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-~8-

EXPLANATORY NOTE

The Employment Cost Index (KCI) is a quarterly measure of the change in the price of labor,
tree trom the intluence of employment shifts among occupations and industries. The ECI wage
and salary series is limited to changes in wage and salary rates, defined as straight-time aver-
age hourly earnings. Straight-time earnings are total earnings before payroll deductions, ex-
cluding premium pay for overtime, work on weekends and holidays, and shift differentials. Pro-
duction bonuses, incentive earnings, commission payments, and cost-of-living adjustments are in-
cluded in straight-time earnings, whereas nonproduction 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 holidays, paid vacations, paid

sick leave, and other paid leave;

Supplemental pay - Shitt 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 - Sociai 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 insurance; and

Other benefits - Merchandise discounts in department stores.

The ECI collects data for both the private and public sectors, which are pub lished
separately and also combined as the total civilian nonfarm economy. The private sector includes
the total private nonfarm economy, excluding private households. The public sector covers State
and local governments, but excludes the Federal government.

Each quarter, straight-time average hourly earnings and benefit 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.

Occupations were classified according to definitions used in the 1970 Census. Within an
establishment, specific job categories are selected to represent 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 owership--State, local, or private.

Fixed employment weights from the 1970 Census are used each quarter to calculate the most
aggregate indexes-~civilian nonfarm, private nonfarm, and State and local government. 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.


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‘seTaetes

NOILVSN3dHOO


-9-

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 2.0 percent change in wage and salary rates for
“private nonfarm workers" in the first quarter of 1982 (table 3) is the actual percent change
in straight-time average hourly earnings from the Pay period including the 12th day of
December 1981 to the comparabl# pay period in March 1982.

More detailed information on the ECI is available in several articles and publications.
These include a chapter’ in the BLS Handbook of Methods (Bulletin 1910), "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 are available upon request.


United States
Department yy
of Labor

Bureau of Labor Statistics Washington, D.C. 20212

Historical, technical information: USDL: 82-192
(202) 523-1165

Current data: (202) 523-1221, 1208 FOR RELEASE: 2:00 P.M. E.D.T.
Media contact: (202) 523-1913 Thursday, May 27, 1982

EMPLOYMENT COST INDEX ~. MARCH 1982:

The Employment Cost Index (ECI), measuring changes in compensation rates for workers in the
civilian nonfarm economy, rose 1.7 percent in the 3 months ended in March 1982, the U.S. Depart-
ment of Labor's Bureau of Labor Statistics reported today. Compensation includes wages, salaries,
and employer costs for employee benefits. The ECI for wages and salaries alone increased
1.8 percent. These series exclude farm, private household, and Federal employees. Index numbers
for both measures rose to 106.3 (June 1981=100).

In the private nonfarm sector, a slowdown in employer cost increases for both compensation
and wages was evident. Increases in employer costs for compensation and wages were lower for al-.
most all worker groups for the 3 months ended in March 1982 than in the same quarter in 1981.
Compensation costs rose 1.7 percent for the first quarter 1982, substantially less than the
3.6 percent increase for the first quarter a year earlier; wages advanced 2.0 percent compared
with 2.7 percent in the first quarter 1981. :

Reflecting a deceleration in compensation cost and wage increases that began in the second
quarter 1981, 12~month changes declined sharply. For private nonfarm workers, the 12-month change
in compensation costs was 7.8 percent in March 1982, down from 10.7 percent for the 12 months
ended in March 1981. Corresponding increases for wages were 8.1 percent and 9.3 percent.

For private nonfarm workers, employer costs for compensation rose less than wages during the
first quarter of 1982, in contrast to the first quarters of 1980 and 1981 when compensation rose
more than wages. Changes in social security costs had a smaller effect on the overall compensa
tion change this year than in previous years. A rise in January 1981 in both the tax rate for
social security and the salary ceiling to which the tax rate applies accounted for 0.5 percentage
point of the first quarter 1981 compensation increase. The tax rate and salary ceiling increases
this year were smaller and accounted for only 0.1 percentage point of the first-quarter rise.

Rates of change in employer compensation costs for white-collar workers, in particular, were
markedly. lower than those for wages, 1.7 percent versus 2.2 percent, respectively. Costs for
benefits, such as nonproduction bonuses, savings and thrift, and pension plans declined. These
benefits make up a larger portion of costs for white-collar workers' compensation than they do
of blue-collar or service workers’.

Costs for service workers' compensation also increased less than wages, 3.5 percent compared
with 3.9 percent. Compensation and wage advances for blue-collar workers, however, were similar,
1.5 percent and 1.4 percent, respectively. The cost of blue-collar compensation for the first
quarter 1982 increased corisiderably less than in the same quarter in 1981 when it registered
3.0 percent.

Beginning with this release, compensation change data,
as well as wage and salary indexes, are available for
workers by bargaining status and by area size. (See
table 4.)



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SHIUVIVS GNV SHOVM


-~2-

The nonunion sector, where costs for compensation rose 1.7 percent compared with 2.3 percent
tor wages alone, reflected the deceleration of benefit cost increases for white-collar workers.
Nonunion workers in manufacturing and nonmanufacturing industries showed similar differences be-
tween compensation and wage increases. In the manufacturing sector, benefit cuts for white-collar
workers in the automobile industry slowed the compensation advance. In the nonmanuf acturing
sector, lower compensation changes were seen mainly among workers in service industries.

Compensation costs for union workers increased 1.6 percent in March 1982, compared with
3.1 percent a year earlier. Costs for pension plans as well as legally required benefits rose
at a slower pace in the first quarter of 1982 than in the first quarter of 1981.

For both union and nonunion workers, changes in compensation costs declined sharply for the
12 months ended in March 1982. In the union sector, compensation increased 9.1 percent for the
12 months ended in March 1982, compared with 11.8 percent for the 12 months ended in March 1981.
Corresponding increases for nonunion workers were 7.0 percent and 10.2 percent.

Following the pattern of recent years, nonunion wages rose more than union wages during the
first quarter, 2.3 percent compared with 1.4 percent. This occurred even though the Federal
minimum wage did not rise in January 1982 as it did in earlier years. Wages of nonunion workers
are more iikely to be affected by changes in the Federal minimum wage.

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