U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

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The New ECI "Exclusionary" Series: An Improved Measure to Control for Wage

Volatility

by Wayne Shelly

Bureau of Labor Statistics

Originally Posted: August 30, 2006

With the release of the March 2006 Employment Cost Index (ECI), several new series were published that exclude incentive

paid workers from all workers in a given industry or occupational category.1 Because incentive pay tends to be volatile,

removing it allows a better look at the underlying trends in wages;2 this is similar in concept to the core Consumer Price Index

(CPI) series, which has volatile items (food and energy) removed to gain a better understanding of changes in prices. The

ECI "excluding sales occupations" series had been published each quarter over many years to give data users a look at a

given series without the effect of commissions and other incentive pay; however, excluding sales workers from a given series

also removed workers such as cashiers, who typically earn only straight-time wages. After researching the issue, BLS

developed a new set of series to separate workers with volatile pay.3

Table. Employment Cost Index series and new exclusionary series, 3-month percent change, wages and salaries, not

seasonally adjusted, March 2006

All

workers

Excluding sales

occupations

Excluding incentive paid

occupations

Civilian workers

Civilian, all workers 0.7 0.8 0.7

Civilian, white-collar 0.7 0.8 -- Private industry workers

Private industry, all workers 0.7 0.9 0.8

Occupational group

White-collar occupations 0.8 1.0 -- Management, professional, and related 1.1 -- 1.0

Management, business, and financial 1.3 -- 1.1

Sales and office 0.4 -- 0.8

Sales and related -0.2 -- 0.9

Blue-collar, Production, transportation, and

material moving 0.6 -- 0.6

Production 0.7 -- 0.6

Industry and occupational group

Goods producing industries 0.7 0.8 0.8

Goods producing, white-collar 0.7 1.1 -- Manufacturing, white-collar 0.6 1.1 -- Service providing industries 0.8 0.9 0.9

Service providing, white-collar 0.8 1.0 -- Note: Dashes indicate data not available.

Source: Employment Cost Index--March 2006, USDL 06-732 (U.S. Department of Labor), April 28, 2006, tables 8, 9.
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

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All

workers

Excluding sales

occupations

Excluding incentive paid

occupations

Trade, transportation, and utilities 0.4 -- 0.7

Wholesale trade 0.2 0.9 1.1

Retail trade 0.5 -- 0.7

Financial activities 1.3 1.9 1.2

Credit intermediation and related activities 1.5 -- 1.3

Insurance carriers and related activities 1.0 1.1 0.9

Real estate and rental and leasing -0.2 -- 0.9

Note: Dashes indicate data not available.

Source: Employment Cost Index--March 2006, USDL 06-732 (U.S. Department of Labor), April 28, 2006, tables 8, 9. • The table lists all of the ECI private industry, wage and salary series that were accompanied by an "excluding

incentive paid occupations" series, an "excluding sales occupations" series, or both, in the March 2006 news release.

It also shows the 3-month changes, not seasonally adjusted, for the period from December 2005 to March 2006. For

each wage and salary series, there is a respective total compensation series but not a respective benefits series; none

of these series are seasonally adjusted.

• The chart shows each ECI private industry series that was accompanied by both an "excluding sales occupations"

series and an "excluding incentive paid occupations" series, and the 3-month change, not seasonally adjusted, for the

December 2005 to March 2006 period for each of these series.

Note: Each exclusionary series had a lower standard error than that of its complementary all-worker series. Also, in each

case, the "excluding incentive paid occupations" series had a lower standard error than its complementary "excluding sales

occupations" series.4 Because data for the new series have been published only for December 2005 and March 2006, it is

too early to analyze longer trends.

SOURCE: Employment Cost Index--March 2006, USDL 06-732 (U.S. Department of Labor), April 28, 2006; available on the

Internet at http://www.bls.gov/news.release/archives/eci_04282006.pdf.
U.S. BUREAU OF LABOR STATISTICS COMPENSATION AND WORKING CONDITIONS

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Wayne Shelly

Economist, Division of Compensation Data Analysis and Planning, Office of Compensation and Working Conditions, Bureau of

Labor Statistics.

Telephone: (202) 691-6205; E-mail: Shelly.Wayne@bls.gov

Notes

1 The basic unit of observation for the Employment Cost Index is a unique occupation (or "quote") within an establishment. Among other

characteristics, all workers in a quote are defined as either incentive paid or time-based (nonincentive) paid. Data for workers in incentive-paid

occupations are omitted for the "exclusionary series." The new base for these series was set at 100 in December 2005; March 2006 was the

first quarter in which a 3-month change could be registered.

2 See Anthony J. Barkume and Thomas G. Moehrle, "The Role of Incentive Pay in the Volatility of the Employment Cost Index," Compensation

and Working Conditions, Summer 2001, pp. 13-18; available on the Internet at http://www.bls.gov/opub/cwc/archive/summer2001art2.pdf.

3 Several existing series that exclude sales workers are still being published, but they will be discontinued with the release of the March 2007

ECI data.

4 The most recent ECI standard errors are available online at http://www.bls.gov/ncs/ect/ectvar.htm and http://www.bls.gov/web/

eci.supp.toc.htm#stanerr_txt. Data for Chart. New Employment Cost Index series: "excluding incentive paid occupations", 3 month percent change,

wages and salaries, not seasonally adjusted, March 2006

All workers Excluding sales occupations Excluding incentive paid occupations

All private industry 0.7 0.9 0.8

Goods producing industries 0.7 0.8 0.8

Service providing industries 0.8 0.9 0.9

Wholesale trade 0.2 0.9 1.1

Financial activities 1.3 1.9 1.2

Insurance carriers and related activities 1 1.1 0.9

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