32 Compensation and Working Conditions Spring 1999

Tracking Changes

in Benefit Costs

Employer Costs for Employee Compensation

In the last four decades of the 20th century, the

proportion of employer compensation costs has

shifted away from wages and toward insurance,

retirement plans, and legally required benefits.

WILLIAM J. WIATROWSKI

William J. Wiatrowski is an economist in the Division of Compensation Data

Analysis and Planning, Bureau of Labor Statistics.

Telephone: (202) 606-6255

E-mail: Wiatrowski_W@bls.gov

In the final four decades of the 20th century, employee compensation, as measured by employer costs, has undergone

dramatic shifts. In 1959, cash payments (including straighttime pay, premium pay, bonuses, and paid leave) comprised

91 percent of all compensation costs for production workers in manufacturing industries; this fell to 78 percent by

1998. The remaining employer compensation costs were

for benefits – those non-wage items that generally provide

time off, insurance protection, and retirement security. In

1959, the largest proportion of benefit expenditures was for

paid time off; by 1998, the largest benefit expenditure was

for legally required items, such as Social Security and medicare.

These facts set the stage for the story of changes in compensation that have been widely reported and widely attributed to a variety of causes: New legally-required benefits

such as medicare, which didn’t exist in 1959; new and revised laws encouraging and regulating certain benefits,

particularly retirement plans; changes in workforce demographics—notably more working women and younger retirees—leading to changes in compensation; and rising

health care costs spurred by technological advances and

increased demand.1 In contrast, the data also suggest that

the primary compensation medium is still cash. This article traces data from the Bureau of Labor Statistics on compensation costs over the past 40 years, exploring both the

changes that have occurred and the similarities that still

exist after two generations.

Data on employer costs for compensation come from two

BLS surveys. The first, Employer Expenditures for Employee Compensation (EEEC), was conducted from 1959

through 1977. The survey captured total dollars paid for

various components of compensation during the year, at

first just for production and related workers in manufacturing industries and later for all workers in private industry.

(The difference in survey coverage is reflected in the accompanying tables.) These data along with employee work

hours were used to construct an average cost per hour worked

estimate for each component of compensation. The sum of

these costs provided a total compensation cost and also allowed ratios of each component as a percent of total compensation to be computed.2

The desire for greater information on trends in compensation costs led BLS to develop a new program, the Employment Cost Index (ECI), in the mid-1970s. The ECI

reports rates of change in employer costs for compensation.

(See table 1 for an example of current ECI estimates.) At

present, nearly 300 ECI series are published quarterly; data

users include the Federal Reserve Board (to set monetary

policy), the Health Care Financing Administration (to set

medicare reimbursement rates), and the U.S. Office of Personnel Management (to set pay for certain Federal workers).

The ECI is designed as a fixed-weighted Laspeyres index. The employment weights used to construct the index

are fixed.3 To reflect changes in the price of compensation

rather than the number of workers receiving the compensation, data are captured for a fixed set of occupations and

compensation components over a given time period. For

example, in one establishment, data may be collected for

full-time entry level accountants. Wage and benefit costs
 Compensation and Working Conditions Spring 1999 33

Changes in Benefit Costs

for these same workers are tracked as long as the establishment is part of the survey. Similarly, data may be collected

for the cost of a vacation plan for a group of workers with a

given length of service distribution (those with less than 1

year of service, those with 1 to 5 years, etc.). Vacation costs

over time are calculated based on this fixed length of service distribution. Beginning in 1986, ECI data were also

used to produce a new series called Employer Costs for

Employee Compensation (ECEC), which presents the average dollar cost per hour worked for various compensation components as well as the percent of total compensation cost attributable to each component. Unlike the ECI,

the ECEC uses current, not fixed, employment weights,

thereby representing current costs of compensation.4 The

ECEC data from 1986 until the present are used for the

analysis in this article.

There are two important differences between the EEEC

and the ECEC. The first involves the data being collected.

EEEC is a measure of expenditures, collected retrospectively for the entire year just completed. An expenditure is

the total dollar cost paid for the benefit in a year, and reflects all changes to the benefit cost and to the group of

workers receiving that benefit during the year. For example,

an annual health expenditure may include data from two

different health care plans, if the employer switched plans

during the year. Such an expenditure may also include data

for workers who left the establishment during the year,

joined the establishment during the year, or even joined

and left the establishment during the year. In contrast, the

ECEC is a measure of the price of the benefit plans in March

of each year multiplied by the usage (that is, the number of

workers receiving the benefit) of the specific benefit plans

that were established during the initial collection of data.

(These initial data are used to reduce the amount of data a

survey respondent must provide.) For example, if the establishment initially reported that two-thirds of employees

were covered by a family health care plan and one-third

were covered by an individual health care plan, the calculation of hourly cost would take the current price and apply

the initial family/individual usage pattern. If the mix of

benefit plans changes, however, new usage patterns are

obtained.5

The second difference involves the components of compensation that are surveyed and tabulated. The EEEC included a limited number of compensation components and

grouped them such that some individual items could not be

tabulated separately. The focus of the benefits was based at

least in part on benefits typically found in collective bargaining agreements.6 Because medicare was not inaugurated until 1966, such costs do not exist in the early data

and, when added, were incorporated into Social Security

expenditures and not tabulated separately.7 The ECI uses

different benefit groupings. For example, a category called

legally required benefits includes all items that employers

are mandated to provide, even though they are used for different purposes. This includes Social Security, medicare,

unemployment insurance, and workers’ compensation.

Perhaps more importantly, data are reported separately for

many of the components that were grouped together in the

EEEC. The difference in compensation components between the two surveys forms the basis for analysis, with

new groups formed to make certain comparisons.8

The EEEC and the ECEC are different surveys that use

different methods. They were not designed to provide strictly

comparable estimates. Therefore, readers are cautioned not

to attach too much significance to small changes between

series. Nonetheless, some trends that began in the EEEC

continue with ECEC data, and clearly represent shifts in

compensation patterns over time.

Results

Table 2 shows the overall share of costs for various compensation components among production workers in manufacturing industries from 1959 to 1998. Most striking is

the decrease in straight-time (non-overtime) pay (from 81.5

to 66.2 percent of compensation) and the increase in leTABLE 1. Percent changes in employee compensation, Employment Cost Index, seasonally adjusted, 1996-98

Civilian workers

 Compensation costs .................... 0.7 0.7 0.8 0.8 1.0 0.7 0.9 1.0

 Wages and salaries ................. .7 .8 .9 .9 1.1 .8 .9 1.2

 Benefit costs ............................ .6 .3 .5 .5 0.8 .4 .8 0.8

Private industry

 Compensation costs .................... .7 .6 .9 .8 1.0 .7 .9 1.1

 Wages and salaries ................. .7 .9 .9 1.0 1.1 .8 1.0 1.3

 Benefit costs ............................ .6 .1 .6 .5 .9 .3 .8 .7

State and local government

 Compensation costs .................... .7 .6 .5 .6 .6 .8 .7 .8

 Wages and salaries ................. .8 .6 .6 .7 .8 .7 .7 .7

 Benefit costs ............................ .7 .4 .3 .3 .3 .8 .7 1.0

Dec.

1996

Mar.

1997

June

1997

Sept.

1997

Dec.

1997

Mar.

1998

June

1998

Sept.

1998

3 months ending —
34 Compensation and Working Conditions Spring 1999

gally-required costs as a percent of compensation (from 4.1

to 9.6 percent). Another striking shift occurs in the insurance component (health, life, and disability insurance), with

rapid increases at certain times followed by decreases in

recent years. Similar though less dramatic trends occurred

among all workers in private industry between 1966 and

1998, as shown in table 3.

The data can be viewed from a number of benefit perspectives. Individual benefits may be examined as part of

one or more benefit grouping. For example, instead of comparing straight-time pay only, all compensation paid in cash,

including overtime pay, shift differentials, bonuses, severance pay, and pay for time off, are examined in table 4. As

a percent of compensation, total cash payments have declined by about 10 percent from 1966 to 1998. The major

shift among cash payments appears to be in straight-time

pay. Except for the cost of overtime, the share of costs for

other cash components remains relatively stable.9

Retirement costs can be looked at as the sum of employer

retirement and Social Security costs. Among employer retirement plans, the last 40 years has been a period of much

increase in regulation, especially since the enactment of

the Employee Retirement Income Security Act (ERISA) in

1974. In the years since ERISA, the trend in retirement

plans has been toward greater employee participation in

defined contribution retirement plans, while traditional

defined benefit pension plans have shown some decline in

coverage.10 The data in table 5 reflect this shift, as defined

contribution retirement plan costs begin to appear in the

1960s and account for about one-third of the costs of employer retirement plans by 1998.

Despite all the new regulations regarding retirement

plans, costs for these plans have remained remarkably stable

over 40 years. This may not be too surprising, however,

because both defined benefit and defined contribution plans

tend to have costs related to earnings. Although new retirement plan regulations could have resulted in increased

costs (by requiring such things as survivor protection, vested

benefits, and insurance premium payments), as a percent

of total compensation there has been little shift.11

In contrast, employer Social Security costs as a percent

of all compensation costs have risen over the last 40 years

(from 2 percent for blue-collar workers in manufacturing

in 1959 to nearly 5 percent in 1998).12 This trend can be

directly linked to rises in Social Security tax rates and the

level of earnings upon which the tax is imposed. In 1959,

the employer Social Security tax rate was 2.5 percent of

earnings up to $4,800. The maximum tax was $120 per

year. In 1998, employers paid Social Security taxes of 6.2

percent of earnings up to $68,400, for a maximum tax of

$4,240.80 per year.

Another group of compensation costs encompasses health

care and disability related benefits. Included in this group

are insurance costs (health, life, and disability), sick leave,

medicare, and workers’ compensation. Life insurance,

which in 1998 made up about 2 percent of total insurance

cost, is not available separately prior to 1991. (In many

cases, including union health and welfare funds, all insurances are treated as a single employer payment.)

Overall, the health and disability category shows larger

increases in percent of compensation than other categories.

(See table 6.) This is due to increases in all of the components. Increases in insurance costs in the early 1970s and

early 1990s parallel overall health care price rises during

those periods, as are reflected in the Consumer Price Index

and in the Department of Health and Human Services’ data

on health care expenditures. Influences on rising health

costs include advanced technology, new drugs and treatments, and expanded coverage.13 Medicare has a similar

effect on the total costs in this group. When implemented

in 1966, the medicare tax on employers was .35 percent of

earnings up to $6,600, for a maximum tax of $23 per year.

Today, the tax is 1.45 percent of earnings with no maximum.

One final group to consider is legally required or mandatory benefits, including Social Security, medicare, workers’ compensation, and unemployment insurance. (See table

7.) Throughout the time period, Social Security has been

the legally required benefit with the greatest employee cost,

and this cost as a percent of total compensation has continTABLE 2. Percent of employer compensation cost by components of compensation, production and related workers,

private manufacturing establishments, 1959-98

1959 1962 1966 1968 1970 1972 1974 1977 1986 1988 1990 1992 1994 1996 1998

Total compensation......................... 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Wages and salaries .................... 81.5 80.1 77.7 77.4 76.2 74.8 73.0 70.9 69.7 67.0 66.4 65.0 63.7 65.2 66.2

Benefits ...................................... 18.3 20.0 22.5 22.5 23.9 25.2 26.9 29.1 30.3 33.0 33.6 35.0 36.3 34.8 33.8

Paid leave ............................... 5.4 5.5 5.8 6.2 6.9 6.5 7.2 7.3 6.2 7.0 6.8 6.9 6.8 6.8 6.7

Supplemental pay ................... 4.4 4.4 5.3 4.9 4.4 4.6 4.3 4.1 3.6 4.7 4.8 4.6 4.4 5.0 5.2

Insurance ............................... 2.0 2.4 2.8 3.1 3.9 4.2 4.7 5.5 6.5 8.1 8.5 9.7 10.3 9.3 8.6

Retirement.............................. 2.2 2.3 2.6 2.7 3.0 3.4 3.6 4.3 3.8 3.1 3.1 3.5 4.2 3.4 3.4

Legally required ...................... 4.1 5.1 5.8 5.4 5.5 6.2 6.9 7.4 10.0 9.7 10.1 10.0 10.1 9.9 9.6

Other ...................................... 0.2 0.3 0.2 0.2 0.2 0.3 0.2 (1) 0.2 0.4 0.3 0.4 0.5 0.4 0.4

(

1

) Data not available.

Note: Data for 1986 are for blue-collar workers in all private

establishments. Data for 1988-98 are for blue-collar workers in

private manufacturing establishments.
 Compensation and Working Conditions Spring 1999 35

Changes in Benefit Costs

TABLE 3. Percent of employer compensation cost by components of compensation, all workers, all private establishments, 1966-98

1966 1968 1970 1972 1974 1977 1986 1988 1990 1992 1994 1996 1998

Total compensation............................................... 100 100 100 100 100 100 100 100 100 100 100 100 100

Wages and salaries .......................................... 80.6 80.4 79.8 78.5 76.3 74.8 73.0 72.7 72.4 71.8 71.1 71.9 72.4

Benefits ............................................................ 19.2 19.5 20.2 21.5 23.7 25.1 27.0 27.3 27.6 28.2 28.9 28.1 27.7

Paid leave ..................................................... 5.7 5.9 6.3 6.3 6.7 6.9 7.0 7.0 6.9 6.8 6.5 6.4 6.6

Supplemental pay ......................................... 3.6 3.4 3.0 3.0 3.4 3.0 2.3 2.4 2.5 2.4 2.6 2.8 2.6

Insurance ..................................................... 2.1 2.2 2.6 3.0 3.3 4.0 5.5 5.6 6.1 6.9 7.2 6.5 6.3

Retirement .................................................... 2.6 2.9 3.2 3.5 3.9 4.3 3.8 3.3 3.0 2.9 3.0 3.1 3.8

Legally required ............................................ 5.1 5.0 5.0 5.5 6.3 6.8 8.4 8.8 9.0 9.1 9.4 9.1 8.2

Other ............................................................ 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.2 (1) 0.1 0.2 0.2 0.2

(

1

) Less than 0.5 percent.

TABLE 4. Percent of employer compensation cost for cash compensation, all workers, all private establishments,

1966-98

1966 1977 1988 1998 1966 1977 1988 1998

Total cash ..................................... 90.0 84.8 82.2 81.8 100 100 100 100

Total cash for time worked ........ 84.2 77.8 75.0 75.0 93.6 91.7 91.2 91.7

Straight-time pay .................. 80.6 74.8 72.7 72.4 89.6 88.2 88.4 88.5

Premium pay ........................ 2.4 1.9 1.5 1.3 2.7 2.2 1.8 1.6

Overtime .......................... 2.1 1.6 1.2 1.0 2.3 1.9 1.5 1.2

Shift differential ................. 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.4

Nonproduction bonuses ....... 1.2 1.1 .8 1.3 1.3 1.3 1.0 1.6

Total other cash ........................ 5.8 7.0 7.2 6.8 6.4 8.3 8.8 8.3

Severance pay.............................. .1 .1 .2 .2 .1 .1 .2 .2

Paid leave ..................................... 5.7 6.9 7.0 6.6 6.3 8.1 8.5 8.1

Percent of all compensation Percent of cash compensation

TABLE 5. Percent of employer compensation cost for retirement benefits, all workers, all private establishments,

1966-98

1966 1977 1988 1998 1966 1977 1988 1998

Total retirement ............................. 5.4 8.0 8.1 8.5 100 100 100 100

Employer retirement plans ........ 2.6 4.3 3.3 3.8 48.1 53.8 40.7 44.7

Defined benefit ..................... 2.5 4.1 2.8 2.4 46.3 51.3 34.6 28.2

Defined contribution ............. 0.1 0.2 0.5 1.4 1.9 2.5 6.2 16.5

Social security .......................... 2.8 3.7 4.8 4.7 51.9 46.3 59.3 55.3

Percent of all compensation Percent of retirement compensation

TABLE 6. Percent of employer compensation costs for health and disability-related benefits, all workers, all private

establishments, 1966-98

1966 1977 1988 1998 1966 1977 1988 1998

Total health ................................... 3.8 6.7 9.3 9.8 100 100 100 100

Insurance (1) ............................. 2.1 4.0 5.6 5.8 55.3 59.7 60.2 59.2

Sick leave ................................. 0.5 0.8 0.9 1.0 13.2 11.9 9.7 10.2

Medicare .................................. .3 .7 1.1 1.2 7.9 10.4 11.8 12.2

Workers compensation ............. .9 1.2 1.7 1.8 23.7 17.9 18.3 18.4

(1) Insurance includes health, disability, and life insurance.

Percent of all compensation Percent of health and disability-related

compensation
36 Compensation and Working Conditions Spring 1999

TABLE 7. Percent of employer compensation cost for legally required benefits, all workers, all private

establishments, 1966-98

1966 1977 1988 1998 1966 1977 1988 1998

Total legally required ..................... 5.1 6.8 8.8 8.2 100 100 100 100

Social Security/Medicare .......... 3.1 4.4 5.9 5.8 60.8 64.7 67.0 70.5

Social Security ..................... 2.8 3.7 4.8 4.7 54.9 54.4 54.5 56.4

Medicare .............................. 0.3 0.7 1.1 1.2 5.9 10.3 12.5 14.1

Unemployment insurance ............. 1.1 1.2 1.0 0.7 21.6 17.6 11.4 7.9

Workers compensation ................. .9 1.2 1.7 1.8 17.6 17.6 19.3 21.5

Note: Because of rounding, sums of individual items may not equal totals.

TABLE 8. Social Security and medicare tax rates (percent of covered earnings) and covered earnings, 1959-98

1959 ..................................................................... 2.5 $4,800 * *

1960 ..................................................................... 3.0 4,800 * *

1961 ..................................................................... 3.0 4,800 * *

1962 ..................................................................... 3.125 4,800 * *

1963 ..................................................................... 3.625 4,800 * *

1964 ..................................................................... 3.625 4,800 * *

1965 ..................................................................... 3.625 4,800 * *

1966 ..................................................................... 3.85 6,600 0.35 $6,600

1967 ..................................................................... 3.9 6,600 .5 6,600

1968 ..................................................................... 3.8 7,800 .6 7,800

1969 ..................................................................... 4.2 7,800 .6 7,800

1970 ..................................................................... 4.2 7,800 .6 7,800

1971 ..................................................................... 4.6 7,800 .6 7,800

1972 ..................................................................... 4.6 9,000 .6 9,000

1973 ..................................................................... 4.85 10,800 1.0 10,800

1974 ..................................................................... 4.95 13,200 .9 13,200

1975 ..................................................................... 4.95 14,100 .9 14,100

1976 ..................................................................... 4.95 15,300 .9 15,300

1977 ..................................................................... 4.95 16,500 .9 16,500

1978 ..................................................................... 5.05 17,700 1.0 17,700

1979 ..................................................................... 5.08 22,900 1.05 22,900

1980 ..................................................................... 5.08 25,900 1.05 25,900

1981 ..................................................................... 5.35 29,700 1.3 29,700

1982 ..................................................................... 5.4 32,400 1.3 32,400

1983 ..................................................................... 5.4 35,700 1.3 35,700

1984 ..................................................................... 5.7 37,800 1.3 37,800

1985 ..................................................................... 5.7 39,600 1.35 39,600

1986 ..................................................................... 5.7 42,000 1.45 42,000

1987 ..................................................................... 5.7 43,800 1.45 43,800

1988 ..................................................................... 6.06 45,000 1.45 45,000

1989 ..................................................................... 6.06 48,000 1.45 48,000

1990 ..................................................................... 6.2 51,300 1.45 51,300

1991 ..................................................................... 6.2 53,400 1.45 125,000

1992 ..................................................................... 6.2 55,500 1.45 130,200

1993 ..................................................................... 6.2 57,600 1.45 135,000

1994 ..................................................................... 6.2 60,600 1.45 no limit

1995 ..................................................................... 6.2 61,200 1.45 no limit

1996 ..................................................................... 6.2 62,700 1.45 no limit

1997 ..................................................................... 6.2 65,400 1.45 no limit

1998 ..................................................................... 6.2 68,400 1.45 no limit

Social Security

employer tax rate

(percent of

covered

earnings)

Medicare

employer tax rate

(percent of

covered

earnings)

Covered

earnings

Covered

earnings

Percent of all compensation Percent of legally required compensation
 Compensation and Working Conditions Spring 1999 37

Changes in Benefit Costs

1

 For a discussion of changes in compensation, see William J. Wiatrowski,

“Family-related Benefits in the Workplace,” Monthly Labor Review, March

1990, pp. 28-33. Information on changes in labor force demographics may

be found in Howard V. Hayghe, “Developments in Women’s Labor Force

Participation,” Monthly Labor Review, September 1997, pp. 41-46, and in

Diane Herz, “Work After Early Retirement: An Increasing Trend Among

Men,” Monthly Labor Review, April 1995, pp. 13-20. Data on trends in

health care costs are available in Report on the American Workforce, chapter

3 (U.S. Department of Labor, 1995). 2

 For information on survey methods used in the Employer Expenditures

for Employee Compensation Survey, see Employee Compensation in the

Private Nonfarm Economy, 1974, Bulletin 1963 (Bureau of Labor Statistics, 1977). 3

 For more information on index methodology, see the appendix to Employment Cost Indexes 1975-97, Bulletin 2504 (Bureau of Labor Statistics,

July 1998). 4

 For details on survey methodology, see Employer Costs for Employee

Compensation, 1986-97, Bulletin 2505 (Bureau of Labor Statistics, August 1998). 5

 It should be noted that total annual expenditures are acceptable data for

the ECI, and consequently the ECEC, when initial usage and current price

data are not available. 6

 One reason for the focus on collectively bargained benefits may have

been the rise in union membership during the 1950s. According to BLS data,

union membership as a percent of the labor force rose from 15.5 percent in

1945 to 24.7 percent in 1955. 7

 Medicare and Social Security are linked in data collection for these

surveys because contributions to these programs are linked. The tax on both

employers and employees for medicare and Social Security, known as the

Federal Insurance Contribution Act (or FICA), is often expressed as a single

percent of pay up to a specified maximum. In fact, there are two distinct

percents of pay, one for each program. Prior to 1994, the maximum wages

upon which these two tax percentages were applied were the same; currently,

there is still a ceiling on wages subject to Social Security taxes but there is no

ceiling on wages subject to medicare taxes.

In some of the tables that accompany this article, Social Security and

medicare costs are provided separately. To determine these amounts for years

prior to 1998, the total employer percentage for combined Social Security

and medicare cost was divided into the two components, using the ratio of

Social Security to medicare tax rate, as shown in table 8. In 1966, 91.67

percent of the total tax was attributable to Social Security; in 1977 the Social

Security portion was 84.62 percent; and in 1988 the Social Security portion

was 80.69 percent. These percents were applied to the total Social Security

and medicare cost shares to determine the two individual values. In 1998,

data for Social Security and medicare were captured and tabulated separately.

8

 Another major difference between the surveys is that the EEEC was

mailed to survey participants, who filled out the forms. For the ECEC, a BLS

economist does the initial collection of data through a personal visit. 9

 The surveys classify certain cash payments as either production bonuses or nonproduction bonuses. Production bonuses are directly related to

an employee’s output, such as a commission on a sale. Nonproduction bonuses lack that direct relationship to production. An example might be a

holiday bonus. BLS continues to research and refine these definitions. 10 In a defined contribution retirement plan, employer or employee funds,

or both, are placed in an individual account for the employee. Benefits are

based on the value of the account at retirement, which includes contributions

and earnings. Accounts may be invested in different vehicles with varying

degrees of risk. Ultimately, the risk of having sufficient funds for retirement

is borne by the employee. A traditional defined benefit pension plan includes

a formula to determine the amount of retirement benefit, generally based on

earnings and years of service. The risk of maintaining sufficient funds in plan

accounts to provide these benefits is borne by the employer. Data from the

Bureau’s Employee Benefits Survey indicate that the proportion of workers

covered by a defined benefit pension plan has declined throughout the 1980s

and 1990s, while the proportion covered by a defined contribution retirement

plan has increased over the same time period. For a detailed discussion of

these plans, see Employee Benefits in Medium and Large Private Establishments, 1995, Bulletin 2496 (Bureau of Labor Statistics, April 1998). For a

discussion of the shift from defined benefit to defined contribution retirement

plans, see Michael S. Gordon, Olivia S. Mitchell, and Marc M. Twinner, Positioning Pensions for the Twenty-First Century (Pension Research Council,

1997). 11 Although required plan provisions may have tended to increase plan

costs, during much of the 1980s and 1990s, greater than average investment

returns have created situations where employers have not been required to

provide additional funds to their defined benefit pension plans. Such plans

are termed “fully funded.” 12 Published estimates are not available for blue-collar workers in manufacturing industries in 1998, although the data for all blue-collar workers and

for all workers in manufacturing industries both indicate that approximately

5 percent of compensation costs were for Social Security. 13 See details on health care costs in Report on the American Workforce,

1995.

14 For more information on workers’ compensation benefits, see Charles

A. Berreth, “State Workers’ Compensation Legislation Enacted in 1996,”

Monthly Labor Review, January 1997, pp. 43-50. For information on unemployment insurance benefits, see Daniel P. McMurrer and Amy B. Chasanov,

“Trends in Unemployment Insurance Benefits,” Monthly Labor Review, September 1995, pp. 30-39.

ued to increase. These increases mirror increases in Social

Security tax rates and the income upon which the tax is

levied, as seen in table 8. In more recent years, workers’

compensation has taken up a greater proportion of employer

legally required compensation costs while unemployment

insurance has declined. This trend parallels the rising cost

of workers’ compensation coverage (due to rising medical

costs) and the overall declines in unemployment.14

Conclusion

Employee compensation no longer means just wages; the

variety and cost of employee benefits has expanded considerably and shifted slightly away from cash in the last half

the 20th century. Since 1959, the Bureau of Labor Statistics

has tracked these trends through employer compensation

cost data. Soon, BLS will expand upon these data to include costs associated with various types of benefit plans

and plan provisions. The establishment sample used to

produce the Employer Cost for Employee Compensation

series is being expanded to include the collection of benefit

availability, cost, and detailed provisions. With this expanded data series, data users will not only be able to track

the cost of specific benefits but will also be able to determine how costs vary by type of plan or presence of certain

plan features. The expanded data will be available in the

next few years.