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17

vent employment shifts among occupations and industries from influencing the
changes. Therefore, year-to-year changes in the cost levels will differ from
those in the ECI.

The March 1989 compensation cost levels were calculated with the March 1989
private industry employment counts from th2 Bureau of Labor Statistics. Current
Employment Statistics program benchmarked to the 1988 universe of all private
nonfarm establishments. In most cases, the employment counts used were total
private industry employment estimates for 2-digit major industry groups (such as
primary metal manufacturing or food stores) as defined by the SIC system. (For
the aerospace industries, employment estimates for-.4-digit industries such as
aircraft manufacturing were used.) The employment data from these 2-digit groups
{or 4-digit industries) were distributed to major occupational groups (such as .
executives, administrators, and managers or machine operators, assemblers, and
inspectors), using the relative importance of the groups as estimated by the ECI
sample. .

More information on the cost levels, including how the costs are calculated,
appears in the article “Analyzing employers' costs for. wages, salaries, and bene-
fits" in the October 1987 issue of the Monthly Labor Review. The published cost
levels for March 1987 also appear in that article. :

An annual bulletin is issued from the ECI program. The first bulletin,
Employment Cost .Indexes and Levels--1975-88 (Bulletin 2319), provides complete
historical data on ECT indexes and levels, and measures of the precision of the
two series through June 1988. It also includes an explanation of survey methods
and discussion of the published information. The second annual bulletin, to be
issued later this year, will include this material as well as complete historical
ECI data and measures of precision through March 1989.

The Relative Standard Errors

Because the data are based on a sample survey, the compensation cost esti-
mates probably differ from the figures that would be obtained from all-units cov-
ered by the survey. To determine the precision of each cost level estimate, a
standard error was calculated.

The standard ‘error defines a range (confidence interval) around the cost es-
timate. The approximate 95-percent confidence interval is the estimate plus or
minus twice the standard error. The standard error can also be expressed as a
percent of the cost estimate, or the relative standard error. For example, the
95-percent confidence interval for a Cost estimate of $10 with a relative standard
error of 1.0 percent would be $10.00 plus or minus 2.0 percent (2 times 1.0 per-
cent) or $9.80 to $10.20. We can be 95 percent confident that the “true" cost
falls within the confidence interval. :

The relative standard error is shown with the cost estimates for some series
in the appendix. Relative standard errors for all published estimates are
available upon request. They also will appear in the 1989 ECI annual bulletin to
be published later this year. A fuller explanation of the relative standard
errors is provided in the article “Analyzing employers' costs for wages, salaries,
and benefits" in the October 1987 issue of the Monthly Labor Review.





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16
EXPLANATORY NOTES

Employer costs for employee compensation is a measure of the average cost per
employee hour worked to employers for wages and salaries and benefits.

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, 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 are:
Paid leave--paid vacations, holidays, sick leave, and other leave.

Supplemental pay--premium pay for overtime and work on weekends and holidays, |
Shire differentials, nonproduction bonuses, and lump-sum payments provided in |
lieu of wage increases. . |

Insurance _benefits--life, health, and sickness and accident insurance.

Retirement and savings benefits--pension and other retirement plans and sav-
ngs and thrift plans.

Legally required benefits--social security, railroad retirement and suppTe-
Mental retirement, raiiroad unemployment insurance, Federal and state i
unemployment insurance, workers! compensation, and other benefits required by |
law, suchas state temporary disability insurance |

Other benefits-~severance pay and supplemental unemployment plans.
The Survey : :

Employer costs for employee compensation cover all occupations in private .
industry, excluding farms and households. These cost levels are published once a
year with the payroll period including March 12th as the reference period.

The cost levels are based on compensation cost -data collected for the Bureau -
of Labor Statistics Employment Cost Iridex (ECI), released quarterly. Cost data i
were collected from the ECI's March 1989 private industry sample which consisted i
of about 21,000 occupations -within 4,000 sample establishments. The sample
establishments are classified in industry categories based on the 1972 Standard -
Industrial Classification (SIC) system, as defined by the U.S. Office of
Management and Budget. ‘Within an establishment, specific job categories are
selected to represent broader major occupational groups such as professional
specialty and technical occupations.

The cost levels are calculated with current employment. weights each year. In
contrast, the ECI, which measures the change in employer costs for employee com- |
pensation, is calculated with fixed employment counts from the 1980 Census to pre-


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: United States ~
: Departmer _ &
of Labor - .

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

Technical contact: USDOL: 89-295

‘ Albert Schwenk (202) 523-1165
Media contact: FOR. RELEASE: Immediate
Kathryn Hoyle . (202) 523-1913 Thursday, June 15, 1989

EMPLOYER COSTS FOR EMPLOYEE COMPENSATION - MARCH 1989

Employer costs for employee compensation in private industry
averaged $14.28 per hour worked in March 1989, the U.S.
Department of Labor's Bureau of Labor Statistics reported today:
Straight-time wages and salaries--72.7 percent of the costs-—-
averaged $10.38, while benefit costs--the remaining 27.3
percent~-averaged $3.90.

Legally required benefits (e.g., social security, workers'
compensation, unemployment insurance) averaged $1.27 per hour
worked--the largest cost to employers among the benefit -
categories. Legally required benefits accounted for 8.9 percent i
of total compensation costs and about a third of all benefit
costs. Social security, the largest legally required benefit,
cost employers, on average, 84 cents per hour worked--5.9 percent
of all compensation costs and about a fifth of all benefit costs.
{See table 1.) . .

Other important benefit categories and their average costs i
: per hour worked were: Paid leave ($1.00), insurance (85 cents),
retirement and savings (42 cents), and supplemental pay (34
cents), which includes premium pay for overtime, shift pay,
nonproduction bonuses, and lump-sum payments provided in lieu of
wage increases. (See chart on page 3.) -

Compensation costs varied widely by industry and
occupational group, union status, and geographic region.

Compensation costs averaged more for workers in goods~
producing industries ($17.21 per hour worked) than for those in
service-producing industries ($13.12). Among service-—producing
industries, compensation costs ranged from $8.10 in retail trade

. to $20.20 in transportation and public utilities.” Among. the
goods~producing industry groups, compensation costs were $15.33
in nondurables manufacturing and $18.43 in durables :
Manufacturing. (See table 4.)



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Appendix. Employer costs per hour worked for components of compensation, and relative standard errors, 1/

by major industry and occupation categories, March 1989

. Benefit Costs
Industry or Occupation Total Supple- Pensions
ategoryTM Compensa~|Wages and Paid mental and Legally
* fi tion i Total Leave Pay Insurance! Savings [Required
AIl private industry workers
Cost per hour worked......| $14.28 $10.38 $3.90 $1.00 $0.34 $0.85 $0.42 $1.27
Relative Error.... sees «8% «7% 1.1% 1.6% 2.5% 1.5% 3.1% 8%
Goods-producing industries .
Cost per hour worked......] $17.21 $11.90 $5.30 $1.20 $.60 $1.28 $.57 $1.61 $.05
Relative Error.... wee 1.5% 1.4% 1.8% 2.2% 3.8% 2.2% 4.8% 1.6% 10.6%
Service-producing industries iy
Cost per Rour worked......] $13.12 $9.77 $3.35 $.92 $.23 $.68 $.36 | $1.14 x
Relative Error.... sees 1.0% 1.0% 1.4% 2.1% 3.7% 2.1% 4.0% . Bx
Manufacturing
Cost per hour worked......| $17.16 $11.71 $5.45 $1.33 $.65 $1.40 $.54 $1.48 $.05
Relative Error..... sees 1,5% 1.5% 1.8% 2.2% 4.5% 2.2% 4.2% 1.6% 10.4%
Aircraft manufacturing (SIC 372) :
Cost per hour worked......] $22.02 $15.08 $6.94 $1.95 $.96 $1.67 $.64 $4.67 $.06
Relative Error... sees 0.8% 0.8% 0.8% 0.9% 2.1% 0.7% 1.2% 0.7% 3.4%
Nonmanufacturing
Cost per hour worked. vob $13.46 $10.00 $3.46 $91 $.25 $.70 $.39 $1.21 *
Relat ve Error..... a 1.0% 9% 1.5% 2.0% 3.2% 2.1% 4.0% 9%
White-collar workers ‘
Cost per hour worked......| $16.57 $12.29 $4.28 $1.30 $.29 $.92 $.50 $1.25 x
Relative Error.... sees 1.1% 1.1% 1.5% 2.1% G.T% 1.9% 3.4% 8%
Blue~collar workers
Cost per hour worked. ++] $14,35 $9.91 $4.44 .87 $.53 $102 $.45 $1.55 $.03
Relative Error....... on 1.2% [- V.1% 1.7% 1.9% 2.9% 2.4% 4.5% 1.5% 10.1%
Service: Workers .
Cost per hour worked - $7.16 $5.50 31.66 $134 $.10 $.32 $i $.78 *
_ Relative Error..... a 1.8% 1.7% 3.1% 5.2% 6.1% 5.6% 15.6% 1.9%

iv The relative standard error is the standard error
expressed as a percent of the cost.

We can be 95 percent
confident the interval around the cost estimate bounded by
tuo times plus and. two times minus the relati
contains the true’ cost. See explanatory note.

% Cost per hour worked is $0.01 or less.

@ error





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?
Other Benefits -

Relative Importance of Components of Employer Costs :

Legoly Required Benefits

89%

for Employee Compensation, Private Industry, March 1989


2

Amorig Scbupat Lona categories, average compensation costs
were higher for white-collar workers ($16.57) than for blue~
collar workers ($14.35) and service workers ($7.16). However,
the level of compensation varied considerably by occupational
group within the blue-collar and white-collar categories. (See
table 5.) No breakdown in compensation costs for various service
occupational categories (e.g., protective, service or health
service occupations) is available.

In all private industry, benefits made up a larger
proportion of compensation costs for blue-collar workers as a
whole (30.9 percent) than for white-collar workers (25.8 percent)
and service workers (23.2 percent). This relationship held when
occupational groups within the blue-collar and white-collar
categories were compared. - (See table 5.)

Benefits also accounted fora larger proportion of total
+ compensation costs for blue-collar workers than for white-collar

workers within both goods- and service-producing industries. In .
goods~producing industries, benefits made up 32.2 percent of
compensation costs for blue-collar workers, compared with 28.4
percent for white-collar workers. (See table 6.) The -
corresponding proportions in service-producing industries were
28.8 percent and 25. 1 percent. (See table 7.)

Compensation costs averaged more for union workers ($18. 25)
in private industry than for nonunion workers ($13.48). In_
addition, benefits made up a larger proportion of compensation
costs for union workers (33.6 percent) than for nonunion workers
(25.6 percent). (See table 3.) This pattern also was found when
the comparison was limited to blue-collar workers in |
Manufacturing. (See table 10.) Union and nonunion cost levels
reflect a variety of influences, including coverage by a
collective bargaining agreement and variation in distribution of .
union and nonunion workers among occupations and industries.

Compensation costs varied by region, ranging from $16.18 in
the Northeast to $12.54 in the South. The proportion of
compensation costs made up of benefits, however, was similar
among the four regions, ranging from 26.3 percent in the South to
28.8 percent in the Midwest. (See table 3.)

HK RR ERIK RK IKK KIKI KR REIKI REI IR AR KARR KERRIER RRR AE

This release includes, for the first time, the employer *
* cost per hour worked for wages, benefits, and compensation *
* for workers in aerospace manufacturing industries. (See *
* table 11.) Funds for the development and mairtenance of *
* these series are provided by the Aerospace Industries *
* cd
* *
* *

Association (AIA). The series are published in this

release for the convenience of all users.
BRAKE EERE RK RR KKK KKK KERR KKK KERR REREKKREREERRKEREERKKKKEK



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