Table 1. Rates of compensation change in the Employment Cost Index

Percent changes for

Series 3 months ended 12 months ended
March | June |September | December December
1980 1980 1980 1980 1980
All private nonfarm

workers 1/ -~-~-------------------- 2.7 2.3 2.3 2.1 9.8

White-collar workers ---. 2.8 2.3 2.0 2.1 9.5

Blue-collar workers _ 2.4 2.5 2.7 2.1 10.1

Service workers -- _ 4.3 ll 2.1 1.7 9.4

Manufacturing industries -------- 2.8 2.0 2.3 2.2 9.8

Nonmanufacturing industries 2.7 2.5 2.3 2.0 9.8

1/ Excludes private household workers.


EXPLANATORY NOTE

The Employment Cost Index (ECI) is a quarterly measure of the change in the rate of employee
* compensation, free from the influence of employment shifts among occupations and industries with
different wage and compensation levels. Compensation is made up of two major components:
Wage and salary rates and employer costs for employee benefits.

Since 1975, the ECI has provided quarterly measures on changes in wage and salary rates,
defined as straight-time average hourly earnings. Straight-time earnings 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 earnings, whereas nonproduction 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.

With the addition of employee benefit costs, the ECI measures quarterly changes in compen-
sation along with changes in wage and salary rates. Benefits covered by the ECI include:

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

paid leave;

Supplemental pay - Shift differentials, nonproduction bonuses, severance
pay, and supplemental unemployment plans;

Insurance benefits - Life, health, and sickness and accident insurance;

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 umemployment insurance, Federal and
State unemployment insurance, workers' compensation, and other legally
required benefits such as State temporary disability insurance; and
Other benefits ~ Merchandise discounts in department stores.
Each quarter, straight-time average hourly earnings and benefit cost data (cents-per-hour-
worked) are collected from a probability sample of about 10,000 occupations within 2,000

sample establishments. Occupations were defined to correspond to 417 occupational categories

used in the 1970 Census.


Pay rose 10.9 percent over the year for union workers compared with 8.0
percent for nonunion workers. The difference was greater in the manufacturing
sector where pay increases for union and nonunion workers were 11.0 percent and
7.9 percent, respectively. In nonmanufacturing, corresponding gains were 10.8
percent and 8.1 percent.

Workers in the West registered the largest increases among regions--10.8
percent. Pay increases were lowest in the Northeast--8.6 percent. Metropolitan

areas showed gains of 9.0 percent, lower than the 9.4 percent for other areas.


Rates of wage and salary change in Employment Cost Index

Table 2.

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au



The sample establishments were classified in 62 industry groups based on a two-digit
Standard Industrial Classification (SIC), as defined by the U.S. Office of Management and
Budget. Base-period sample weights are applied to the occupational data in the sample establish-
ments to calculate weighted averages on earnings, benefit costs, and compensation for each
occupation by industry.

Multiplying these averages by occupational employment weights from the 1970 Census produces
total wage and compensation bills for the occupations by two-digit SIC. The bills are summed
over industry/occupation components to produce levels of aggregation used in the ECI series
(e.g., occupational groups, industry divisions).

Dividing current quarter wage and compensation bills by those in the previous quarter
provides the quarter-to-quarter percent changes published for the ECI.

Data are collected for the pay period encompassing 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 2.0 percent change in wage and salary rates for
“all private nonfarm workers" in the fourth quarter of 1980 (table 2) is the actual percent
change in straight-time average hourly earnings from the pay period including the 12th day
of September 1980 to the comparable pay period in December 1980.

ECI wage and salary data are also published by region and metropolitan areas (based on
the location of the sample establishment) and for "union" and "nonunion" series (based on
whether the sample occupations are covered by collective bargaining agreements).

Publication of quarterly changes in compensation is limited to six major ECI series.

(See table 1.) These series are part of the ECI's basic occupation and industry estimating
structure and, with one exception, represent at least 3,000 occupations surveyed at an establish-
ment level. Service workers' data represent about 909 establishment/occupations. Compensation
data for other ECI series will be published after assessment of sample sizes and the quarter-to~
quarter changes in benefit costs.

More detailed information on the ECL is available in several articles and publications.
These include a chapter in the BLS Handbook of Methods (Bulletin 1910), "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.


United States
Department ¢)
of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Judith Finger (202) 523-1165 USDL: 81-104
Kathryn Hoyle (202) 523-1913

FOR RELEASE: Immediate
. Friday, February 27, 1981

EMPLOYMENT COST INDEX - 4TH QUARTER 1980

Employee compensation rates, as measured by the Employment Cost Index (ECI),
increased 2.1 percent for the 3 months ended in December 1980, the U.S. Depart-
ment of Labor's Bureau of Labor Statistics reported today. Compensation, which
includes wages, salaries, and employer costs for employee benefits, rose 9.8 per-
cent in the 12 months ended in December 1980.

Wage and salary rates increased 2.0 percent in the fourth quarter 1980 com-
pared to 2.4 percent in the same quarter a year earlier. For the 12 months ended
in December 1980, wages and salaries advanced 9.0 percent. The ECI is not
seasonally adjusted.

COMPENSATION CHANGES

Compensation increases for major industrial and occupational groups were
closely clustered around the 2.1 percent gain for all private nonfarm workers
in the fourth quarter. Service workers, the only exception, registered a
1.7 percent increase (table 1).

Compensation advanced 9.8 percent for all private nonfarm workers over the
12 months ended in December 1980. Gains in nonmanufacturing industries and in
manufacturing industries were identical to the overall advance. Compensation
increases for workers in blue-collar occupations (10.1 percent) outpaced
those for the other two occupational groups--9.5 percent for white-collar workers

and 9.4 percent for service workers.


y percent changes,

ECI cumulative quarterl
wages and salaries,
September 1975—December 1980

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1980

1979

1978

1977

1976

1975



Compensation rose more rapidly than wages over the year in each industrial
and occupational group. Service workers registered the largest difference, with
a compensation rise of 9.4 percent compared with an 8.1 percent wage gain.

The smallest difference was recorded for manufacturing industries where compen-
sation increased 9.8 percent and wages, 9.4 percent.

Wage gains and their impact on wage-related benefits, such as paid holidays,
paid vacations, and employer contributions to Social Security, accounted for
approximately four-fifths of the compensation rise.

WAGE AND SALARY CHANGES

September 1980-December 1980. The 2.0 percent wage and salary rise for

all private nonfarm workers was paced by a 2.3 percent increase for workers in
the manufacturing industries. Workers in durable and nondurable manufacturing
received similar increases--2.3 percent and 2.1 percent, respectively.

There was greater variation among industries in the nonmanufacturing
sector, where the overall gain was 1.9 percent. The largest wage gain, 3.2
percent, was in wholesale trade; the smallest gain, 1.1 percent, was in retail
trade, partly resulting from decreases in commission earnings for automobile
salesworkers. In transportation and public utilities, the 2.7 percent wage
increase reflected the collective bargaining settlement for a large number of
workers in the telephone industry.

White-collar and blue-collar workers posted similar pay gains of 2.0
percent and 2.1 percent, respectively, while service workers' pay rose 1.5
percent. In white-collar occupations, wage increases ranged from 1.3 percent
for managers and administrators to 2.8 percent for salesworkers, which
reflected increases in commission earnings for stock and bond brokers.

Among blue-collar occupations, craft and kindred workers posted the
highest wage gains of 2.2 percent. Wages for transport equipment operatives

showed the smallest increase--1.9 percent.


Union workers' pay rose an average 2.5 percent during the quarter compared
with 1.8 percent for nonunion workers. Corresponding increases within the manu-
facturing sector were 2.4 percent and 2.1 percent. The nonmanufacturing sector
showed a greater disparity between pay gains for unionized and nonunionized
workers--2.6 percent and 1.7 percent, respectively.

Among regions, wage gains varied from 2.2 percent in the North Central
region to 1.9 percent in the Northeast and South. Pay rose 2.0 percent in the
West.

Workers in metropolitan areas registered wage increases of 2.0 percent
compared with 2.4 percent in other areas.

December 1979-December 1980. The increase in wage and salary rates for the

12 months ended in December 1980 was 9.0 percent. Manufacturing workers regis-—
tered pay gains of 9.4 percent. Within this sector, pay rose 9.8 percent for
workers in durable goods industries and 8.6 percent for those in nondurables.

Wages in nonmanufacturing industries increased 8.8 percent overall.
Increases ranged from 11.1 percent in transportation and public utilities to 7.0
percent in retail trade.

Blue-collar workers registered larger wage gains (9.6 percent) than either
white-collar workers (8.7 percent) or service workers (8.1 percent). Operatives
except transport outpaced all other blue-collar occupational groups with pay
increases of 10.2 percent. The lowest wage gains, 8.2 percent, were received
by transport equipment operatives. Among white-collar occupations, professional
and technical workers posted the highest pay increases, 10.5 percent, while sales-

workers trailed with 6.7 percent.