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10

Occupations were classified according to definitions used in the
1979 Census. Within an establishment, specific job categories are
selected to represent broader occupational definitions. The sample
establishments were classified in industry categories based on the 1972
Standard Industrial Classification (SIC), as defined by the U.S. Office
of Management and Budget. Within the private sector sample, estab-
lishments are designated by a 2-digit SIC, while in State and local
governments, industrial categories vary from a more specific 3-digit SIC
such as elementary and secondary schools to a broader major industry
division such as public administration. Each establishment is also
classified by ownership--State government, local government, or private.

Fixed employment weights from the 1970 Census 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. For the series based on
bargaining status, region, or area size, however, employment data are
not available from the Census. The 1970 employment weights are reallo-
cated within these series each quarter based on the current 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. The June 1985 issue of the
Month] al jew contains an article "Introducing new weights for

the Employment Cost Index," that describes how 1980 weights will be used
in calculating the ECI beginning in June 1986.

Data are collected for the pay period including the 12th day of the
survey months of March, June, September, and December. ECI statistics
are neither annualized nor adjusted for seasonal influences. For
example, the 0.6 percent change in wage and salary rates for "private
industry workers" in the 3 months ended December 1985 (table 4) is the
actual percent change in straight-time average hourly wage and salary
rates from the pay period including the 12th day of September 1985 to
the comparable pay period in December 1985.

More detailed information on the ECI is available in several
articles and publications. These include a chapter in the BLS Handbook
of Methods (Bulletin 2134-1), "The Employment Cost Index." Two articles
also appeared in the Monthly Labor Review: "Employment Cost Index: a
measure of change in the 'price of labor'," July 1975; and "How benefits
will be incorporated into the Employment Cost Index," January 1978.
Reprints of these articles plus several other descriptive pieces and a
historical listing of ECI data are available upon request. A historical
listing of ECI data also appears in the May issue of Current Wage
Developments.


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9

EXPLANATORY NOTE

The Employment Cost Index CECI) is a quarterly measure of the
change in the price of labor, free from the influence of employment
shifts among occupations and industries. The ECI wage and salary series
is limited to changes in wage and salary rates, defined as the hourly
straight-time wage rate or, for workers not paid on an hourly basis,
earnings divided by the corresponding hours. Straight-time wage and
salary rates are total earnings before payroll deductions, excluding
premium pay for overtime, work on weekends and holidays, and shift
differentials. Production bonuses, incentive earnings, commission
payments, and cost-of-living adjustments are included in straight-time
wage and salary rates.

The compensation series includes employer costs for employee
benefits as well as wages and salaries. Benefits covered by the ECI
include:

Paid leave - Paid vacations, paid holidays, paid sick leave,
and other paid leave;

Supplemental pay - Premium pay for overtime and work on week-
ends and holidays, shift differentials, and nonproduction
bonuses;

Insurance benefits - Life, health, and sickness and accident
insurance; .
etirement an. av in enefi - 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! compen-
sation, and other legally required benefits such as State tempor-
ary disability insurance; and

Other benefits - Severance pay, supplemental unemployment plans,
and merchandise discounts in department stores.

Excluded from both wages and salaries and employee benefits are
such items as payments-in-kind, free room and board, and tips.

The ECI collects data for both the private and public sectors,
which are published separately and also combined as the total civilian
economy. The private sector includes the total private economy,
excluding farms and households. The public sector covers State and
local governments, but excludes the Federal government,

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 about 12,000 occupations within 2,200 sample
establishments in the private sector and about 3,600 occupations within
700 sample establishments in State and local governments.


United States
News 2 ©
p of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 86-32
(202) 523-1165

Media contact: (202) 523-1913 FOR RELEASE: 10:00 A.M. E.S.T.
Tuesday, January 28, 1986

EMPLOYMENT COST INDEX - DECEMBER 1985

The Employment Cost Index (ECI) increased 4.3 percent for the year ended
in December 1985, down from 5.2 percent for the year ended in December 1984,
the U.S. Department of Labor's Bureau of Labor Statistics reported today.
The ECI measures changes in compensation costs, which include wages, salaries,
and employer costs for employee benefits.

Compensation costs rose 0.6 percent in the September-December 1985 period,
below the 1.2 percent gain in the same period a year ago. This slowdown
occurred for both private industry workers (0.6 percent, down from 1.3 percent)
and State and local government workers (0.7 percent, down from 1.0 percent).

For the year ended in December 1985, compensation cost increases (4.3
percent) were below those a year earlier (5.2 percent). In contrast, wage and
salary increases were about the same as a year ago (4.4 percent and 4.5 percent,
respectively)--showing that deceleration in employee benefit costs was
largely responsible for the slowdown in compensation cost increases.

Over-the-year wage gains in private industry varied widely by occupation
group, ranging from 2.3 percent for service workers to 9.8 percent for sales
workers (the most volatile ECI series, which is heavily influenced by commission
earnings).

This release provides, for the first time, index series for "private
industry workers, excluding sales workers," and for "white-collar workers,
excluding sales workers." (See tables 3 and 4.) The new series permit

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Beginning with the June 1986 news release, ECI estimates will
be based on fixed employment counts from the 1980 Census of
Population rather than from the 1970 Census, as in the past.
The updating of ECI weights is described in an article,
"Introducing New Weights for the Employment Cost Index," in the
June 1985 issue of the Monthly Labor Review.

ECI estimates for the period March 1985 to March 1986 will be
recalculated, using the 1980 Census weights. The recalcula-
tions, which will be available in September 1986, will provide
a one-year overlap for ECI estimates based on 1970 and 1980
Census weights.

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2

examination of compensation and wage trends, free from the influence of sales
worker pay which reflects volatile changes in commission payments.

Pay for private industry workers excluding sales workers rose 3.6 percent
over the year ended in December 1985, compared with 4.1 percent for all private
industry workers. The impact of sales worker pay gains was even greater for
white-collar workers: With sales workers excluded, white-collar pay rose 4.0
percent compared with 4.9 percent when sales workers were included,

Pay increases over the year ended in December also varied widely among
industries, ranging from 3.1 percent for construction to 9.2 percent for
finance, insurance, and real estate (also strongly influenced by commission
earnings).

A 3.6 percent pay increase for manufacturing workers in 1985 was the lowest
recorded for those workers in the 10-year history of the series. A record low
was also posted for workers in nondurable goods manufacturing (3.7 percent),
while pay increases for workers in durable goods manufacturing matched their
previous low (3.6 percent). (See table 4.)

Over-the-year pay gains for nonunion workers (4.6 percent) exceeded those
of union workers (3.1 percent). This relationship held in goods-producing
industries (4.1 percent compared with 2.9 percent), as well as in service-
producing industries (5.0 and 3.5 percent, respectively). (See table 6.)

The December 1985 ECI level stood at 129.2 for compensation costs, based
on June 1981=100. The ECI covers private industry workers (excluding farms and

jana and State and local government workers. It is not seasonally ad-
usted.

ECI news releases for the remainder of 1986 will be published on the
following schedule:

Reference Month Release Date
March 1986 April 29, 1986
June 1986 July 29, 1986

September 1986 October 28, 1986