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8

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 straight-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:

Hours related benefits ~ Premium pay for overtime
and work on weekends and holidays, paid vacations,
paid holidays, paid sick leave, and other paid leave;

Supplemental pay - Shift differentials, nonproduction
bonuses, severance pay, and supplemental unemployment
plans;

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

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

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; and

" Other benefits - Merchandise discounts in department
stores.

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 tarms 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 benetit
cost data (cents—per—hour-worked) are collected from a 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.


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NOILVSNadWOD


9

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 the 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 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.

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 1.4 percent
change in wage and salary rates for "private industry workers" in the 3 months
ended September 1983 (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 June 1983 to the comparable pay period in September 1983,

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 Monthl
Labor Review: "Employment Cost Index: a measure ot 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
are available upon request.


.

- United States
News =" 9
of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 83-473
(202) 523-1165
Media contact: (202) 523-1913 FOR ‘RELEASE: 10:00 A.M. E.S.T.

Thursday, November 3, 1983

EMPLOYMENT COST INDEX ~- SEPTEMBER 1983

The Employment Cost Index (ECI) increased 1.7 percent in the 3 months ended
in September 1983, the U.S. Department of Labor's Bureau of Labor Statistics re-
ported today. The Index stood at 116.5 for compensation costs (wages, salaries,
and employer costs for employee benefits), based on June 1981=100. (See table 1.)
The ECI covers private industry and State and local government workers. It is
not seasonally adjusted.

The 1.7 percent ECI increase was substantially below the 2.4 percent advance
registered in June~September a year ago. The pattern of smaller increases in
1983 compared with 1982 was recorded for private industry workers (1.5 percent,
down from 2.0 percent). It was even more Pronounced for State and local govern-
ment workers (3.2 percent, down from 4.6 percent); compensation cost changes for
these workers are heavily concentrated in the June-September quarter.

The slowdown in the compensation cost rise reflected lower increases in
wages and salaries as well as employee benefit costs. Wages and salaries alone
rose 1.7 percent in June-September 1983, down from 2.2 percent in the same period
last year. The drop in benefit cost increases was similar to that for wages and
salaries alone.

Wage and salary increases for private industry workers averaged 1.4 percent
in June-September 1983, compared with 1.8 percent in the third quarter of 1982.
Increases for service workers showed the largest drop, 0.2 percent in the
September 1983 quarter contrasted to 1.3 percent a year earlier. The slowdown in
1983 increases also occurred among blue-collar workers (0.9 percent, down trom
1.8 percent) and the parts of the labor force in which they are concentrated-~
e.g-, union manufacturing and construction workers.

Wages tor construction workers, for example, were almost unchanged
(0.1 percent) in the third quarter ot 1983. This increase was the lowest tor any
quarter since this series began in 1976. Moreover, it occurred in a quarter that
traditionally has heavy collective bargaining activity in construction.

Wage gains tor State and local government workers also were smaller in the
third quarter of 1983 (3.0 percent) compared with the same quarter in 1982
(4.4 percent).

Twelve-month increases in compensation costs showed marked declines compared
with last year: 5.8 percent for the year ended September 1983, down trom
7.3 percent in the same period in 1982. The slowdown was greater tor State and


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industry were the lowest since these series began (in 1976 or 1977). Record low
wage and salary increases for the September 1982-83 period were registered for
blue-collar workers (4.1 percent), durable goods manufacturing workers (3.6 per=
cent), construction workers (2.8 percent), and union workers in manufacturing
(3.8 percent), among others.

September 1982-83 wage and salary increases for State and local government
. Workers averaged 5.0 percent. This increase was down from 8.1 percent in
September 1981-82,


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