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EXPLANATORY NOTE

The Employment Cost Index (ECZ) 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, whereas nonpro-
duction bonuses (such as Christmas or year~end bonuses) are excluded. Also
excluded are such items as payments-in-kind, free room and board, and tips.

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

Hours related benefits - Premium pay for overtime
and work on weekends and holidays, paid vacations,
paid holidays, paid sick leave, and other paid leave;

Supplemental pay - Shift differentials, nonproduction

bonuses, severance pay, and supplemental unemployment if
plans; ‘ . e

at

Insurance benefits — Life, health, and sickness and ay
accident insurance; . - $q

Retirement and savings benefits = Pension and other -
retirement plans and savings and thrift plans; .

Legally required benefits - Social security, rail-

road retirement and supplemental retirement, railroad
unemployment insurance, Federal and State unemployment
insurance, workers’ compensation, and ‘other legally
required benefits such as State ‘temporary disability
insurance;. and

oe

Other benefits - Merchandise discounts in department
stores.

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 benetit
cost data (cents-per-hour-worked) are collected from a probability sample of about
10,000 occupations within 2,000 sample establishments in the. private sector and
about 3,700 occupations within 750 sample establishments in State and local

governments.


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NOILYSNAdWOD


Occupations were classified according to definitions used in the 1970
Census. Within an establishment, specific job categories are selected to repre=
sent 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, establishments 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 emp'oyment 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 reallocated 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.

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 1.1 percent
change in wage and salary rates for “private industry workers" in the 3 months
ended December 1983 (table 3) is the actual percent change in straight-time
average hourly wage and salary rates from the pay period including the 12th day
of September 1983 to the comparable pay period in December 1983,

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

are available upon request.



“¢
i

+

& United States
a il Department ¢)
of Labor :

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 84-36
(202) 523-1220
Media contact: (202) 523-1913 FOR RELEASE: 10:00 A.M. E.S.T.

Tuesday, January 31, 1984

EMPLOYMENT COST INDEX - DECEMBER 1983

The Employment Cost Index (ECI) increased 1.1 percent in the 3 months ended
in December 1983, the U.S. Department of Labor's Bureau of Labor Statistics
reported today. For the year ended in December 1983, the increase was 5.7 per-
cent--down from 6.6 percent in 1982.

The December 1983 Index level stood at 117.8 for compensation costs (wages,
salaries, and employer costs for employee benefits), based on June 1981=100
(table 1). The ECI covers private industry and State and local government
workers. It is not seasonally adjusted.

‘The 1.1 percent increase in compensation costs was about the same as the
1.2 percent rise in September-December a year ago. The similarity of increases
in the fourth quarters of 1983 and 1982 was also recorded for private industry
workers (1.2 percent, down from 1.3 percent last year), but not for State and
local government workers (1.0. percent, up from 0.7 percent). Wages and salaries
followed much the same pattern as compensation cost increases during the
September-December 1983 and 1982 periods (table 2).

Wage and salary gains for private industry workers averaged 1.1 percent in
September-December 1983, but the pattern of change varied widely by occupation
and industry group. Blue-collar workers, for example, had wage changes ranging
from a 1.2 percent increase for laborers and operatives (non-transport) to a
0.5 percent decrease for transport operatives (table 3). The decrease reflects
wage cuts for intercity bus drivers that occurred in the fourth quarter of 1983.

Pay increases also varied for white-collar occupational groups, from
0.4 percent for professional and technical workers to 2.6 percent for sales
workers. Pay for sales workers--one of the most volatile ECI series--was
strongly affected by commission earnings, particularly for stock and bond
brokers. .

Compensation cost increases for the year ended December 1983 (5.7 percent)
were substantially below last year (6.6 percent). The slowdown was greater for
State and local government workers (6.0 percent compared with 7.2 percent a year
ago) than for private industry workers (5.7 and 6.4 percent).

Over-the-year wage and salary gains for private industry workers also
dampened in 1983 compared with 1982. White-collar pay gains in 1983 were down
slightly from 1982, 6.0 compared with 6.4 percent. Wage increases for blue-
collar workers, on the other hand, dropped to 3.8 percent in 1983, contrasted
to 5.6 percent in 1982.


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SHIYVIVS CNV SHOVM


2

Reflecting lower average pay gains for blue-collar workers, several worker
groups in private industry registered the lowest over-the-year wage increases .
since these ECI series began in 1976 or 1977. Record low wage gains were regis-
tered for craft workers (3.8 percent), transport operatives (3.1 percent), workers
in the Northeast and North Central regions (4.6 percent), and union workers in .
both manufacturing (3.6 percent) and nonmanufacturing (5.5 percent). As a result
of the slowdown in union wage gains, average wage increases for nonunion workers
exceeded those for union workers in 1983 (table 5)--the first time this has
occurred since 1978 when the Federal minimum wage was increased by 15 percent.
(Compensation cost increases, on the other hand, were virtually the same for union
workers in 1983 as for nonunion workers--5.8 and 5.7 percent, respectively.)

Wage and salary increases for State and local government workers averaged
5.3 percent for the year ended in December 1983, down from 6.5 percent in 1982.

This release introduces ECI measures of compensation cost
changes for private industry workers in four broad regions--
Northeast, South, North Central, and West. (See table 4.)

_—s



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