14
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 compen-
sation.

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
Jump-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 about 22,000 occupations within 4,200 sample establishments in
private industry and about 5,800 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. ECI statistics are neither annualized nor adjusted for seasonal
influences.

l 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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6


United States
Department &

News =

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 89-516
Wayne Shelly (202) 523-1165
“ ‘ TRANSMISSION OF MATERIAL IN THIS RELEASE

Media contact: : TS EMBARGOED UNTIL 8:30 A.M. (EST)
Kathryn Hoyle (202) ‘523-1913 TUESDAY, OCTOBER 31, 1989

EMPLOYMENT COST INDEX - SEPTEMBER 1989

The Employment Cost Index. (ECI) rose 1.6 percent in the 3 months ended in
September 1989 to a level of 151.3 (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 5.1 percent.. The ECI measures changes in compensation costs--wages,
salaries, and employer costs for employee benefits. It is not seasonally adjusted.

The 1.6 percent increase in compensation costs in the June-September 1989 period
was above. the 1.3 percent-gain in the same period a year ago. This pattern held for
both state and local government workers (3.3 percent, up from 2.7 percent a year ago)
and private industry workers (1.2 percent, up from 1.0 percent). (See table 1.)
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.

The 5.1 percent increase. in compensation casts for the year ended in September
1989 was higher than the 4.7 percent increase a year ago. This relationship was more
pronounced for state and local government workers (6.4 percent, up from 5.4 percent)
than for private industry workers (4.7 percent, up from 4.5 percent). The table
below. shows over-the-year changes in private industry since March of 1987.

12-month percent changes in the ECI, private industry workers

12-months Compensation Wages and Benefit
: ended costs salaries costs
1987" March 3.1 3.2 2.9
: June 3.0 3.0 3.3
Sept. 3.3 3.3 3.1
Dec. 3.3 3.3 3.5
1988 = March 3.9 3.3 5.8
dune 4.5 3.7 6.4
Sept. 4.5 3.7 6.7
Dec. 4.9 4.1 6.8
1989 March 4.6 4.2 5.4
June 4.5 4.1 5.6
Sept. 4.7 4.4 6.0



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15

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.

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.

The costs per hour worked of compensation components, based on March 1988
data from the ECI, are published in a separate news release titled "Employer
Costs for Employee Compensation--March 1989." 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 is available in several sources.
These include an annual bulletin, Employment Cost Indexes and Levels, 1975-89,
(Bulletin 2339); a chapter in the BLS Handbook 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.0. 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 formatted for use with Lotus 1-2-3.



3

ECI news releases for 1990 will be published on the following schedule:

Reference Month Release Date
March 1990 April .24, 1990
June 1990 July 24, 1990
September 1990 October 25, 1990

Changes in wages and salaries and benefit costs, private industry, 1980-89

percent “change percent ‘change
16 16
14 + 4 14
12 - 4 12
10 F 4 10
Bf 46
6b 46
4p and salaries 44
ar 42
o LA bbt ttt sitsirisr sii  d g

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989



2

Benefit cost increases in private industry for the year ended’ in September 1989
exceeded wage and salary gains primarily because of rising health insurance costs.
The increases in benefit costs were below those for the same period a year ago (6.0
percent, down from 6.7 percent), however, because the social security tax rate did
not increase in 1989, whereas it rose 5 percent in January 1988.

Wage and salary gains in private industry averaged 4.4 percent for the year
ended in September 1989, up from 3.7 percent a year ago. Excluding sales workers,
pay increases averaged 3.9 percent, up from 3.7 percent a year ago. (See table 4.)
Sales worker pay, heavily influenced by volatile commission earnings, rose 7.7
percent in the year ended in September 1989, up from 3.5 percent a year ago.

Compared with a year ago, over-the-year pay increases were higher for both
white-collar workers (4.8 percent, up from 3.9 percent) and blue-collar workers (3.6
percent, up from 3.3 percent), but lower for service occupations (3.3 percent, down
from 3.8 percent). Excluding sates workers, white-collar pay gains were only

«Slightly higher than those a year ago (4.2 percent, up from 4.0 percent).

Pay increases in private industry over the year ended in September 1989 were
higher for workers in service-producing than for those in goods-producing industries
(4.8 percent compared with 3.7 percent). September 1988-89 pay gains‘in the service-
producing sector reflected larger-than-average increases in finance, insurance, and
real estate (8.2 percent), wholesale trade (7.0 percent), and hospitals (6.6
percent). The gains in finance, insurance, and real estate and in wholesale trade

- were affected by commission earnings.

Over-the-year wage and salary advances for nonunion workers (4.9 percent)
exceeded those for union workers (2.5 percent), as they have since March 1983-84.
(See table 7.) This pattern held in both goods-producing and service-producing
industries. Compensation cost increases also were higher for nonunion workers (5.3
percent) than for union workers (3.2 percent). (See table 6.) .

For state and local government workers, pay gains for the year ended in
September 1989 (5.5 percent) were higher than those a year ago (4.7 percent). The
September 1988-89 gains were highest in elementary and secondary schools, averaging
6.6 percent. (See table 2.) .

FEISS IIIS IO IASI COIS SI SEI ICA TSI SSIS REI TOSI III Ib

* Beginning with the ECI news release for March 1990, the base for ECI
series will be June 1989=100, rather than June 1981=100. This change
is being made so that all ECI series--including many new series that
began after June 1981--are published with reference to the same base
(June 1989=100). The change will not. affect the fixed employment

weights being used, which will continue’to be based on the 1980 census.
HRKKIKIEKE KIER EIKRR ARR IK III IIIA IIA I AIA IR ISI III IKI III II III ISIN IO ISI IAIAAI IG A I A I  S

Ce
i

ECI data for December 1989 will be released on Thursday, January 25, 1990, at
8:30 a.m. E.S.T.


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