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18
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 and the public sector--excluding farms, households, and 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 over
23,000 occupations within over 4,500 sample establishments in private industry and
about 7,000 occupations within 1,000 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.

The sample establishments are classified in industry categories based on the
1987 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


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19

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.

Beginning with the March 1990 ECI release, indexes were rebased to June
1989=100. A description of the rebasing is included in the article "Employment
Cost Index Rebased to June 1989," in the April 1990 issue of the Monthly Labor
Review.

Beginning with the December 1990 ECI release, seasonally adjusted data are
available for selected ECI series. Seasonal adjustment removes the effects of
events that follow a more or less regular pattern each year. These adjustments
make nonseasonal patterns easier to spot.

The costs per hour worked of compensation components, based on March 1991
data from the ECI, are published in a separate news release titled "Employer Costs
for Employee Compensation - March 1991."+ 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 wit 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, 1975-91, (Bulletin
2389); a chapter in the BLS Handbook of Methods (Bulletin : ie 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, I1linois 60690. Reprints of
the articles plus other descriptive pieces and a complete historical listing are
available upon request. ECI historical data are also available on data diskettes.

Information in this release will be made available to sensory impaired
individuals upon request. Voice phone: 202-523-1221, TDD phone: 202-523-3926, TDD
Message Referral Phone Number: 1-800-326-2577.

1 Cost levels by establishment size for March 1991 appear in the article
"Compensation cost levels by establishment employment size," in the August 1991
issue of the Bureau's monthly publication, Compensation and Working Conditions."



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United States
News =" 4
; of Labor

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

Technical, historical contact: USDL: 92-240
Mark Brinkley (202) 523-1165

TRANSMISSION OF MATERIAL IN
Media contact: THIS RELEASE IS EMBARGOED
Kathryn Hoyle (202) 523-1913 UNTIL 8:30 A.M. (EDT),

TUESDAY, APRIL 28, 1992

EMPLOYMENT COST INDEX - MARCH 1992

The Employment Cost Index (ECI) increased 1.2 percent before seasonal adjustment
in the 3 months ended in March 1992, the U.S. Department of Labor's Bureau of Labor
Statistics reported today. The March 1992 ECI level of 113.5 (June 1989=100) was 4.0
percent higher than the index in March 1991. The ECI measures changes in compensation
costs, including wages, salaries, and employer costs for employee benefits.

Quarterly changes, seasonally adjusted

On a seasonally adjusted basis, ECI compensation costs rose 0.9 percent in the
December 1991-March 1992 quarter, the same as in the September-December 1991 quarter.
(See table below.) Corresponding quarterly increases in wages and salaries were 0.7
and 0.9 percent. Benefit costs rose 1.3 percent in December 1991-March 1992, following
a 1.2 percent increase in September-December 1991, their smallest quarterly rise since
1987.

Table A. Percent changes in ECI for civilian workers

Seasonally adjusted | Unadjusted

Compensation a-months ended. 7 | 12-months
component 1990 1991 1992 | ended

June Sep. Dec. Mar. June Sep. Dec. | Mar. i Mar. 1992
Compensation costs.. | 1.2 1.1 1.0 11 1.3 0.8 0.9 | 0.9 i 4.0
Wages and salaries. | 1.2 1.0 0.9 1.1 0.9 0.6 0.9 0.7 3.2
Benefit costs...... / 1.5 1.5 1.5 | 1.4 1.5 1.6 1.2 : 1.3 i 5.7

Qver-the-year_ changes, unadjusted

Compensation costs (not seasonally adjusted) increased 4.0 percent for the year
ended in March 1992--down from 4.3 percent for the year ended December 1991. (See
table 4.) This pattern held for both private industry workers (4.2 percent, down from
4.4 person) and state and local government workers (3.0 percent, down from 3.6
percent).


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Yooh DAY DO
T

Changes in wages and salaries and benefit costs, private industry, 1980-92
i2-month percent change -month percent change

Wages and salaries

L n L L 1 n L 1 1 L 1 L ni

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992

ad
or NO AR OH

or ND Oo FHA YD O



2

The slowdown in the rate of compensation growth reflected a deceleration in wage
and salary gains (3.2 percent, down from 3.6 percent for the year ended December
1991). Lower wage and salary increases were recorded for both private industry workers
(3.4 percent, down from 3.7 percent) and state and local government workers (2.9
percent, down from 3.5 percent).

In contrast to the deceleration in wage and salary gains, benefit cost increases
were about the same in March 1991-92 as in December 1990-91--5.7 percent and 5.6
percent, respectively. This leveling off in benefit cost increases persisted for
private industry workers (6.3 percent and 6.2 percent, respectively), but not for state
and local government workers (3.4 percent, down- from 3.9 percent). Health and workers’
compensation insurance continued. their relatively rapid rises, with. the. increases in
private industry exceeding those: in state and local governments.

Compensation increases in private industry for the year ended in March 1992 were
higher for service occupations (4.8 percent) than for blue-collar (4.3 percent) or
white-collar occupations (4.0 percent), reflecting in part the effects of the April 1,
1991, increase in the Federal minimum wage from $3.80 to $4.25 an hour. Compensation
gains for white-collar occupational groups ranged from 3.3 percent for sales workers to
4.7 percent for professional and technical workers. Increases for blue-collar workers
varied from 3.9 percent for precision production, craft, and repair occupations and for
transportation and material moving accupations to 5.2 percent for machine operators,
assemblers, and inspectors. (See table 5.)

Over-the-year compensation gains were higher for private goods-producing
industries (4.6.percent) than for service-producing industries (4.0. percent). Within
the service-praducing industries, compensation increases ranged from 2.0 percent in
business services to 5.5 percent in communications. Compensation gains among the
goods-producing industries ranged from 3.0 percent in construction to 5.2 percent in
durable goods manufacturing.

Compensation increases for union workers (5.2 percent) exceeded those for nonunion
workers (4.0 percent) for the year ended in March 1992, as they have since June 1991
and in contrast to the trend that had prevailed for nearly a decade. This pattern held
for both service-producing and goods-producing industries. (See table 6.)

eon data for June 1992 will be released on Tuesday, July 28, 1992, at 8:30 A.M.


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