PROGRAM 

Stephen H. Cohen 

Bureau of Labor Statistics; 2 Massachusetts Ave., N.E.; Room 3160; Washington, D.C. 20212 

Key Words: Compensation Surveys, Sample Design, 

Estimation 

1. Overview 

For many decades, the Bureau of Labor Statistics 

has conducted studies of wages by occupation and 

industry. The best known of the early studies stemmed 

from a Senate resolution of March 3, 1891, which 

instructed BLS to investigate the effects of tariff 

legislation on wages and prices. 

Systematic collection of wage data by occupation 

and industry continued after the turn of the century, with 

changes in coverage dictated mainly by government 

needs. 

Survey activity shifted in the early 1940's 

defense period to heavy industries essential to war 

production. Implementation of wage stabilization policy 

during the war required a large-scale program of 

occupational wage studies by industry and locality. The 

emphasis on data by locality continued after 1945 

within the framework of industry studies generally 

designed to yield national and regional estimates. 

Area wage surveys, initiated in the late 1940's, 

were designed to meet the growing demand for pay data 

related to office clerical and manual jobs that are 

common to a wide variety of manufacturing and 

nonmanufacturing industries within a metropolitan area. 

In 1960, the program was converted to a statistically 

selected group of areas which data could be estimated 

to represent all metropolitan areas of the 48 contiguous 

United States. 

Also in 1960, the Bureau began conducting an 

annual nationwide survey of professional, 

administrative, technical and clerical jobs in a broad 

spectrum of private industries. In 1990, Congress 

passed legislation that provided for local variations in 

Federal white-collar pay scales. B LS combined its area 

wage program with the national white collar pay survey 

into the Occupational Compensation Survey Program 

(OCSP) to meet this administrative need along with 

providing compensation analysts with an enhanced 

local/national products. 

In 1976, the Bureau began to publish the 

Employment Cost Index (ECI) which measures the rate 

of change in employee compensation, which includes 

wages, salaries, and employer's cost for employee 

benefits. Several elements distinguish the ECI from 

other surveys of employee compensation. It is 

comprehensive in that it includes costs incurred by 

employers for employee benefits in addition to wages 

and salaries; and covers all establishments and 

occupations in both the private nonfarm and public 

sectors. It measures the change in cost of employing a 

fixed set of labor inputs, so it is not affected over time 

by changes in the occupational composition of the labor 

force. The survey is timely in that statistics are 

published quarterly. The ECI also enables users to 

compare rates of change in occupational group, 

industrial, geographic, union coverage, and 

public/private sub series. 

In 1980 the Bureau began annual full-scale 

comprehensive surveys on the incidence and 

characteristics of employee benefits for full and part 

time employees: the Employee Benefits Survey (EBS). 

Since the early 1980's discussion has ensued 

within the Bureau to integrate the occupational wage 

surveys, industrial wage surveys, ECI and EBS into a 

single integrated compensation program. One purpose 

of the goals of integration is to find ways to eliminate 

the duplication that exists through the current use of 

three separate surveys to study compensation. With the 

new joint occupation selection system, each 

establishment would only be contacted one time (in 

each sample cycle), rather than possibly being visited 

for more than one survey. Therefore, the burden on 

respondents will be reduced significantly, especially for 

those large establishments that are likely to be selected 

in multiple samples with many of the same data 

elements captured in multiple surveys. While the new 

sample size would be larger than that for an individual 

survey, it would be smaller than the sum of the samples 

for the current surveys. Therefore, fewer establishments 

of all sizes would be visited, so the overall burden on 

respondents would go down. 

In October 1996, BLS began the process of 

integrating the above program into a single program: 

The National Compensation Survey (NCS). NCS allows 

for the continuation of data collected by OCSP, ECI and 

EBS. A review of some of the key concepts underlying 

the programs follows. 

2. Concepts 

Previous occupational pay surveys studied 

occupations that provided a representation of the range 

of duties and responsibilities associated with white 

collar jobs, skilled maintenance trades, and custodial 

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occupations have been divided into two or more work 

levels, based upon differences in incumbents' 

experience and responsibilities. Survey occupations are 

defined in advanced with a uniform set of job 

descriptions. Survey occupations were judgementally 

chosen. Weekly salaries reported for individuals in 

white collar jobs relate to regular straight-time salaries 

paid for standard workweeks. Earnings information for 

plant workers excludes late-shift differentials and 

premium pay for overtime. 

Data on weekly work schedules; paid holiday 

and vacation practices; and health, insurance, and 

retirement plans were recorded separately for 

nonsupervisory office workers and for production and 

related workers. 

The current industrial scope includes all 

establishments employing 50 or more employees in the 

private sector and all establishments for the nonfederal 

public workforce. 

The ECI is designed as a Laspeyres, fixedweight index at the occupational level, thus eliminating 

effects of employment shifts among occupational 

groups. The index weights are derived from the 

Occupational Employment Survey modified by the 

1990 Census. The wage and salary component of the 

index is represented by average straight-time hourly 

earnings in an occupation. Straight-time earnings are 

defined as total earnings before deductions, excluding 

premium payments for overtime, weekend, and lateshift work. Earnings include production bonuses, 

commissions, and cost of living allowances but exclude 

nonproduction bonuses, payments in kind, and tips. 

All earnings are computed on an hourly basis. 

Benefit costs are also computed on an hourly basis° The 

benefit data potion of the ECI includes paid leave 

benefits, supplemental pay, insurance, pension and 

savings, legally required benefits, and severance pay 

and supplemental unemployment benefit funds. 

More detail on concepts can be found in the 

BLS Handbook of Methods (1997). 

3. Integration Efforts 

When NCS is fully implemented, most of the 

information currently produced by these three surveys 

will continue to be available; the difference is that the 

source will be a single sample. Integration of the three 

programs is necessary to minimize the burden to 

respondents, to reduce the cost of collection and 

processing these critical data, and to link data elements 

of the three surveys together. 

One aim of NCS is to produce data on both the 

local and national level. BLS will therefore sample 

establishments in 154 localities. The set of localities 

U.S., 5 additional self-representing PSU's, and 118 

randomly sampled localities. Data on compensation 

will be available for 34 of the self-representing largest 

metropolitan areas, a limited number of other areas, 

broad geographic regions, and the nation as a whole. 

In each locality, BLS will take a sample of 

establishments. Within each establishment, BLS will 

take a sample of jobs. BLS will collect information on 

the work levels of selected jobs, compensation, hours 

worked, and other characteristics. 

"Work level" is defined as the degree of 

knowledge, skill, judgment, scope, and working 

conditions associated with a job. The data on the work 

level of jobs will be collected by classifying each job 

according to a "generic" method that can be universally 

applied. Each job will receive some number of points 

based on a series of factors, allowing the job to be 

sorted into a level. This methodology, known as 

"generic leveling" is based upon OPM's Factor 

Evaluation System (FES) developed in the 70' s. The 

compensation data will include the following 

information: 

--Median and mean earnings by occupation; 

--Earnings by job level (and aggregation of 

jobs by level to Major Occupational 

Group, total private, etc.), as defined by 

generic leveling; 

--Local and national breakouts on earnings; 

--Employer cost of benefits; 

--Employee cost of benefits; 

--Number of people participating in benefit 

plans; 

--Provisions of benefit plans. 

The types of benefits information that will be collected 

include: 

--Health, life, and disability insurance; 

--Retirement plan information; 

--Leave information; 

--Cost of mandated benefits, including 

Social Security, Workers' 

Compensation, and Unemployment 

Insurance; 

--Overtime, shift, and bonus pay. 

The benefit plan provision information to be collected 

includes: 

--Availability Of managed care in health 

insurance; 

--Typical deductibles and copayments in 

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--Other health care information, including 

availability of coverage of 

hospitalization, home health care, 

mental health, and substance abuse 

treatment; 

--Dental, vision, and prescription drugs; 

--Average levels of coverage for life and 

disability plans; 

--Detailed pension plan provisions 

including data on eligibility, 

survivor options, and disability 

provisions; 

--Detailed savings plans provisions, 

including match rates, investment 

choices, and loan options; 

--Average number of vacation days, sick 

days, holidays, and other forms of 

leave. 

4. Sample Design 

The survey design for NCS is detailed below. The 

major features of the design are outlined with issues to 

be addressed by research to improve the sample design 

discussed. Other papers in these meetings: Black, Ernst 

and Tehonica (1997a, 1997b), and Paben and Ernst 

(1997), discuss some of this research in more detail. 

4.1. Stratification and Sample Selection 

The NCS sample is selected using a 3-stage 

stratified design with probability proportional to 

employment sampling at each stage. The first stage of 

sample selection is a probability sample of areas, the 

second stage is a probability sample of establishments 

within sampled areas, the third stage of sample selection 

is a probability sample of occupations within sampled 

areas and establishments. 

The selection of sample areas is done by first 

dividing the entire area of the United States, consisting 

of counties and independent cities, into primary 

sampling units (PSU's). In most States, a PSU consists 

of a county or a number of contiguous counties. In New 

England and Hawaii, minor civil divisions are used 

instead of counties. Metropolitan areas, as defined by 

Office of Management and Budget (OMB), are used as 

a basis for forming PSU's. Outside of metropolitan 

areas, each county defines a PSU. 

The PSU's with similar average wages as 

measured by Unemployment Insurance reports wage are 

grouped into strata within each of the 9 Bureau of the 

Census" economic divisions. Then one PSU is selected 

proportional to the employment of the PSU. There are 

36 PSU's that are self-representing, and these include 

the 18 Consolidated Metropolitan Statistical Areas 

(CMSA's) and 15 largest Metropolitan Statistical Areas 

(MSA's). The remaining strata are formed by 

combining PSU's that are MSA's and have similar 

average annual pay into 45 MSA strata and PSU's that 

are non-MSA's and have similar average annual pay 

into 73 non-MSA strata. The PSU's selected with 

probability proportionate to PSU employment from 

these strata, are non-self-representing because each one 

chosen represents the entire stratum. The NCS sample 

design was supplemented with 3 PSU's to meet 

requirements of Federal Employee Pay Comparability 

Act of 1990. 

The sample of establishments is drawn by first 

stratifying the sampling frame for each PSU by industry 

and ownership. 

The number of sample establishments 

allocated to each stratum within a PSU is approximately 

proportional to the stratum employment. Each sampled 

establishment is selected within a stratum with a 

probability proportional to its employment. The 

industry strata were chosen because of a desire to 

produce estimates of major industry division as well as 

selected individual industries which are traditionally 

produced for the ECI and locality products. After the 

first round of surveys is completed, the allocation will 

be reviewed using the first round variance estimates to 

develop an optimal allocation that will efficiently 

produce the desired publication lines. 

After the sample of establishments is drawn, 

occupations are selected in each sampled establishment. 

The number of occupations (4,8, 10, 12, 16 or 20) 

selected in an establishment depends on the total 

number of employees in the establishment. The 

probability of an occupation being selected is 

proportionate to its employment within the 

establishment. 

Approximately 1/3 of the total NCS sample of 

36,000 establishments will be designated core sample 

for ECI quarterly wage and benefit collection, while for 

the remaining 2/3 of the sample wage only data will be 

collected annually. In order to reduce respondent 

burden in these core units due to the increased 

collection time associated with benefits, the 

occupational selection rate will be reduced. The effect 

on variances on occupational wage data was found to be 

a reasonable tradeoff to avoid potentially significant 

additional nonresponse in these core units that require 

quarterly collection of both wage and benefit 

information. 

There are a number of data collection issues 

that require special selection or weighting schemes to 

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is schedules that result from collecting data from units 

other than assigned. This problem occurs because the 

respondent can not supply data only for the frame unit 

because of the way the records are maintained in the 

establishment. The field documents the issue and the 

schedule is reweighted. The most difficult process that 

this effects is the modification of the variance formulae. 

Another special handling situation is 

occupational selection of multi-national corporations. 

As discussed above each probability selected 

occupation requires extensive data collection to 

determine the appropriate skill level of the occupation. 

When selection is done by establishment, for companies 

with hundreds of locations and occupations, continued 

respondent cooperation becomes problematical. These 

are usually establishments that can significantly effect 

the estimates in some markets. For those reporters we 

developed a centralized occupational selection scheme. 

We select the occupations PPS from a master 

nationwide list stratified by major operating units of the 

corporation. Then for each establishment we survey 

only those occupations that are on the nationwide list. 

We then poststratify the weights in each establishment 

based upon the employment in the occupations in the 

establishment and its total employment. 

4.2. Sample Replacement Scheme 

The initial plan of NCS was to replace the 

OCSP samples and outputs using a fixed job list with 

generic leveling outputs that represent the entire market. 

The initial sample will be restricted to establishments 

employing 50 or more workers with expansion to occur 

over time. Beginning in April 1998, the ECI sample will 

be gradually replaced by the core NCS units. 

When fully implemented the NCS sample will 

consist of five panels. Each panel will contain one-fifth 

of cross-area and cross-industry sample, i.e., it will be a 

representative sub-sample of the total sample with onethird of the sample members in each panel designated 

for quarterly collection for the ECI. Each panel will be 

in the survey for 5 years and then it will replaced. 

Under this scheme the entire sample is completely 

replaced after 5 years. Since there will not be sufficient 

resources to completely replace the ECI at one time, we 

will need to develop a process to blend the current ECI 

sample with the NCS sample to derive the index. Over 

time the current 23 benefit package studied will be 

modernized and here too a method to blend the series 

together will have to be developed. 

The primary objective of the replacement 

scheme is to reduce reporting burden of individual 

establishments by rotating units out of the sample, and 

of the universe it is designed to cover. 

For each panel an additional questionnaire is 

proposed to probe establishments that pass birth 

screening criteria as applied to the B LS frame to ensure 

these units are economic birth establishments to the 

universe. This will enable BLS to weight all five panels 

to properly reflect the effect of births in our estimates. 

4.3. Estimation Procedure 

The survey will produce level estimates, such 

as average wage of professional workers at the entry 

level along with quartiles, first and last decile, and 

indexes. The estimation procedures for these two type 

of estimates are described below. Index procedure 

includes also seasonal adjustment. Note that both of 

these procedures involve weighting the data from each 

employee in the sampled occupation by the final weight, 

i.e., the inverse of the probability of the employee being 

in the sample. 

The final weights for each occupational quote 

include the initial sample weights, adjustments to the 

initial sample weights, and three types of adjustments 

for non-response. The initial sample weight for an 

occupation in a particular establishment and PSU 

reflects the probability of selecting a particular PSU, 

probability of selecting a particular establishment within 

the PSU, and probability of selecting a particular 

occupation within the selected establishment and PSU. 

Adjustments to the initial weights are done when data 

are collected for a more or less than the sampled 

establishment. This may be due to establishments 

mergers, or splits, or inability of respondents to provide 

requested data for the sampled establishment. The three 

types of adjustments for non-response include 

adjustment for establishment refusal to participate in the 

survey, adjustment for respondent refusal to provide 

data for a particular occupation, and adjustment for 

respondent unwillingness to provide occupation level 

information. 

The estimation procedure for a level estimate, 

such as mean weekly earnings, involves multiplying 

data for each employee in the sample occupation by the 

final weight and dividing by the sum of the final 

weights. To generate the proportion or percentage that 

is desired, such as percent of employees participating in 

a particular benefit, appropriate employee counts of 

plan participants and establishment employment totals 

are used in the estimation procedure. 

Level estimates are raked (benchmarked) 

against the Bureau's employment series to account for 

growth in the industry since the development of the 

frame. There is a 24 to 30 month delay from the 

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produced from that frame. 

Sample allocations for the PSU's except the 34 

self-representing PSU's which are published areas are 

in proportion to the total stratum size that the selected 

PSU represents. This means that the small PSU's (as 

measured by total nonagricultural employment in the 

PSU) have a larger proportion of the universe in the 

sample. Unfortunately this implies that the larger areas 

which are economically more interesting have smaller 

proportions of their universe in the sample. The Bureau 

is beginning to embark on a research effort to design a 

small area estimation program to model estimates of 

these larger areas that do not have adequate sample for 

a designed based estimate. 

The index computation involves the standard 

formula for Laspeyres fixed-employment-weighted 

index, modified by the special statistical conditions that 

apply to the NCS. An index for a benefit derived from 

the NCS data is simply a weighted average of the 

cumulative average benefit costs changes within each 

estimation cell, with base-period benefit bills as the 

fixed weights for each cell. 

The estimation cell is defined on the basis of 

private or public sector/industry/major occupation 

group. For the private sector, 72 Pseudo-Standard 

Industrial Classification (PSIC) industries have been 

identified, most at the 2 digit SIC level. For the public 

sector, separate cells are identified for State and for 

local governments. Industries as broad as "public 

administration" and as narrow as "colleges and 

universities" are treated as separate estimation cell 

industries. For example, one estimation cell is 

identified as State government/public 

administration/clerical workers. 

The index computations for the occupation and 

industry groups follow the same procedures as those for 

all overall indexes except for the summation. The bills 

for the occupational groups are summed across 

industries for each group; the bills for the industry 

divisions are summed across occupational groups for 

each industry division. When NCS is fully 

implemented, indices are planned for the nine Economic 

Census Divisions and the larger CMSA's and MSA's. 

4.4. Non-response 

There are three types of non-response: 

permanent non-response, temporary non-response, and 

partial non-response. The non-responses can occur at 

the establishment level, occupation level, or benefit 

item level. The assumption for all non-response 

adjustments is that non-respondents are similar to 

respondents. 

occupation non-response, weights of responding units 

or occupations which are deemed to be similar are 

adjusted appropriately. Establishments are considered 

similar if they are in the same 2-digit SIC by broad size 

class groupings. For occupations, each schedule must 

have a correct major occupational grouping (MOG) 

code or census occupation for the schedule to be 

considered complete. Missing wage data for 

occupations is reweighted within occupational level if 

known, otherwise within the same occupation code or 

MOG. If there are no sufficient data at this level, then a 

broader level of aggregation is considered for 

establishment and occupational non-response with 

suppression of detail below the non-response 

aggregation level. 

For temporary and partial non-response, a 

replacement value is imputed based on information 

provided by establishments with similar characteristics. 

Imputation for benefit non-response is done separately 

for each benefit both in the base period and quarterly. 

If it is unknown whether or not a benefit practice exists 

for a non-respondent, the average cost is imputed based 

on data from all responding establishments (including 

those with no plans and plans with zero costs). 

There is a continuous effort to maximize 

response rate. We are developing and providing 

respondents with new and useful products. We are 

looking into providing alternative methods for 

respondents to report their data. 

4.5. Measuring the Quality of the Estimates 

The two basic sources of error in the estimates 

are bias and variance. Bias is the amount by which 

estimates systematically do not reflect the 

characteristics of the entire population. Many of the 

components of bias can be categorized as either 

response or non-response bias. 

Response bias occurs when respondents' 

answers systematically differ from the correct values. 

Response bias can be measured by using a re-interview 

survey. Properly designed and implemented, this can 

also indicate where improvements are needed and how 

to make these improvements. Another aim is quick 

feedback to the field economist to avoid systemic 

problems from continuing to use incorrect procedures. 

This program is designed as a process improvement 

effort rather than data scrubbing. 

Each field economist is also subject to 

Targeted Data Analysis and Regional Office 

Observational Visits. In these efforts a senior field 

economist reviews the schedule or observes the 

interview respectively. After the review, the schedule is 

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techniques immediately. 

Non-response bias is the amount by which 

estimates obtained do not properly reflect the 

characteristics of non-respondents. This bias occurs 

when non-responding establishments have, for example, 

benefits movements which are different from those of 

responding establishments. Non-response bias is being 

addressed by continuous efforts to reduce the amount of 

non-response. 

Another source of error in the estimates is 

sampling variance. Industries and occupations are 

identified that contribute substantial portions of the 

sampling variance. Allocating more sample to these 

areas would improve the efficiency of the sample. 

These variances will be considered in allocation and 

selection of the future replacement samples. 

References 

Black, S. R., Ermst, L. R., and Tehonica, J. (1997a), 

"Sample Design and Estimation for the National 

Compensation Survey," in Proceedings of the Survey 

Association, to appear. 

Black, S. R., Ermst, L. R., and Tehonica, J. (1997b), 

"Statistical Problems in BLS Compensation Surveys 

when the Collected Establishment Data Differs from the 

Assigned Data," in Proceedings of the Survey Research 

Methods Section, American Statistical Association, to 

appear. 

Ernst, L. R. and Paben, S. (1997),Adjusting 

Establishment Selection Probabilities and Number of 

Occupational Selections to Reduce Variance in B LS 

Compensation Surveys, in Proceedings of the Survey 

Research Methods Section, American Statistical 

Association, to appear. 

BLS Handbook of Methods, U.S. Department of Labor, 

Bureau of Labor Statistics, 

April 1997, Bulletin 2490. 

Any opinions expressed in this paper are those of the 

author and do not constitute policy of the Bureau of 

Labor Statistics. 

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