income, and Health Insurance for All workers, 1991 to 2005 

Year Paid leave Retirement income Health insurance

1991 1.42 0.59 1.24

1992 1.44 0.61 1.35

1993 1.42 0.62 1.40

1994 1.40 0.65 1.43

1995 1.34 0.63 1.30

1996 1.33 0.66 1.24

1997 1.34 0.65 1.16

1998 1.35 0.64 1.16

1999 1.36 0.65 1.16

2000 1.40 0.65 1.19

2001 1.47 0.66 1.24

2002 1.51 0.66 1.35

2003 1.51 0.68 1.45

2004 1.50 0.80 1.53

2005 1.49 0.87 1.59

Percentage change 

1991-2005 5 47 28

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 
Appendix III: Employers’ Real Hourly Costs 

for Employee Paid Leave, Retirement Income, 

and Health Insurance 

Table 14: Employers’ Real Hourly Costs for Employee Paid Leave, Retirement Income, and Health Insurance by Establishment 

Size, 1991 to 2005 

Small (1-99) Medium (100-499) Large (500+) 

Paid 

leave 

Retirement 

and savings

Health

insurance 

Paid 

leave

Retirement 

and savings

Health

insurance

Paid 

leave 

Retirement 

and savings

Health

insurance

1991 $1.03 $0.42 $0.92 $1.28 $0.54 $1.21 $2.32 $0.98 $1.89

1992 $1.01 $0.40 $1.00 $1.29 $0.53 $1.28 $2.35 $1.04 $2.04

1993 $1.03 $0.41 $1.05 $1.23 $0.54 $1.26 $2.28 $1.07 $2.18

1994 $0.99 $0.42 $1.06 $1.24 $0.57 $1.30 $2.38 $1.21 $2.32

1995 $0.93 $0.40 $0.93 $1.24 $0.59 $1.30 $2.24 $1.13 $2.04

1996 $0.93 $0.41 $0.89 $1.23 $0.60 $1.26 $2.33 $1.26 $1.98

1997 $0.92 $0.42 $0.85 $1.24 $0.60 $1.15 $2.36 $1.21 $1.86

1998 $0.94 $0.41 $0.85 $1.25 $0.59 $1.17 $2.39 $1.21 $1.84

1999 $0.94 $0.44 $0.87 $1.26 $0.60 $1.15 $2.44 $1.19 $1.86

2000 $1.01 $0.44 $0.90 $1.35 $0.61 $1.20 $2.39 $1.18 $1.89

2001 $1.09 $0.45 $0.94 $1.48 $0.65 $1.34 $2.42 $1.19 $1.91

2002 $1.11 $0.44 $1.01 $1.54 $0.66 $1.47 $2.54 $1.24 $2.09

2003 $1.08 $0.44 $1.08 $1.55 $0.68 $1.60 $2.57 $1.32 $2.22

2004 $1.04 $0.44 $1.13 $1.56 $0.79 $1.70 $2.62 $1.75 $2.37

2005 $1.04 $0.47 $1.15 $1.54 $0.86 $1.76 $2.69 $1.95 $2.54

Percentage 

change 

1991-2005 1 12 25 20 61 45 16 99 34

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series.

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

Page 50 GAO-06-285 Employee Compensation 
Appendix III: Employers’ Real Hourly Costs 

for Employee Paid Leave, Retirement Income, 

and Health Insurance 

Table 15: Employers’ Real Hourly Costs for Employee Paid Leave, Retirement Income, and Health Insurance by Full-time and

Part-time Status, 1991 to 2005 

Full-time Part-time

Paid leave 

Retirement and

savings

Health

insurance Paid leave

Retirement and

savings

Health

insurance

1991 $1.65 $0.70 $1.43 $0.37 $0.12 $0.37

1992 $1.68 $0.72 $1.58 $0.39 $0.13 $0.38

1993 $1.66 $0.74 $1.65 $0.38 $0.14 $0.37

1994 $1.68 $0.79 $1.72 $0.33 $0.14 $0.36

1995 $1.63 $0.77 $1.58 $0.31 $0.13 $0.33

1996 $1.65 $0.81 $1.53 $0.29 $0.15 $0.29

1997 $1.63 $0.79 $1.41 $0.32 $0.15 $0.27

1998 $1.64 $0.77 $1.41 $0.31 $0.16 $0.28

1999 $1.66 $0.79 $1.43 $0.32 $0.17 $0.25

2000 $1.72 $0.79 $1.47 $0.36 $0.18 $0.28

2001 $1.79 $0.81 $1.51 $0.39 $0.16 $0.36

2002 $1.84 $0.81 $1.63 $0.42 $0.16 $0.40

2003 $1.85 $0.84 $1.76 $0.39 $0.16 $0.42

2004 $1.84 $0.98 $1.86 $0.37 $0.18 $0.44

2005 $1.85 $1.07 $1.92 $0.37 $0.18 $0.49

Percentage change 

1991-2005 12 55 34 -1 48 32

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

Page 51 GAO-06-285 Employee Compensation 
Appendix III: Employers’ Real Hourly Costs 

for Employee Paid Leave, Retirement Income, 

and Health Insurance 

Table 16: Employers’ Real Hourly Costs for Employee Paid Leave, Retirement Income, and Health Insurance by Union and

Nonunion Status, 1991 to 2005 

Union Non Union

Paid leave 

Retirement and

savings

Health

insurance Paid leave

Retirement and

savings

Health

insurance

1991 $1.93 $1.18 $2.20 $1.32 $0.48 $1.06

1992 $2.05 $1.30 $2.50 $1.33 $0.48 $1.14

1993 $2.03 $1.33 $2.66 $1.31 $0.49 $1.18

1994 $2.09 $1.55 $2.88 $1.28 $0.50 $1.19

1995 $1.91 $1.41 $2.58 $1.25 $0.51 $1.10

1996 $1.95 $1.59 $2.46 $1.24 $0.52 $1.05

1997 $1.85 $1.58 $2.36 $1.27 $0.52 $0.99

1998 $1.82 $1.49 $2.28 $1.28 $0.52 $1.00

1999 $1.88 $1.56 $2.29 $1.28 $0.52 $1.01

2000 $1.92 $1.63 $2.38 $1.33 $0.52 $1.04

2001 $2.04 $1.63 $2.42 $1.40 $0.54 $1.10

2002 $2.19 $1.72 $2.69 $1.43 $0.54 $1.19

2003 $2.25 $1.78 $2.88 $1.42 $0.55 $1.27

2004 $2.22 $2.15 $3.08 $1.41 $0.64 $1.35

2005 $2.18 $2.31 $3.30 $1.41 $0.70 $1.37

Percentage change 

1991-2005 13 97 50 7 45 30

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

Page 52 GAO-06-285 Employee Compensation 
Appendix III: Employers’ Real Hourly Costs 

for Employee Paid Leave, Retirement Income, 

and Health Insurance 

Table 17: Employers’ Real Hourly Costs for Employee Paid Leave, Retirement Income, and Health Insurance by Industry 

Sector, 1991 to 2003

Services providing sector Goods producing sector

Paid leave 

Retirement and

savings

Health

insurance Paid leave

Retirement and

savings

Health

insurance

1991 $1.31 $0.49 $1.07 $1.72 $0.89 $1.72

1992 $1.33 $0.49 $1.15 $1.76 $0.93 $1.92

1993 $1.30 $0.50 $1.19 $1.77 $0.99 $2.04

1994 $1.28 $0.51 $1.20 $1.75 $1.07 $2.14

1995 $1.22 $0.51 $1.11 $1.68 $1.00 $1.87

1996 $1.21 $0.56 $1.05 $1.71 $0.96 $1.83

1997 $1.22 $0.54 $0.97 $1.70 $1.00 $1.75

1998 $1.23 $0.54 $0.98 $1.70 $0.95 $1.71

1999 $1.25 $0.55 $0.99 $1.70 $0.95 $1.72

2000 $1.32 $0.56 $1.01 $1.66 $0.92 $1.78

2001 $1.39 $0.59 $1.08 $1.71 $0.89 $1.79

2002 $1.44 $0.59 $1.19 $1.74 $0.92 $1.93

2003 $1.44 $0.59 $1.29 $1.76 $1.01 $2.03

Percentage change 

1991-2003 10 22 20 2 14 18

Source: GAO analysis of Bureau of Labor Statistics (BLS) data from the National Compensation Survey (NCS).

Notes: Costs are measured as the average employer cost per employee hour worked. To control for 

the effect of inflation, dollars are reported in 2004 terms by using the BLS Consumer Price Index 

Research Series. 

Data represent costs to private employers only. 

Bold signifies that percentage changes between 1991 and 2005 are statistically significant at the 

95 percent confidence level. 

BLS began using new codes to classify industries with the 2004 data. Therefore, 2004 and 2005 data 

were not comparable to 1991 to 2003 by industry. 

Page 53 GAO-06-285 Employee Compensation 
Appendix IV: 

A

GAO Contacts and 

cknowledgments 

Page 54 GAO-06-285 Employee Compensation 

Appendix IV: GAO Contacts and 

Acknowledgments 

Sigurd R. Nilsen, Director, (202) 512-7003, nilsens@gao.gov

Patrick di Battista, Assistant Director, and Sara L. Schibanoff, Analyst-inCharge, managed this assignment. Others who made key contributions 

throughout the assignment include James Pearce, Jean Cook, and 

Susan Bernstein. Dan Schwimer provided legal assistance. Marc Molino 

and Mimi Nguyen provided assistance with graphics. 

GAO Contact 

Staff 

Acknowledgments 

(130450) 
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