14
EXPLANATORY NOTE

The Employment Cost Index (ECI) is a measure of the change in the cost of
labor, free from the infiuence 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 compen-
sation. .

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 21,000 occupations within 4,000 sample establishments in
private industry and about 3,500 occupations within 700 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.

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 >
y of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 89-205
Albert Schwenk (202) 523-1165 :
TRANSMISSION OF MATERIAL IN THIS RELEASE
Media contact: TS EMBARGOED UNTIL 8:30 A.M. (EDT),
Kathryn Hoyle (202) 523-1913 TUESDAY, APRIL 25, 1989

EMPLOYMENT COST INDEX - MARCH 1989

The Employment Cost Index (ECI) rose 1.2 percent for the 3 months ended in March
1989, the U.S. Department of Labor's Bureau of Labor Statistics reported today. The
March 1989 ECI stood at 147.3, based on June 1981=100. For the year ended in March
1989, the ECI increase was 4.8 percent. The ECI 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 March 1989 was
less than the 5.0 percent increase for the year ended in December 1988, but greater
than the 4.1 percent increase for the year ended in March 1988. This pattern held

| for both private industry and state and local government workers. (See table 1.)

Wage and salary increases in private industry averaged 4.2 percent for the year
ended in March 1989, up from 3.3 percent a year ago. This pattern was reversed for
benefit cost increases--5.4 percent, down from 5.8 percent. The social security tax
rate did not increase in 1989, whereas it rose 5 percent in January 1988. The table
below shows over-the-year changes in private industry compensation costs since
March 1986.

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

- 12-months Compensation Wages and Benefit
ended costs salaries costs
1986 March 3.8 3.9 3.2
June 3.8 3.7 3.5
Sept. 3.2 3.1 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. 4.5 3.7 6.7

Dec. 4.9 4.1 6.8

1989 March 4.6 4.2 5.4



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15

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.

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 1988
data from the ECI, are published in a separate news release titled “Employer
Costs for Employee Compensation--March 1988." 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, 1975-88,
(Bulletin 2319); a Chapter in the BLS Handbook of lethods (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.0. Box 2145, Chicago,
Illinois 60690. Reprints of the articles plus other descriptive pieces and a
complete historical listing are available upon request to Area Code 202--523-
1165. ECI historical data are also available on data diskettes formatted for
use with Lotus 1-2-3,


3

ECI data for June 1989 will be released on Tuesday, July 25, 1989, at 8:30 A.M.
E.0.T.

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

12—month 12—month
percent change Pereent change
16 - 16
145 *& 4 14
i %,
Fi
1z Fo Mey 4 12
10 - qy 10
an 48
et 46
4 Wages and salaries 44
2h 42
a ee ee

1980-1981 1982 1983 1984 1985 1986 1987, 1988 = 1989



2

The 4.2 percent rise in wages and salaries for private industry workers reflects
the influence of relatively large pay increases for sales workers. Excluding sales
workers, pay gains averaged 3.9 percent. Sales’ worker pay, heavily influenced by
volatile commission earnings, rose 7.2 percent in the year ended in March 1989, up
from 0.6 percent a year ago.

Over-the-year pay gains were higher for workers in service-producing than for
those in goods-producing industries ol percent compared with 3.1 percent). March
1988-89 pay gains in the service-producing sector reflected larger than average
increases in finance, insurance, and real estate (7.4 percent), health services
including hospitals (6.9 percent), and wholesale trade (6.1 percent). The gains in
finance, insurance, and real estate and in wholesale trade were affected by
commission earnings.

Wage and salary increases in private industry for the year ended in March 1989
were higher for white-collar occupations (5.0 percent) than for blue-collar (3.2
percent). Pay gains for white-collar occupational groups ranged from 4.1 percent for
clerical workers to 7.2 percent for sales workers. Increases for blue-collar
occupational groups ranged from 2.9 percent for laborers to 3.5 percent for machine
operators, assemblers, and inspectors.

Over-the-year wage and salary advances for nonunion workers (4.8 percent)
exceeded those for union workers (2.5 percent), as they have since March 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 (5.1
percent) than for union workers (3.0 percent). (See table 6.)

For state and local government workers, pay gains for the year ended jn March
1989 (4.8 percent) were higher than those a year ago (4.4 percent). The March 1988-
89 gains were highest in elementary and secondary schools, averaging 5.7 percent.

RHI EIR IEEE RIKI RIAA AI II ARIA INIA EII III IAAI AIT II IIIS IIIIIIIT AIK IK

For the first time, this release includes measures of wage and
compensation changes for educational services and colleges and
universities in private industry. (See tables 3 and 4.) These
series are part of the Bureau of Labor Statistics' efforts to
improve statistical programs for service-producing industries.

This release also includes, for the first time, measures of wage,
benefit, and compensation cost changes for aerospace manufacturing
industries. (See table 8.) Funds for the development and
maintenance of these series are provided by the Aerospace Industries
Association. The series are published in this release for the
convenience of all users. :

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 serfes are published with
reference to the same base (June 1989=100), including many new
series that began after June 1981. The change will not affect the
fixed employment weights being used, which will continue to be

based on the 1980 census.
KKK IK IKI RIK IRIE IIR RISES III ISIE K IAEA IIA IIIB IIIA ERIA IAAI

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