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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, 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
nearly 23,000 occupations within 4,400 sample establishments in private industry
and about 8,800 occupations within 1,300 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

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


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19

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 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 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 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, 1975-90, (Bulletin
2372); a chapter in the BLS Handbook of Methods (Bulletin 2205), "The 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, Illinois 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.

2 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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- of Labor
Bureau of Labor Statistics Washington, D.C. 20212

United States :
Department &

Technical, historical contact: USDL: 91-552
Wayne Shelly (202) 523-1165

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

\ TUESDAY, OCTOBER 29, 1991

EMPLOYMENT COST INDEX - SEPTEMBER 1991

The Employment Cost Index (ECI) increased 1.2 percent before seasonal adjustment
in the 3 months ended in September 1991, the U.S. Department of Labor's Bureau of Labor
Statistics reported today. The September 1991 ECI level of 111.5 (June 1989=100) was
4.3 percent higher than the index in September 1990. The ECI measures changes in

compensation costs, including wages, salaries, and employer costs for employee
benefits.

On a seasonally adjusted basis, the ECI compensation costs rose 0.9 percent in the
dune-September 1991 period, down from the 1.2 percent rise in the March-June 1991
period. The June-September 1991 rise of 0.5 percent for wages and salaries was about
half what it has been over the past several years, while the 1.6 percent increase in
benefit costs is in line with the recent past, as indicated below:

Table A. Percent changes in ECI for civilian workers

Seasonally adjusted Unadjusted

Compensation 3-months ended 12-months
component 1989 1990 1991 ended

Dec. | Mar. June Sep. Dec.} Mar. June Sep. | Sep. 1991
Compensation costs.. |1.2 1.5 1.2 1.1 1.0 1.2 1.2 0.9 4.3
Wages and salaries. | 1.1 1.1 41.2 1.0 0.9 1.2 1.0 0.5 . 3.8

Benefit costs...... |1.6 2.0 1.5 1.5 1.5 1.4 1.5 1.6 6.0 ©

Over-the-year changes, unadjusted

Compensation costs (not seasonally adjusted) increased 4.3 percent for the year
ended in September 1991, down from the 4.6 percent gain for the year ended in June
1991. Virtually all of this slowdown was due to smaller increases for State and local
government workers (4.1 percent, down from 5.2 percent). The slowdown reflected
deceleration in both wage and salary and benefit cost gains. Wages and salaries rose
3.9 percent in September 1990-91, down from 4.9 percent in June 1990-91, while


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Changes in wages and salaries and benefit costs, private industry, 1980-91
-month percent change -month percent change

Wages and Salaries

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

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corresponding increases for benefit costs were 4.6 and 5.6 percent. Benefit cost
~ increases for State and local government workers were dampened because several

jurisdictions decreased or temporarily suspended payments into employee retirement
funds over the past 6 months.

Compensation cost changes for State and local government workers are heavily
cencentrated in the June-September period, whereas those for private industry workers
are spread throughout the year.

Private industry workers had compensation cost gains of 4.5 percent in the
September 1990-91 period, about the same as the 4.4 percent increase in June 1990-91.
The rate of compensation cost increase for private industry workers included
acceleration ‘in benefit cost gains while wage and salary increases leveled off at 3.7
percent. Benefit costs for private industry workers rose 6.4 percent during September
1990-91, up from 6.2 percent in June 1990-91--reflecting relatively large increases in
nonproduction bonuses and in health and worker compensation insurance costs.

For the year ended September 1991, compensation cost increases in private industry
were the same for goods-producing and service-producing industries (4.5 percent).
Compensation cost gains among the goods-producing industries ranged from 3.9 percent in
construction to 4.6 percent in durable goods manufacturing. Within the service-
producing industries, compensation cost increases ranged from 2.8 percent in insurance
to 5.8 percent in health services.

Over-the-year compensation cost increases in private industry were higher for
service workers (5.5 percent) than for either white-collar or blue-collar workers (both
4.4 percent). Service-worker gains were boosted by relatively large increases for
those workers in the health and personal services industries.

Compensation cost increases over the year ended September 1991 were higher for
union (4.8 percent) than for nonunion workers (4.3 percent). This pattern held for
both the goods-producing and service-producing industries and was in contrast to the
situation that had prevailed for nearly a decade. Nonunion increases had exceeded
those for union workers almost without exception since March 1983-84.

(es sf for December 1991 will be released on Tuesday, January 28, 1992, at 8:30 A.M.
EST)


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