14

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 series! 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 about 22,000 occupations
within 4,200 sample establishments in private industry and about 4,200 occupations within 800
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. ECI
statistics are neither annualized nor adjusted for seasonal influences.

The sample establishments are classified in industry categories based on the 1972
Standard Industrial Classification (SIC), as defined by the U.S. Office of Management and
Budget.

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. :

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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| United States
_ Department >
of Labor

* Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 89-360 -
Wayne Shelly (202) 523-1165

TRANSMISSION OF MATERIAL IN THIS RELEASE
Media contact: 1S EMBARGOED UNTIL 8:30 A.M. (EDT),
Kathryn Hoyle (202) 523-1913 TUESDAY, JULY 25, 1989

EMPLOYMENT COST INDEX - JUNE 1989

The Employment Cost Index (EC!) rose 1.1 percent in the 3 months ended in June 1989,
the U.S. Department of Labor’s Bureau of Labor Statistics reported today. The June 1989 ECI
stood at 148.9, based on June 1981=100. For the year ended in June 1989, the increase was
4.8 percent. The EC! measures changes in compensation costs--wages, salaries, and employer
costs for employee benefits. It is not seasonally adjusted.

The 4.8 percent rise in compensation costs for the year ended in June 1989 was slightly
higher than the 4.6 percent increase for the year ended in June 1988. The June 1988-89
increase for state and-local government workers (5.8 percent), was above that for June 1987-88
(5.0 el whereas increases for private industry workers were the same in both periods (4.5
| percent).

Wage and salary increases for private industry workers averaged 4.1 percent for the year
ended in June 1989, up from 3.7 percent a year ago. This pattern was reversed for benefit cost
increases--5.6 percent, down from 6.4 percent. The social security tax rate did not increase in
1989, whereas it rose 5 percent in January 1988. Employer health insurance costs continued to
rise most rapidly among employee benefits, with nonproduction bonuses also showing some
acceleration. The table below shows over-the-year changes in private industry compensation
costs since September 1986. .

12-month percent changes in the ECI, private industry workers

12-months Compensation Wages and Benefit
ended costs salaries costs
1986 Sept. 3.2 . 3.41 3.3
Dec. 3.2 3.1 3.4
1987 March 3.1 3.2 2.9
June | “3.0 3.0 3.3
Sept. 3.3 3.3 3.1
Dec. 3.3 3.3 3.5
1988 March 3.9 3.3 5.8
dune 4.5 3.7 6.4
Sept. 45 3.7 6.7
Dec. 49 41 6.8
1989 March 46 4.2 5.4
June 4.5 41 5.6



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15

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.

The costs per hour worked of compensation components, based on March 1989 data
from the ECI, are published in a separate news release titled "Employer Costs for Employee
Compensation--March 1989." 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 EC! is available in several sources. These include an

- annual bulletin, Employment Cost Indexes and Levels, 1975-88, (Bulletin 231 9); a chapter in the
BLS Handbook of Methods (Bulletin 2285), "The Employment Cost Index;" and several articles
published in the Monthly Labor Review. The annual 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.O. Box 2145, Chicago, Illinois 60690.
Reprints of the articles plus other descriptive pieces and a complete historical listing are
available upon request. EC! historical data are also available on data diskettes formatted for
use with Lotus 1-2-3.


Changes in wages and salaries and benefit costs, private industry, 1980-89

12—month
percent change

16

14

12

10

12—month
percent change

16

7 14

4 12

0-7-7 -7-T B= S oe

1960 1981

1982

1983

1984

1985

1986

1987

1988

1989



2

The 4.1 percent rise in wages and salaries for private industry workers reflects the
influence of relatively large pay gains for sales workers. Excluding sales workers, pay increases
averaged 3.9 percent, the same as a year ago. Sales worker pay, heavily influenced by volatile
commission earnings, rose 6.0 percent in the year ended in June 1989, up from 2.9 percent a
year ago.

Over-the-year ay gains were higher for workers in service producing than in goods-
producing industries (4.7 percent compared with 3.2 percent). Within the.service-producing
sector, pay gains ranged from 1.9 percent in transportation and in communication to 6.4 percent
in hospitals and 7.6 percent in finance, insurance, and real estate. The gain in finance,
insurance, and real éstate also was influenced by commission earnings.

Wage and salary increases in private industry for the year ended in June 1989 were
higher for white-collar occupations (4.6 percent) than for blué-collar workers (3.3 percent). Pay
gains for white-collar occupational groups ranged from 4.2 percent for managers to 6.0 percent
for sales workers. The range for blue-collar workers was from 2.6 percent for transport
operatives to 3.6 percent for machine operators, assemblers, and inspectors.

. Over-the-year wage and salary advances for nonunion workers (4.6 Percent) exceeded
those for union workers (2.6 percent), as they have since Match 1983-84. This pattern held in
both goods producing and service-producing industries. (See table 7.) Compensation cost
increases also were higher for nonunion workers (5.0 percent) than for union workers (3.1
percent). (See table 6.) .

, For state and local government workers, pay gains for the year ended in June 1989 (5.0
percent) were higher than those a year ago (4.4 percent). The June 1988-89 gains were highest
in health services, averaging 5.9 percent.

Ci dslalolhalalabeababahehcelsieahbleebbeisebibieaele Ubiehbbtbeblaneniier neato ee G ECCT E ETE TET TT

This release includes, for the first time, measures of wage and compensation change for
educational services and colleges and universities in state and local governments and for
educational services in the civilian (nonfederal) economy.. (See tables 1 and 2.) These
series are part of the Bureau of Labor Statistics’ efforts to improve statistical programs
for service-producing industries.

Beginning with the ECI news release for March 1990, the base for ECI series will be

June 1989=100, rather than June 1981=100. This change is being made so that all ECI
series--including many new series that began after June 1981--are published with reference
to the same base (June 1989=100). The change will not affect the fixed employment
weights being used, which will continue to be based on the 1980 census.

a es
ee a es

JESSIE IIIS III SAID IIIS IISIDIIOH TITTIES ISS I HES II SA Ei oe

ECI data for September 1989 will be released on Tuesday, October 31, 1989, at
8:30 A.M. (EST), : . :

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