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18
EXPLANATORY NOTE

The Employment Cost Index (ECI) is a measure of the change in the cost of
labor, free from the influence of employment shifts among occupations and
industries. The compensation series includes changes in wages and salaries and
employer costs for employee benefits. The wage and salary series and the benefit
cost seriesl provide the change for the two components of compensation.

Wages and salaries are defined as the hourly straight-time wage rate or, for
workers not paid on an hourly basis, straight-time earnings divided by the
corresponding hours. Straight-time wage and salary rates are total earnings
before payroll deductions, excluding premium pay for overtime and for work on
weekends and holidays, shift differentials, and nonproduction bonuses such as
lump-sum payments provided in lieu of wage increases. Production bonuses,
incentive earnings, commission payments, and cost-of-living adjustments are
included in straight-time wage and salary rates.

Benefits covered by the ECI are: Paid leave (vacations, holidays, sick
leave, and other leave); supplemental pay (premium pay for overtime, shift
differentials, and nonproduction bonuses such as lump-sum payments provided in
lieu of wage increases); insurance benefits (life, health, and sickness and
accident); retirement and savings benefits (pension and other retirement plans and
savings and thrift plans); legally required benefits (social security, railroad
retirement and supplemental retirement, railroad unemployment insurance, Federal
and state unemployment insurance, workers' compensation, and other legally
required benefits such as state temporary disability); and other benefits
(severance pay and supplemental unemployment plans).

The ECI provides data for the civilian economy, which includes the total
private economy, excluding farms and households, and the public sector, excluding
the Federal government. The private industry series and the state and local
government series provide data for the two sectors separately.

Each quarter, straight-time average hourly wage and salary rates and benefit
cost data (cents-per-hour-worked) are collected from a probability sample of
nearly 23,000 occupations within 4,400 sample establishments in private industry
and about 6,000 occupations within 1,000 sample establishments in state and local
governments. Data are collected for the pay period including the 12th day of the
survey months of March, June, September, and December.

The sample establishments are classified in industry categories based on the
1987 Standard Industrial Classification (SIC), as defined by the U.S. Office of
Management and Budget.

1 the benefit cost indexes provide the change in the cost of benefits to a fixed
labor force. They are not price indexes for a fixed market basket of benefits.
Therefore, the indexes will change as a result of either a change in the price of
benefits provided (for example, higher pay for holidays) or a change in the
benefits (for example, an additional holiday).


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19

Within an establishment, specific job categories are selected to represent
broader occupational definitions. Since June 1986, the jobs have been Classified
according to definitions used in the 1980 Census. Prior to June 1986, they were
Classified according to the 1970 Census. Differences between the two
classification systems are slight, as indicated in the article "Introducing new
weights for the Employment Cost Index," in the June 1985 issue of the Monthly
Labor Review.

Fixed employment weights are used each quarter to calculate the most
aggregate indexes--civilian, private, and state and local governments. These
fixed weights are also used to derive all of the industry and occupation series
indexes. Since June 1986, employment counts from the 1980 Census have been used
as weights. Prior to June 1986, employment counts from the 1970 Census were used.

For the series based on bargaining status, region, or area size, employment
data are not available from the Census. The employment weights are reallocated
within these series each quarter based on the current ECI sample. The indexes for
these series, consequently, are not strictly comparable to those for the
aggregate, industry, and occupation series. A fuller explanation of the
calculation of index numbers appears in an article, "Estimation procedures for the
Employment Cost Index," in the May 1982 issue of the Monthly Labor Review.

Beginning with the March 1990 ECI release, indexes were rebased to June
1989=100. - A description of the rebasing is included in the article "Employment
Cost Index: Rebased to June 1989," in the April 1990 issue of the Monthly Labor
Review.

Beginning with the December 1990 ECI release, seasonally adjusted data are
available for ECI major industry and occupational series. Seasonal adjustment
removes the effects of events that follow a more or less regular pattern each
year. These adjustments make nonseasonal patterns easier to identify. Seasonal
factors for 1991 were published in the March 1991 issue of Current Wage

Developments.

The costs per hour worked of compensation’ components, based on March 1990
data from the ECI, are published in a separate news release titled "Employer Costs
for Employee Compensation - March 1990." A description of the cost levels is
provided in the article "Analyzing employers' costs for wages, Salaries, and
benefits" in the October 1987 issue of the Monthly Labor Review. The cost levels,
which are published annually in mid-June, are calculated with current employment
weights, rather than the fixed 1980 Census weights used in computing the ECI.
Therefore, year-to-year changes in the cost levels will usually differ from those
in the ECI.

More detailed information on the ECI is available in several sources. These
include an annual bulletin, Employment Cost Indexes and Levels, 1975-90, (Bulletin
2372); a chapter in the BLS Handbook of Methods (Bulletin 2285), "The Employment
Cost Index;" and several articles published in the Monthly Labor Review. The
annua? bulletin is available from the Superintendent of Documents, U.S. Government
Printing Office, Washington, D.C. 20402, or Bureau of Labor Statistics,
Publications Sales Center, P.0. Box 2145, Chicago, Illinois 60690. Reprints of
the articles plus other descriptive pieces and a complete historical listing are
available upon request. ECI historical data are also available on data diskettes.


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6


: United States
. Department >
y of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 91-196
Wayne Shelly (202) 523-1165
TRANSMISSION OF MATERIAL IN
Media contact: THIS RELEASE IS EMBARGOED
Kathryn Hoyle (202) 523-1913 UNTIL 8:30 A.M. (EDT),
TUESDAY, APRIL 30, 1991

EMPLOYMENT COST INDEX - MARCH 1991

The Employment Cost Index (ECI) increased 1.4 percent before seasonal adjustment
in the 3 months ended in March 1991, the U.S. Department of Labor's Bureau of Labor
Statistics reported today. The March 1991 ECI level of 109.1 (June 1989=100) was 4.6
percent higher than the index in March 1990. The ECI measures changes in compensation
costs, including wages, salaries, and employer costs for employee benefits.

On a seasonally adjusted basis, the ECI rose 1.2 percent in the December 1990-
March 1991 period; the rise in the September-December 1990 period was 1.0 percent.

Table A. Percent changes in ECI for civilian workers

Seasonally adjusted Unadjusted

Compensation 3-months ended 12-months
component 1989 1990 1991} ended

dune Sep. Dec. Mar. June Sep. Dec. | Mar. | Mar. 1991
Compensation costs..| 1.1 1.4 1.2 1.5 1.2 1.1 1.0 1.2 4.6
Wages and salaries.| 1.0 1.2 1.1 Ll 1.2. 1.0 9 1.2 4.2
Benefit costs....../ 1.8 1.8 1.6 2.0 1.5 1.5 1.5 1.4 5.9

Over-the-year changes, unadjusted

Compensation costs (not seasonally adjusted) increased 4.6 percent for the year
ended in March 1991--down from 4.9 percent for the year ending December 1990. (See
table 4.) The lower increases in the March 1990-91 period reflects little change in
the rate of wage and salary gains (4.2 percent, compared with 4.3 percent), coupled
with a marked slowdown in benefit cost increases (5.9 percent, down from 6.7 percent).
(See tables 7 and 10.) The slowdown in the rate of increase in benefit costs occurred
as relatively large increases in health insurance costs and workers' compensation
insurance rates were dampened by lower increases in pension costs and nonproduction
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Changes in wages and salaries and benefit costs, private industry, 1980-1991

-month -month
percent change percent change
15 15
145 = 4 14
13 5 4 13
124 4 12
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1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991



2

Compensation increases in private industry for the year ended in March 1991 were
higher for white-collar occupations (4.7 percent) than for blue-collar (4.3 percent)
or service occupations (4.2 percent). Compensation gains for white-collar
occupational groups ranged from 4.2 percent for clerical workers and for sales workers
to 5.0 percent for professional and technical workers and for executives,
administrators, and managers. Increases for blue-collar workers varied from 3.1
percent for transportation and material moving occupations to 4.4 percent for craft
workers and for machine operators, assemblers, and inspectors. (See table 5.)

Over-the-year compensation gains were about the same in private goods-producing
industries (4.4 percent) as in service-producing industries (4.5 percent). Within the
service-producing industries, compensation increases ranged from 2.3 percent in
transportation to 6.5 percent in hospitals and business services. Compensation gains
among the goods-producing industries ranged from 4.2 percent in construction to 4.5
percent in nondurable goods manufacturing.

Compensation increases for nonunion workers (4.5 percent) exceeded those for
union workers (4.1 percent) for the year ended in March 1991, as they have almost
without exception since March 1983-84. This pattern held for service-producing but
not for goods-producing industries. (See table 6.)

ECI data for June 1991 will be released on Tuesday, July 30, 1991, at 8:30 A.M.
(EDT).


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