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United State.

of Labor’
Washington, D.C. 20212

Bureau of Labor Statistics

Technical contact: USDL: 90-317

Brenda Rogers (202) 523-1165

Media contact: FOR RELEASE: Immediate
Kathryn Hoyle (202) 523-1913 Tuesday, June 19, 1990

EMPLOYER COSTS FOR EMPLOYEE COMPENSATION — MARCH 1990

. Employer costs for employee compensation in private industry
averaged $14.96 per hour worked in March 1990, the U.S.
Department of Labor's Bureau of Labor Statistics reported today.
Straight-time wages and Salaries--72.4 percent of the costs--
averaged $10.84, while benefit costs--the remaining 27.6
percent--averaged $4.13. ,

Legally required benefits (e.g. social security, workers’
compensation, unemployment insurance) averaged $1.35 per hour
worked--the largest cost to employers among the. benefit
categories. Legally’ required benefits accounted for 9.0 percent
of total compensation costs and about a third of all benefit
costs. Social security, the largest legally required benefit, -
cost employers, on average, 89 cents per hour worked-~6.0 percent
of all compensation costs and about a fifth of all benefit costs.
(See table 1.)

Other important benefit categories and their average costs
per hour worked were: Paid leave ($1.03), insurance (92 cents),
retirement and savings (45 cents), and supplemental pay (37
cents), which includes premium pay for overtime, shift pay,
nonproduction bonuses, and lump-sum payments provided in lieu of
wage increases. (See chart on page 3.)

Compensation costs varied widely by industry and
occupational group, union status, and geographic region.

Compensation costs averaged more for workers in goods—
producing industries ($17.55 per hour worked) than for those in
service-producing industries ($13.97). Among service-producing
industries, compensation costs ranged from $8.52 in retail trade
to $21.48 in transportation and public utilities. In goods~
producing industry groups, compensation costs were $15.59 in
nondurable goods~“manufacturing and $18.56 in durable -goods
manufacturing. (See table 4.)

Department : & |

.

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17

vent employment shifts among occupations and industries from influencing the
changes. Therefore, year-to-year changes in the cost levels will differ from
those in the ECI.

The March 1990 compensation cost levels were calculated with the March 1990
private industry employment counts from the Bureau of Labor Statistics Current
Employment Statistics program benchmarked to the 1988 universe of all. private
nonfarm establishments. In most cases, the ‘employment counts used were total
private industry employment estimates for 2-digit major industry groups (such as
. primary metal manufacturing or food stores) as defined by the SIC system. (For
the aerospace industries, employment estimates for 4-digit industries such as
aircraft manufacturing were used.) The employment data from these 2-digit groups
(or 4-digit industries) were distributed to major occupational groups (such as
executives, administrators, and managers or machine operators, assemblers, and
inspectors), using the relative importance of the groups as estimated by the ECI
sample. . .

More information on the cost levels, including how the costs are calculated,
appears in the article “Analyzing employers' costs for wages, salaries, and bene-
fits" in the October. 1987 issue of the Monthly Labor Review. . The published cost
levels for March 1987 also appear in that article.

An annual bulletin is issued from the ECI program. The second bulletin,

Employment Cost Indexes and Levels--1975-89 (Bulletin 2339), provides complete
Ristorieat data on EC! indexes and levels, and measures of the precision of the
two series through dune 1989. It also includes an explanation of survey methods
and discussion of the published information. The third annual bulletin, to be
issued later this year, will include this material as well as complete historical
ECI data and measures of precision through March 1990. .

The Relative Standard Errors

Because the data are based on a sample survey, the compensation. cost esti-
mates probably differ from the figures that would be obtained from ail units cov-
ered by the survey. To determine the precision of each cost level estimate, a
standard error was calculated.

The standard error defines a range (confidence interval) around the cost es-
timate. The approximate 95-percent confidence interval is the estimate plus or
minus twice the standard error. The standard error can also be expressed as a
percent of the cost estimate, or the relative standard error. For example, the

. 95-percent confidence interval for a cost estimate of $10 with a relative standard
error of 1.0 percent ‘would be $10.00 plus or minus 2.0 percent (2 times 1.0 per-
cent) or-$9.80 to $10.20. We can be 95 percent confident that the “true" cost
falls within the confidence interval.

The relative standard error is shown with the cost estimates for some series
in the appendix. Relative standard errors for all published estimates are
available upon request. ‘They also will appear in the 1990 ECI annual bulletin to
be published-later this year. A fuller explanation of the relative standard
errors is provided in the:article “Analyzing employers'- costs for wages, salaries,

‘and benefits® in the October 1987. issue of the Monthly Labor Review.

i
i
i



Relative Importance of Components of Employer Costs
for Employee Compensation, Private industry, March 1990

Le a Benefits
. See” Reares



Among occupational categories, average compensation costs
were higher for white-collar workers ($17.59) than for blue-
collar workers. ($14.57) and service workers ($7.66). However,
the level of compensation varied considerably by occupational
group within the blue-collar and white-collar categories. (See
table 5.) No breakdown in compensation costs for various service
occupational categories (e.g., protective service or food service
occupations) is available.

In all private industry, benefits made up a larger
proportion of compensation costs for blue-collar workers as a
whole (31.1 percent) than for white-collar workers (26.2 percent)
and service workers (23.8 percent). (See table 5.) Benefits
also accounted for a larger proportion of total compensation
costs for blue-collar workers than for white-collar. workers
within both goods- and service-producing industries. In goods-
producing industries; benefits made up 32.3 percent of .
compensation costs for blue-collar workers, compared with 28.4
percent for white-collar workers. (See table 6.) The
corresponding proportions in service-producing industries were
29.2 percent and 25.6 percent. (See table 7.)

- Compensation costs averaged more for union workers ($18.78)
in private industry than for nonunion workers ($14.22). In
addition, benefits made up a larger proportion of compensation
costs for union workers (33.6 percent) than for nonunion workers
{26.0 percent). -(See table 3.) This pattérn also.was found when
the comparison was.limited to blue-collar workers in ~
manufacturing. (See tables 10 and 11.) Union and nonunion cost
levels reflect a variety of influences, including coverage by a
collective bargaining agreement and variation in distribution of
union and nonunion workers among occupations and industries.

Compensation costs varied by region, ranging from $17.02 in
the Northeast to $13.22 in the South. The proportion of
compensation costs made up of benefits, however, was similar
among the four regions, ranging from 26.4 percent in the South to

29.0 percent in the Midwest. (See table 3.)

Note that to obtain the most current cost information, the
cost levels shown in this release are averaged using current
employment weights. Therefore,.changes in cost levels over time
reflect both changing rates of compensation, and changes in
relative employment among occupations with different rates of
compensation.

A measure of.the change in. rates of compensation that is not
influenced by employment shifts is provided by. the’ Employment. .
Cost Index (ECI), which is published quarterly by the Department
of Labor. 7 so . :

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EXPLANATORY NOTES

Employer costs for employee compensation is a measure of the average cost per
employee hour worked to employers for wages and salaries and benefits.

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, nonproduction bonuses, and’ 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 are:
Paid leave--paid vacations, holidays, sick leave, and other leave.

Supplemental pay--premium pay for overtime and work on weekends and holidays,
shirt differentials, nonproduction bonuses, and Jump-sum payments provided: in

lieu of wage increases.
Insurance benefits--life, health, and sickness and accident insurance.

_ Retirement and ‘savings benefits--pension and other retirement plans and sav-
ings and thrift plans.

Legally required benefits--social security, railroad retirement and supple-
mental retirement, railroad unemployment insurance, Federal and state
unemployment insurance, ‘workers' compensation, and-other benefits required by
Taw, such as state temporary disability insurance.

Other benefits--severance pay and supplemental unemployment plans.

The Survey

Employer costs for employee compensation cover all occupations in private
industry, excluding farms and households. -These cost levels are published once a
year with the payroll period including March 12th as the reference period.

The cost levels are based~on compensation ‘cost data collected for the Bureau
of. Labor Statistics Employment Cost. Index (ECI), released quarterly. Cost-data
were collected from the ECI's" March 1989 private industry sample which consisted
of about 23,000 occupations within~4,400 sample establishments. -The sample
establishments are classified “in industry categories based on the 1972 Standard
Industrial Classification (SIC) system, .as defined by the U.S. Office of
Management and Budget. Within an establishment, specific job categories are

- selected to represent broader major occupational groups such as professional
- Specialty and technical occupations.. ’

can > The cost levels. are calculated with current employment weights each year. In
: contrast, the ECI, which measures the change in employer costs for employee com-
Pensation, is calculated with fixed employment counts from the 1980 Census to pre