— ENDNOTES —

* Several articles appearing in previous issues of Compensation and Work-
ing Conditions have described various aspects of the National Compensation
Survey. See John E. Buckley, “BLS Redesigns Its Compensation Surveys,”
September 1996, pp. 19-21; Beth Levin Crimmel, “COMP2000: Designing a
New Wage Survey,” December 1996, pp.9-11; Kenneth J. Hoffmann, “New
Sample Areas Selected for BLS National Compensation Survey Program,”
‘Spring 1997, pp. 27-31; Jason Ford, “Earnings by Level of Work: Results
from Pilot Studies of the National Survey Program,” Summer
1997, pp. 24-31; and Hilery Simpson, “Tips and Excluded Workers: The
New Orleans Test,” Summer 1997, pp. 32-36.

2 The Employment Cost Index, which will be integrated into the NCS,
covers establishments with one or more workers,

> Since the nine factors are also used in the Factor Evaluation System to
grade Federal General Schedule (GS) workers, this information can also be

used to detive grade level equivalents for Federal workers.
“Fora more detailed discussion including some experimental measures,

~ see “Interatea Comparisons of Compensation and Prices,” Report on the

American Workforce, U.S. Department of Labor, 1997, pp.69-97.

* The interarea indexes are calculated differently than the ECT. Ina first
‘step, wage regressions are estimated on NCS micro data ina similar fashion
to those estimated for the wage estimator. Separate equations are estimated
for groups of labor defined by occupation and industry. Coefficients from the
regressions are aggregated to the level of local areas using the Tornqvist in-
dex formula and current compensation cost (or wage) weights. The indexes
are then made multilaterally consistent through minimal adjustment. This
means that if x, y, and z are the indexes for three cities relative to a national
‘base and if the ratio of two of these is the relative wage between two cities,
then minimal adjustment guarantees that x/2z = (x/y) (y/z).

Compensation and Working Conditions Summer 1998 44


National Compensati urvey

Overview

of the NCS:
Summer 1998

BY HARRIET G. WEINSTEIN

Anew BLS compensation survey will Integrate
three of the Bureau's current surveys to provide
data on occupational earnings, employer costs
for employee compensation, and details of
employer-provided benefits. The new umbrella
survey will provide both national and local
data.

The National Compensation Survey (NCS—formerly known
as COMP2000) integrates three BLS surveys that provide a
diverse set of measures of employee compensation. Much
has been accomplished toward reaching this goal and addi-
tional improvements are underway. This article answers
the questions: Where are we now? How did we get there?
And where are we going?

NCS will use a single sample that will provide data on
occupational earnings, employer costs for wages, salaries,
and benefits, and details of employer-provided benefit and
establishment practices. This umbrella program will encom-
pass measures for three BLS programs:

* The Occupational Compensation Survey (OCS),
which described the level and distribution of pay for
selected work levels of white- and blue-collar occu-
pations nationwide and in a variety of local labor
markets;

*_ The Employment Cost Index (ECD), a principal eco-
nomic indicator, which provides a quarterly measure

of the change in employer costs for employee compen-
sation and employer costs-per-hour worked for each
of the components of compensation—wages, sala-
ries, and employee benefits; and

¢ The Employee Benefits Survey (EBS), which is an
annual study of the incidence and detailed charac-

Harriet G. Weinstein is an economist in the Division of Compensation Data
Analysis and Planning, Bureau of Labor Statistics.

Telephone: (202) 606-6237

E-mail: Weinstein H@bls.gov

41 Compensation and Working Conditions Summer 1998

teristics of employer-provided benefits, such as time-
off, insurance, and retirement.

These programs were developed at different times to meet
different needs. They have many overlapping data elements
that result in duplication of data collection and processing.
NCS is designed to eliminate this duplication, develop more
efficient collection and processing techniques, and improve
the quality of published data.’

Sample design

NCS covers workers in private industry establishments
and State and local governments in the 50 States and the
District of Columbia. Federal Government, agriculture, and
private households are excluded from coverage.

From the onset, the integration of the compensation
measures was designed to be implemented in stages. Initial
NCS work focused on compiling only wage data by occu-
pation. The six pilot NCS surveys of straight-time earn-
ings covered establishments with one worker or more, re-
gardless of industry.? However, because of resource
constraints, the first few years of NCS surveys were limited
to establishments with 50 or more employees. Eventually
the survey will again cover establishments with one worker
or more.

Stage 1, the collection of wage data from 24,000 estab-
lishments with 50 or more workers, will be completed in
the summer of 1998. Ultimately, the sample design calls
for a sample of 36,000 establishments—two-thirds of which
will be limited to wages, while the remaining one-third will
provide data on both wages and benefits. The proposed
fully integrated sample is shown on the following page:


Number of establishments
Stage 1 Fully

integrated

0 8,000

0 2,000

0 6,000

24,000 28,000

24,000 22,000

0 6,000

24,000 36,000

24,000 24,000

° 12,000

The NCS sample will be split into five approximately
equal replacement groups. Each group will be nationally
representative and will be replaced every 5 years. The groups
are based on a cross-industry, cross-area sample. ~

The sample will also be divided into four equal collec-
tion panels, each of which will correspond to a calendar
quarter (13 weeks). Each panel will have its own data col-
lection schedule for initiation and updating. Panels used
for the collection of wage-only data will have a 13-week
initiation period. Updating of wage-only data will vary by
the size of the area. In small areas, all units will be in a
single panel that is collected over a 13-week period; in large
areas, the units will be divided into four panels, each of
which has a 13-week update schedule. In contrast, panels
used for collection of wage and benefit data for the ECI will
have a 6-month initiation period and will be updated quar-
terly.

Area-based samples. Among the changes already imple-
mented is the shift from a nationwide, industry-based sample
to an area-based sample. The area-based sample of estab-
lishments is selected in two phases. In the first phase, the
United States is divided into primary sampling units
(PSU’s). In most States, a PSU consists of a county or a
number of contiguous counties. Thirty-three PSU’s are ar-
eas that are always included; others are selected based on
probability proportionate to the area’s employment. That
is, larger areas, in terms of total employment, have a greater
chance of selection than smaller areas,

In the second phase, a sample of business establishments
and State and local government operations are chosen within
each selected area. The individual business establishments
and government operations to be studied are also selected
using a probability proportionate-to-size technique within
each industry sampled. That is, larger establishments, in
terms of total employment, have a greater chance of selec-
tion than smaller establishments.

Establishments are classified by industry as defined by
the Standard Industrial Classification (SIC) Manual, 1987
prepared by the U.S. Office of Management and Budget.
‘Work is underway throughout all Federal statistical agen-
cies to replace the SIC with the North American Industry
Classification System (NAICS). The NAICS scheme will

be used by NCS when it becomes available, probably be-
ginning in 2001.

Integrating the ECI into the NCS. The ECI replenishment
groups that were initiated in 1997 were drawn from NCS
area-based, cross-industry samples. These samples differed
from previous ECI samples that were drawn nationwide by
industry.

Selection of occupations. Occupations within an establish-
ment are selected using a sampling technique called prob-
ability selection of occupations. This technique calls for
the selection of a fixed number of occupations in each es-
tablishment using a process that gives occupations with
greater employment a greater chance of selection. This
probability selection technique results in data for jobs in
proportion to their prevalence in the survey area.

Probability selection obtains a statistically representa-
tive sample of occupations nationally and for individual
survey areas. The resulting data are weighted to represent
all workers without bias. Through this technique, jobs that
are prevalent in an establishment are more likely to be the
ones chosen to be studied. Moreover, this method allows
for the possibility of publishing data for any job group. In
comparison, the OCS series was limited to jobs on a preset
list.

Each selected occupation is classified into 1 of approxi-
mately 450 occupation codes that are part of the Census
Occupational Classification System, a hierarchical classi-
fication system with a number of groups that are broader
than a single occupation. Under this system, occupations
are divided into major occupational groups (MOG’s) and
in some cases sub-MOG’s. Within each MOG, jobs are
classified according to general characteristics such as pro-
fessional specialty, or technical or service occupation. The
sub-MOG is a level finer than the MOG, but still broader
than occupation. Examples of sub-MOG’s include natural
scientists, information clerks, and food service occupations.

During the initial phase of NCS, the Bureau is using the
Census Occupation Classification System to maintain con-
sistency with the current ECI. However, work is currently
being conducted to revise the Standard Occupational Clas-
sification (SOC) system and to require its use for all Fed-
eral statistical programs. NCS will switch to the SOC when
the revision work is completed and the new system is ready
for implementation, probably beginning in 2001.

Generic leveling

Generic leveling is a process used to determine the work
level of an occupation. Each selected occupation is classi-
fied into one of several work levels based on duties and
responsibilities. The process is generic because it is de-
signed to determine the work level of nearly all occupa-
tions found in the economy. The work level of the occupa-
tion is determined using nine factors, each of which is broken
down into a number of levels.? Each of the levels has a

Compensation and Working Conditions Summer 1998 42


written description and a fixed number of points. The to-
tal points from all generic leveling factors determines the
employee’s work level. The nine factors are: Knowledge,
supervision received, guidelines, complexity, scope and ef-
fect, personal contacts, purpose of contacts, physical de-
mands, and work environment. A tenth factor, supervisory
duties, is being tested, but is not currently used to deter-
mine work levels.

Benefits—the next stage

With the completion of the first stage of NCS (imple-
menting a successful area-based wage survey), the process
has begun to integrate the collection and processing of mi-
cro data to estimate benefit costs and employee participa-
tion rates, and to describe detailed benefit provisions.

Features of the plan for incorporating benefits data as
part of the NCS call for:

* Quarterly benefit cost changes;
* Annual benefit cost levels;

* An annual, national study of benefit plan incidence
and key plan provisions;

* A study of detailed plan provisions, topic-by-topic
on a rotating basis (for example, health care and life
insurance will be studied one year; retirement plans,
disability protection, and paid leave plans will be stud-
ied in another year);

* The ability to link and cross analyze benefit costs
with incidence and plan provisions;

* The capacity for quick response surveys of employce
compensation and establishment practices; and

* Special studies of establishment practices and ben-
efits.

The benefits program will continue to develop over the
next few years culminating with the publication of wage
and benefit data from a fully integrated national sample in
2001.

New products

Changes are immediately apparent in comparing the NCS
outputs with the old OCS outputs: Earnings data, no longer
limited to the OCS pre-set job list, are compiled for a larger
variety of occupations that are more representative of the
economy as a whole and information is obtained on addi-
tional variables such as: whether the establishment is for
profit or non-profit.

A national bulletin using the NCS sample, slated for the

43 Compensation and Working Conditions Summer 1998

first quarter of 1999, will provide national occupational
earnings based on data compiled for the local area bulle-
tins. This new national bulletin will include data on new
variables, and will be organized differently than previous
OCS national summaries. Specifically, tables will be dis-
persed within chapters dealing with key occupation and
establishment characteristic variables and additional tables
will be available on the BLS World Wide Web site.

BLS is also investigating the introduction of two new
products—a wage estimator and interarea wage and com-
pensation cost indexes.

The wage estimator application would enable users to
obtain estimates of wages and the dispersions of wages for
jobs with chosen generic leveling factors. Using the Internet,
the user would choose the occupational group of a job, the
local area where the job is located and the generic leveling
factors of the job. The application would report the mean
wage and a measure of the dispersion of wages associated
with that job.

The wage estimator would provide published estimates
of mean wage rates (when available) or wage rates based
on a set of equations (regression formulas) that predict wages
based on NCS micro data. The equations specify linear re-
lationships between the natural log of wages and explana-
tory variables that represent generic leveling factors, occu-
pations, and local areas. Work on developing these
equations is underway.

Interarea wage and compensation cost indexes are also
under development. These measures would allow a com-
parison of the overall wage and compensation cost levels
for local areas for a fixed market basket of labor services.*
For example, it would be possible to state that, holding the
composition of labor constant, the overall level of wages in
New York is x percent higher than in Washington. The
indexes would be conceptually similar to the ECI, except
that the ECI permits comparisons of costs over time, while
the interarea indexes would permit comparisons over time
and areas.

The future of NCS

What will the fully implemented NCS survey look like
in 2001? NCS will be a single compensation survey using
a single sample design to collect data for ECI, EBS, and
locality wages. Some of the changes needed to meet this
goal are already underway while others are in the planning
stage. In the end expected major program enhancements
will include: 1) ECI and EBS surveys based on a geographic,
area-based sample; 2) local, regional, and national wage
estimates based on a random within-establishment occupa-
tional selection rather than a fixed national job list, and a
streamlined, generic leveling methodology for determin-
ing job content; 3) new measures (such as the wage estima-
tor and interarea wage and compensation indexes); and 4)
linkage of benefit incidence and provisions to benefit costs.