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United States
VY Department >
; ; of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 88-31

Felicia Nathan (202) 523-1165

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

EMPLOYMENT COST INDEX - DECEMBER 1987

The Employment Cost Index (ECI) rose 3.6 percent for the year ended in
December 1987, the same increase as in 1986, the U.S. Department of Labor's
Bureau of Labor Statistics reported today. The December 1987 ECI stood at
138.6, based on June 1981=100. The ECI Measures changes in compensation
costs--wages, salaries, and employer costs for employee benefits. It is not
seasonally adjusted.

For the 3 months ended in December 1987, compensation costs rose 0.8
percent, similar to the 0.6 percent increase for the same period in 1986.
This similarity held for both state and local government workers (0.9 percent
and 0.8 percent, respectively) and private industry workers (0.7 percent and
0.6 percent).

Compensation costs in private industry rose 3.3 percent for the year
ended in December 1987, about the same as a year ago (3.2 percent). The
table below shows that over-the-year compensation cost increases dampened
steadily in the 1982-86 period, but leveled off in 1987.

12-month percent changes, private industry workers

Year ended Compensation Wages and Benefit

in December costs salaries costs
1980 9.8 9.0 IT-8
1981 9.8 8.8 12.2
1982 6.4 6.3 7.1
1983 5.7 5.0 7.4
1984 4.9 4.1 6.6
1985 3.9 4.1 3.5
1986 3.2 3.1 3.4
1987 3.3 3.3 3.5



12
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, 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, and shift differentials. 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 sayings 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 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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2

Wages and salaries for private industry workers rose 3.3 percent for the
year ended in December 1987, up slightly from 3.1 percent a year ago. This
relationship held for white-collar occupations (3.7 percent, up from 3.4
percent) and blue-collar occupations (3.0 percent, up from 2.5 percent). Pay
gains for service workers, in contrast, were Jess in 1987 than in 1986 (2.4
percent, down from 2.8 percent). (See table 4.)

Over-the-year pay increases in 1987 in private service-producing
industries (3.5 percent) exceeded those in goods-producing industries (3.2
percent). Pay gains also varied within the service- and goods-producing
industries. (See table 6.)

Wages and salaries rose 3.6 percent for nonunion workers in the December
1986-87 period, compared with 2.6 percent for union workers. (See table 9.)
Pay gains for nonunion workers have outpaced those for union workers in each
of the past 5 years.

Benefit costs for private industry workers increased 3.5 percent for the
year ended in December 1987. The rate of increase in benefit costs in 1987
was about the same as in 1986 and 1985.

Benefit cost increases in 1987 were lower for service workers (2.4
percent) than for white-collar (3.6 percent) and blue-collar workers (3.4
percent), and lower for workers in goods-producing industries (2.9 percent)
than for those in service-producing industries (4.0 percent). (See table 7.)

Compensation costs for state and local government workers rose 4.4
percent for the year ended in December 1987, down from 5.2 percent a year
ago. (See table 1.) The rate of increase in compensation costs declined
sharply for most state and local government series in 1987, compared with
1986. An exception was health services, with compensation cost increases of
4.7 percent in 1987, up from 4.1 percent in 1986.

PIII IIR IR III IIR IRI III * ERIK IARI IIRR RE RIKI AIRK IIA IAI:

* This release presents first-time estimates of quarterly changes *
* in compensation costs and in wages and salaries for workers in *
* communications industries and in food stores. (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. *
GEE IGE III III TIE IT ITT T II IIT IIT IIIS I III AISA TITHE II TIT I

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


13

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, 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 articles and
publications. These include a chapter in the BLS Handbook of Methods
(Bulletin 2134-1), "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 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.