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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 and the public sector--excluding farms, households, and 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 8,800 occupations within 1,300 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
1987 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


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19

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.

Beginning with the December 1990 ECI release, seasonally adjusted data are
available for selected ECI 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 spot.

The costs per hour worked of compensation components, based on March 1991
data from the ECI, are published in a separate news release titled "Employer Costs
for Employee Compensation - March 1991."~ 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, 1975-91, (Bulletin
2389); 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.

Information in this release will be made available to sensory impaired
individuals upon request. Voice phone: 202-523-1221, TDDphone: 202-523-3926, TDD
Message Referral Phone Number: 1-800-326-2577.

1 Cost levels by establishment size for March 1991 appear in the article
"Compensation cost levels by establishment employment size," in the August 1991
issue of the Bureau's monthly publication, Compensation and Working Conditions."



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6


United States
_ Department
: of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Technical, historical contact: USDL: 92-33
Wayne Shelly (202) 523-1165
TRANSMISSION OF MATERIAL IN
Media contact: THIS RELEASE IS EMBARGOED
Kathryn Hoyle (202) 523-1913 UNTIL 8:30 A.M. (EST),
TUESDAY, JANUARY 28, 1992

EMPLOYMENT COST INDEX - DECEMBER 1991

The Employment Cost Index (ECI) increased 0.6 percent before seasonal adjustment
in the 3 months ended December 1991, the U.S. Department of Labor's Bureau of Labor
Statistics reported today. The December 1991 ECI level of 112.2 (June 1989=100) was
4.3 percent higher than in December 1990. The ECI measures changes in compensation
costs, including wages, salaries, and employer costs for employee benefits.

Quarterly changes, seasonally adjusted

On a seasonally adjusted basis, ECI compensation costs rose 0.9 percent in the
September-December 1991 period, about the same as the 0.8 percent change for the June-
September 1991 period. (See box below.) ECI wages and salaries also rose 0.9 percent
in the September-December 1991 period, above the 0.6 percent increase for June-
September but in line with quarterly increases over the last few years. Benefit costs
rose 1.2 percent in September-December 1991--the smallest quarterly increase in benefit
costs since 1987. (See table A for changes over the past two years.)

Table A. Percent changes in ECI for civilian workers

Seasonally adjusted Unadjusted

Compensation 3-months ended 12-months
component 1990 1991 ended

Mar. dune Sep. Dec. | Mar. June Sep. Dec. Dec. 1991
Compensation costs.. 1.4 1.2 1.1 1.0} 1.1 1.3 0.8 0.9 4.3
Wages and salaries. 1.10 1.2 1.0 0.9) 1.1 0.9 0.6 0.9 3.6
Benefit costs...... 2.0 1.5 1.5 1.5] 1.4 1.5 1.6 1.2 5.6

PIII IIR IAAI III III II IAI II AI IA III III IIIA I KISS SII IIA IIIA SII ISIS ISSA ISSA.

This release includes annual revisions in seasonaliy adjusted *
Employment Cost Indexes for compensation costs, wages and salaries,
and benefit costs. Seasonally adjusted indexes for 1987-91 were
revised and are available upon request. The seasonal factors for
1992 will be published in the March 1992 issue of the BLS periodical,

Compensation and Working Conditions.
KKEEEEE KKK EKEEREEEK EKER KIRKE E REAR ERIKA IIIA AAI AIA AAI IK

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Changes in wages and salaries and benefit costs, private industry, 1980-91

-month percent change i-month percent change

Benefit costs 1

A Wages and salaries

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1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

1990 1991

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Over-the-year changes, unadjusted

Compensation cost increases (not seasonally adjusted) averaged 4.3 percent for the
year ended December 1991; this was less than the 4.9 percent gain for the year ended
December 1990. Most of this slowdown was due to smaller increases for State and local
government workers, reflecting deceleration in wage and salary increases (3.5 percent,
down from 5.3 percent) as well as in benefit cost gains (3.9 percent, down from 7.0
percent). Benefit cost increases for State and local government workers were dampened
because several jurisdictions decreased or temporarily suspended payments to employee
retirement funds in 1991,

The 1991 compensation cost increase for State and local government workers (3.6
percent) was below that for private industry workers (4.4 percent)--reversing a trend
that had prevailed since 1981 when State and local government workers were added to the
ECI coverage. Although private industry workers had lower compensation cost increases
in 1991 than in 1990, the slowdown was much less pronounced than that recorded for
State and local government workers.

For the year ended in December 1991, compensation cost increases in private:
industry were higher for goods-producing industries than for service-producing
industries (4.6 percent compared with 4.3 percent). Compensation cost gains in goods-
producing industries ranged from 4.1 percent in construction to 4.6 percent in both
durable and nondurable goods Manufacturing. Within the service-producing industries,
compensation cost increases varied from 1.5 percent in banking, savings and loan, and
other credit agencies to 5.2 percent in public utilities and private colleges and
universities.

Over-the-year 1991 compensation cost increases in private industry were higher for
service workers (4.8 percent) than for either white-collar (4.5 percent) or blue-collar
workers (4.3 percent). White-collar increases ranged from 3.4 percent for sales
workers to 4.8 percent for professional and technical and executive, administrative,
and managerial occupations. Gains for blue-collar workers ranged from 3.3 percent for
transportation and material moving occupations to 4.5 percent for precision production,
craft, and repair occupations.

Compensation cost increases over the year ended December 1991 were higher for
union (4.6 percent) than for nonunion workers (4.3 percent). This pattern held for
both the goods-producing and service-producing industries and was in contrast to the
situation that until recently had prevailed for nearly a decade.

ECI data for March 1992 will be released on Tuesday, April 28, 1992, at 8:30 A.M. (EDT)

The schedule for the remainder of 1992 is as follows:

Reference Month Release Date
dune 1992 July 28
September 1992 October 27

December 1992 January 26, 1993


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