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be

United States
Department SY
of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 87-463

Felicia Nathan (202) 523-1165

Media contact: FOR RELEASE: 10:00 A.M. E.S.T.
Kathryn Hoyle (202) 523-1913 Tuesday, October 27, 1987

EMPLOYMENT COST INDEX - SEPTEMBER 1987

The Employment Cost Index (ECI) increased 1.2 percent in the 3 months
ended in September 1987 to a level of 137.5 (June 1981=100), the U.S.
Department of Labor's Bureau of Labor Statistics reported today. For the year
ended in September, the increase was 3.4 percent. The ECI measures changes in
compensation costs--wages, salaries, and employer costs for employee benefits.
It is not seasonally adjusted.

The 1.2 percent increase in compensation costs in June-September 1987 was
similar to the 1.1 percent gain in the same period a year ago, reflecting
different trends in private industry compared with state and local governments.
Private industry workers had a 1.0 percent increase (up from 0.7 percent a year
ago), while state and local government workers registered a 2.3 percent gain
(down from 2.8 percent a year ago). Compensation cost changes for state and
local government workers are heavily concentrated in the June-September period,
whereas those for private industry workers are spread throughout the year.

Overall, compensation cost increases for the year ended in September 1987
were close to the gains a year ago (3.4 percent, compared with 3.6 percent).
The increase for private industry workers was 3.3 percent, compared with 3.2
percent a year ago, while that for state and local government workers averaged
4.2 percent, down from 5.2 percent in September 1985-86. This slowdown
narrowed the gap in the rate of compensation cost change between state and
local government and private industry workers.

For private industry workers, wages and salaries alone rose 3.3 percent
for the year ended in September 1987, up from 3.1 percent a year ago. The

FRI KK IIR III III IIIA ISIE IIIS IIIS SII III ISI ASIII III I AISI I I Se

This release presents, for the first time, benefit cost indexes for *
selected private industry series. (See table 7.) Historical bene- *
fit cost indexes for the 1979-87 period are available upon request.

changes in compensation costs and in wages and salaries only for

workers in the insurance industry. (See tables 5 and 6.)
FRI KIKI IKK KK KK II KIKI AIK III IKK II KAAS ISIS ISS AAI A IIASA AAA A.

oO Ok OF Ob OF

*
*
This release also presents first-time estimates of quarterly *
*
*


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 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 17,400 occupations within 3,300 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 exampie, an additional holiday).


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2

year-to-year difference in pay gains was more pronounced when salesworkers were
excluded from the comparison: 3.5 percent in September 1986-87, compared with
2.9 percent in September 1985-86. Sales worker pay, heavily influenced by
volatile commission earnings, rose 1.4 percent, down from 4.9 percent a year
ago. (See table 4.)

Wage and salary increases in private industry for the year ended in
September 1987 were larger for white-collar occupations (3.8 percent) than for
blue-collar (2.6 percent) and service occupations (2.9 percent). Twelve-month
pay gains for white-collar workers have been consistently higher than those for
blue-collar workers since 1981.

Over-the-year pay gains in private industry were lower for workers in
goods-producing industries (2.8 percent) than for those in service-producing
industries (3.7 percent). There was considerable variation among the service-
producing industries, with wage and salary increases ranging from 1.6 percent
in transportation to 5.6 percent in the service industry, which includes
education and business as well as other services. (See table 6.)

Wage and salary gains for nonunion workers (3.8 percent) outpaced those
for union workers (1.7 percent) in private industry in the September 1986-87
period. (See table 9.) This pattern held in goods-producing industries (3.2
percent, compared with 1.6 percent), as well as in service-producing industries
(4.1 percent, compared with 1.8 percent).

The benefit cost index for private industry workers (a new ECI series)
increased 3.1 percent for the year ended in September 1987, slightly lower than
the 3.3 percent increase a year ago. (See table 7.) Benefit cost increases
were higher for white-collar workers (3.5 percent) than for blue-collar (2.8
percent) and service workers (2.4 percent). Benefit cost increases were also
higher for workers in service-producing industries (3.8 percent) than for those
in goods-producing industries (2.4 percent).

ECI data for December 1987 will be released on Tuesday, January 26, 1988 at
10:00 a.m. E.S.T.

ECI news releases for 1988 will be published on the following schedule:

Reference Month Release Date
March 1988 April 26, 1988
June 1988 July 26, 1988

September 1988 October 25, 1988


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.