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EXPLANATORY NOTE

The Employment Cost Index (ECI) 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 stralght-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:

Paid leavé - Paid vacations, paid holidays, paid sick
leave, and other paid leave;

Supplemental pay - Premium pay for overtime and work
on weekends and holidays, shift differentials, and non-
production bonuses;

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

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

Other benefits - Severance pay, supplemental unemployment
plans, and merchandise discounts in depdrtment stores; and

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.

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 benefit
cost data (cents-per-hour-worked) are collected froma 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.


Centennial
of Labor
Statistics

. ; U.S. Department of Labor ;
Bureau of Labor Statistics i
Washington, D.C. 20212

Technical, historical contact: USDL: 84-192
(202) 523-1165 .
Media contact: (202) 523-1913 FOR RELEASE: 10:00 A.M. E.D.T.

Monday, April 30, 1984

EMPLOYMENT COST INDEX - MARCH 1984

The Employment Cost Index (ECI) increased 1.7 percent in the 3 months ended
in March 1984, the U.S. Department of Labor's Bureau of Labor Statistics reported
today. For the year ended in March 1984, the increase was 5.8 percent--down from
6.5- percent for the year ended in March 1983.

The March 1984 index level stood at 119.8 for compensation costs (including
wages, salaries, and employer costs for employee benefits), based on June 1981l=
100 (table 1). The ECI covers private industry and State and local government
workers. It is not seasonally adjusted. .

The 1.7 percent increase in compensation costs was about the same as the
1.6 percent rise in the December-March quarter a year ago. The similarity of in-
creases in the first quarters of 1984 and 1983 was also recorded for private
industry workers (1.7 percent in both years), but not for State and local govern-
ment workers (1.6 percent, up from 1.2 percent).

Wage and salary gains (1.2 percent) in the first quarter of 1984 were below
the 1.7 percent compensation cost rise. This pattern occurred because increases
in costs for employee benefits outpaced pay gains. Benefit cost rises were mainly
due to increases in the social security tax rate (from 6.7 to 7.0 percent) and in
the maximum annual salary to which the tax applies (from $35,700 to $37,800);
higher costs for private health insurance and State unemployment insurance; and
larger nonproduction bonuses.

Blue-collar and white-collar workers in private industry had the same average
pay increase (1.1 percent) in the December 1983-March 1984 quarter, but changes
for occupational groups. within the two categories differed substantially. Wage
increases for blue-collar workers ranged from 0.7 percent for nonfarm laborers to
1.4 percent for transport equipment operatives. Salary changes for white-collar
workers ranged from a 0.9 percent decrease for sales workers (reflecting a drop
in commission earnings in finance, insurance, and real estate) to a 2.0 percent
increase for managers and administrators. Pay increases for blue-collar groups
were generally higher in the first quarter of 1984 than during the same quarter a
year ago. This pattern was reversed for white-collar workers.

Wage and salary increases for service workers (2.8 percent) in private
industry were higher than the gains for either white-collar or blue-collar work-
ers. The service-worker increase reflects a variety of influences, including


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 e 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 employment 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 sa~.e. 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 1.2 percent
change in wage and salary rates for "private industry workers" in-the 3 months
ended March 1984 (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 December 1983 to the comparable pay period in March 1984.

More detailed information on the ECI is available in several articles and
publications. These include a chapter in the BLS Handbook of ‘Methods (Bulletin
21341), "The Employment Cost Index." Two articles also appeared in the Monthly
Labor Review: "Employment Cost Index: a measure of change in the 'price of iabor',"
July 1975; and "How benefits will be incorporated into the Employment Cost Index,"
January 1978. Reprints of these articles plus several other descriptive pieces
and a historical listing of ECI data are available upon request.


higher commission earnings for workers providing personal services, as well as

pay adjustment patterns for service workers that usually occur in the first quar-
ter of the year.

In contrast to private industry workers, both compensation cost and wage
and salary increases for State and local government workers in the December 1983-
March 1984 quarter were higher than in the same period last year. This pattern
held for school employees, but not for workers in hospitals and other services or
in public administration. For school employees, one of the largest worker groups
in State and local governments, compensation costs rose 1.5 percent in the first
quarter of 1984, compared with 0.7 percent in the first quarter of 1983. The
corresponding wage and salary gains were 1.3 and 0.6 percent.

For the year ended March 1984, compensation cost increases (5.8 percent)
were substantially below gains for the year earlier (6.5 percent). The slowdown
was about the same for State and local government workers (6.4 percent compared
with 7.1 percent a year ago) as for’ private industry workers (5.7 and
6.4 percent).

Over=the-year wage and salary gains also were lower than a year ago for
civilian workers (5.1 percent contrasted to 5.6 percent), private industry work-
ers (5.0 and 5.4 percent), and State and local government workers (5.6 and
6.4 percent). The slowdown in wage increases resulted in several worker groups
in private industry registering their‘lowest 12-month wage increases since these
ECI series began in 1976 or 1977, including: Clerical workers (5.6 percent),
nonfarm laborers (3.6 percent), workers in nondurable manufacturing (4.4 percent),
construction workers (2.6 percent), and workers in the West region (4.1 percent).


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