14

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 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 1987
data from the ECI, are published 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 will be 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 differ from those in the ECI.

More detailed information on the ECI is available in several sources.
These include a chapter in the BLS Handbook of Methods (Bulletin 2134-1), "The
Employment Cost Index," and several articles published in the Monthly Labor
Review. Reprints of these articles plus other descriptive pieces and a
historical listing are available upon request. ECI historical data are also
available on data diskettes formatted for use with Lotus 1-2-3.


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United States
Department
p of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 88-213

Felicia Nathan (202) 523-1165

Media contact: FOR RELEASE: 10:00 A.M. E.D.T.
Kathryn Hoyle (202) 523-1913 Tuesday, April 26, 1988

EMPLOYMENT COST INDEX - MARCH 1988

The Employment Cost Index (ECI) rose 1.4 percent in the 3 months ended in
March 1988 to a level of 140.6 (June 1981=100),.the U.S. Department of Labor's
Bureau of Labor Statistics reported today. For the year ended in March, the
increase was 4.1 percent. The ECI measures changes in compensation costs--
wages, salaries, and employer costs for employee benefits. It is not seasonally
adjusted. :

The 4.1 percent increase in compensation costs for the year ended in March
1988 was higher than the 3.4 percent gain a year ago. This acceleration in
compensation cost increases resulted primarily from a 5.0 percent rise in the
employer's social security tax rate (from 7.15 to 7.51 percent) and higher
health insurance costs occurring in the first quarter 1988.

The acceleration was concentrated in private industry where compensation
costs rose 3.9 percent for the year ended in March 1988, up from 3.1 percent a
year ago. For the first time in the 8-year history of the series, March-to-
March compensation cost increases in private industry were higher than they were
the previous year, as indicated below:

12-month percent changes, private industry workers

Year ended Compensation Wages and Benefit
in March costs salaries costs
198t 10.7 9.3 14.4
1982 7.8 8.1 7.0
1983 6.4 5.4 9.0
1984 5.7 5.0 7.5
1985 4.4 4.1 5.3
1986 3.8 3.9 3.2
1987 3.1 3.2 2.9
1988 3.9 3.3 5.8


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3

Compensation costs for state and local government workers rose 4.9 percent
for the year ended in March‘1988, about the same as the 5.0 percent increase a
year ago. Wages and salaries alone rose 4.4 percent, down from 5.2 percent a
year ago--indicating that accelerating benefit cost increases for state and
locaT-government workers over the past year have offset a slowdown in pay gains.

IITA IIIA IIIT AR IITA RII IAI KIT II IISA IIIA III SAI III IAI IISA IISA A IIIA IA.

This release presents first-time estimates of quarterly changes
in compensation costs and in wages and salaries for workers in
electric, gas, and sanitary services. (See tables 5 and 6.)

The addition of these series is part of the Federal government's
effort to improve statistical programs for service-producing
industries.

This release also provides first-time index series that ‘exclude
sales workers from wholesale and retail trade and from wholesale
trade alone. (See tables 5 and 6.) These new series permit
examination of compensation and wage trends, free from the influence
of sales worker pay which reflects volatile changes in commission

earnings.
FI TOI IITA IO TI III III IAI II IAAI I I A I

ek Ok ob eb ok Ok
Ob OF OF Ob Ob FF OE OO

ECI data for June 1988 will be released on Tuesday, July 26, 1988, at
10:00 a.m. E.D.T.


2

Wage and salary gains in private industry for the year ended in March 1988
(3.3 percent) were about the same as they were a year ago (3.2 percent).
Benefit cost increases, in contrast, were higher than a year ago (5.8 percent,
up from 2.9 percent). The rise in social security and health insurance costs
were major contributors to the acceleration in benefit cost increases.

Benefit cost increases in private industry for the year ended in March 1988
were higher for blue-collar workers (6.8 percent) than for white-collar workers
(5.1 percent) and service workers (4.4 percent) and higher for workers in goods-
producing industries (6.4 percent) than for those in service-producing
industries (5.3 percent). (See table 7.) This pattern was in contrast to the
trend a year ago when benefit cost increases were lower for blue-collar workers
(2.3 percent) than for service workers (3.9 percent) and white-collar workers
(3.2 percent) and lower in goods-producing (2.1 percent) than in service-
producing industries (3.5 percent).

The accelerating rise in benefit costs in goods-producing industries was
concentrated in manufacturing which registered benefit cost increases of 7.0
percent, up dramatically from 1.5 percent a year ago. A rise in health
insurance costs was a major contributor to benefit cost increases in
manufacturing..

Wage and salary gains in private industry for the year ended in March 1988
were about the same for white-collar workers (3.3 percent) and blue-collar
workers (3.4 percent), whereas those for service workers were lower (2.4
percent). (See table 4.) The similarity in pay gains for white- and blue-
collar workers was in contrast to the trend during 1982-87 when pay gains for
white-collar workers consistently outpaced those for blue-collar workers.
White-collar pay increases were dampened by a small over-the-year pay increase
for sales workers (0.6 percent). With sales workers excluded, white-collar pay
increased by 3.9 percent. :

March 1987-88 pay gains for private sector workers in service-producing
industries (3.1 percent) were below those in goods-producing industries (3.5 ©
percent). (See table 6.) Pay increases in the service-producing sector were
dampened by a pay decline in finance, insurance, and real estate (-0.4 per-
cent)--an industry heavily influenced by commission sales workers such as real
estate agents and stock and bond brokers. With sales workers excluded from the
comparison, pay gains were higher in service-producing industries (3.7 percent)
than in goods-producing industries (3.3 percent).

Over-the-year wage and salary advances for nonunion workers (3.5 percent)
exceeded those for union workers (2.6 percent), as they have since March 1983-
84. With benefit cost increases included in the comparison, however, compen-
sation cost increases for nonunion and union workers were about the same (4.0
percent and 3.9 percent, respectively). In manufacturing, compensation cost
increases for union workers (5.5 percent) exceeded those for nonunion workers
(4.2 percent). Increases for union workers in manufacturing reflected
relatively large increases in health insurance costs and supplemental pay such
as lump-sum and profit sharing payments.


13
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 compen-
sation. . .

. Wages and salaries are 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 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 by the ECI are: Paid leave (vacations, holidays, sick
leave, and other leave); supplemental pay (premium pay for overtime, shift
differentials, nonproduction bonuses, and 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, supplemental unemployment plans, and
merchandise discounts in department stores).

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 18,000 occupations within 3,400 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.

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.

1 The~benefit cost indexes provide the change in the cost of benefits to a
fixed labor forc2. 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).