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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 6,000 occupations within 1,000 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
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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19

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 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. . TT

Beginning with the December 1990 ECI release, seasonally adjusted data are
available for ECI major industry and occupational 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 identify.

The costs per hour worked of compensation components, based on March 1990
data from the ECI, are published in a separate news release titled "Employer Costs
for Employee Compensation - March 1990." 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 js available in several sources. These
include an annual bulletin, Employment Cost Indexes and Levels, 1975-90, (Bulletin
2372); a chapter in the BLS andbook of Methods (Bulletin 2285 > "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.O. 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.


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6


United States
Department >
of Labor

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

Technical, historical contact: USDOL: 91-31
Wayne Shelly (202) 523-1165 =
TRANSMISSION ‘OF MATERIAL IN
THIS RELEASE IS EMBARGOED
UNTIL 8:30 A.M. (EST),

TUESDAY, JANUARY 29, 1991

Media contact:

Kathryn Hoyle (202) 523-1913

EMPLOYMENT COST INDEX = DECEMBER 1990

The Employment Cost Index (ECI) increased 0.7 percent before seasonal adjustment
in the 3 months ended in December 1990, the U.S. Department of Labor's Bureau of Labor
Statistics reported today. The December 1990 ECI level of 107.6 (June 1989=100) was
4.9 percent higher than the index in December 1989.

the ECI rose 1.0 percent ‘in the September-
compensation costs continued to moderate,
(See table 1.)

On a seasonally adjusted basis,
December 1990 period, as increases in
primarily for private industry workers.

This release introduces seasonally adjusted ECI series. (See box on page 2.)
Seasonally adjusted data are useful in identifying underlying trends because they
eliminate the effect of changes that normally occur at the same time and in about the
same magnitude every year. Compensation cost changes for state and local government
workers, for example, are heavily concentrated in the June-September period of every
year, whereas those for private industry workers are spread throughout the year.

- The ECI measures changes in Compensation costs, including wages, salaries, and
employer costs for employee benefits.

private industry.
Benefit cost increases
(See table A.)

The September-December increase in wages and salaries for
workers was the lowest 3-month change in the past 2-1/2 years.
are more volatile but also have shown the same general trend.

Table A. Percent changes in ECI for private industry workers

Seasonally adjusted Unadjusted

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

Mar. June Sept. Dec. | Mar. June Sept. Dec. | Dec. 1990
Compensation costs.. | 1.0 1.2° 1.3 1.1 1.4 1.3 1.0 0.9 4.6
Wages and salaries. | 1.1 0.9 1.1 1.1 | 1.1 1:1 1.0 8 4.0
Benefit costs......] 1.0 1.7 1.7 1.6 1.9 1.5 1.6 1.4 - 6.6



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CI news releases for 1991 will

Reference Month

3

be published on. the following schedule:

Release Date

March 1991
June 1991
September 1991
December 1991

April 30

July 30

October 29
January 28, 1992

Changes in wages and salaries and benefit costs, private industry, 1980-1990

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percent change

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Wages and salaries

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1980 1981 1982 1983 1984 1985

1986 1987 1988

1
OF MHA NADY OO

1989 1990



Over-the-year changes, unadjusted ‘

For the year ended in December 1990, compensation costs (not seasonally adjusted)
increased 4.9 percent, slightly lower than the 5.0 percent gain a year ago. (See
table 4.) The pattern of lower increases in 1990 than in 1989 was found for private
industry workers (4.6 percent, down from 4.8 percent) and state and local government
workers (5.8 percent, down from 6.2 percent a year earlier). (See tables 4 and 5.)

Benefit cost increases in private industry for the year ended in December 1990
(6.6 percent) exceeded wage and salary gains in large part because of the rising costs
of health insurance. Nonproduction bonuses, workers' compensation insurance, and
employer contributions to savings and thrift plans also are reflected in the
relatively rapid growth in benefit costs. (See table 10.)

December 1989-90 compensation increases in private industry were higher for
white-collar workers (4.9 percent) than for either blue-collar (4.4 percent) or
service (4.7 percent) workers. Compensation gains-for white-collar workers ranged
from 5.6 percent for both professional specialty and technical workers and executive,
administrative, and managerial workers to 2.6 percent for sales workers. (Sales
worker pay is heavily influenced by volatile commission earnings.) Compensation
increases for blue-collar workers ranged from:5.0 percent for. machine operators,
assemblers, and inspectors to 4.0 percent for transportation and material moving
occupations.

Over-the-year compensation gains were lower in private service-producing
industries (4.6 percent) than in goods-producing industries (4.8 percent). Within the
goods-producing industries, compensation increases ranged from 3.1 percent in
construction to 5.4 percent in nondurable goods manufacturing. Compensation gains
among the service-producing industries ranged from 1.9 percent in wholesale trade
(heavily influenced by salesworker pay) to 7.0 percent in hospitals.

Compensation increases for nonunion workers (4.8 percent) exceeded those for
union workers (4.3 percent) for the year ended in December 1990, as they have almost
without exception since March 1983-84. This pattern held in both goods-producing and
service-producing industries. (See table 6.)

KIKI IK III IK III KIKI IKARIA IIIS AIA IA IAI ARIA AI AISA IAAI AAAS AISA IIIA
This release presents, for the first time, seasonally adjusted data
for major ECI industry and occupational series. (See tables 1-3).
Historical data for these new series are available upon request.
Seasonal factors for 1991 will be published in the March 1991 issue
of the Bureau's monthly publication, Current Wage Developments.

The tables in this release have been rearranged to accomodate the
new seasonally adjusted series. The tables begin with seasonally
adjusted data (tables 1-3), followed by unadjusted data on
compensation (tables 4-6), wages and salaries (tables 7-9), and
benefit costs (table 10). Unadjusted data on compensation, wages
and salaries, and benefit costs for the aerospace ndustry appear
in table 11.

KIKI KIKI KIKI II IAI III III IIIS III III ISIS IIIA III SII IIIA ISIS IIIA II SII IIA I SIA

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