Compensation and Working Conditions Fall 1998 29

National Compensation Survey

Human Capital Variables

JOHN E. BUCKLEY

The Bureau of Labor Statistics’ (BLS) National Compensation Survey (NCS) program conducted pilot studies in

the mid-1990s in six metropolitan areas as part of a major

shift in how it collects occupational pay data.1 In four of

the six areas—Allentown, Pennsylvania; New Orleans,

Louisiana; Raleigh, North Carolina; and Rochester, New

York—the Bureau collected and tabulated additional information on three types of human capital variables (HCV’s):

Length of service, educational attainment, and job certification. The goals of the HCV tests were two-fold: Determine the extent to which HCV’s influence pay levels, and

determine the availability and accessibility of HCV data

from employer records.

Results of the HCV tests were less than satisfactory. For

most items and areas, the data obtained did not meet BLS

normal publication standards. For example, data on educational attainment were unavailable for about 70 percent

of full-time employees in each area. (See table 1.) Data

availability was better for length of service and job certification, but was still unsatisfactory. Due to the low response

rates, no attempt was made to explore the relationship

among these factors and others such as industry mix, unionization, establishment size, or incentive pay.

Broad results of the HCV tests are presented here for the

record. Because the nonresponse rates exceed normal BLS

publication standards, users should interpret the results

cautiously. It should be noted that reliable information on

HCV has long been available from household surveys.

Length of service

Length of service in an occupation or establishment has

long been observed as a pay factor, especially for workers

not covered by labor-management agreements. (For workers covered by agreements, occupational pay is often a single

rate regardless of length of service.) For this test, length of

service was defined as the amount of time worked with a

company or governmental organization regardless of

changes in occupation. If an employee left the organization and returned, the time before and after the absence

was combined.

The answers sought in this portion of the HCV tests involved the magnitude of the pay differentials associated with

length of service and how length of service affected the pay

of different occupational groups.

The average pay of full-time white-collar workers in New

Orleans with 10-or-more-years of service was about double

that of workers with under 1-year of service. (CompariCollecting Data

on Human Capital

Variables

A pilot test of the feasibility of collecting data on

length of service, educational attainment, and

job certification from employers participating

in the National Compensation Survey in four

metropolitan areas was disappointing.

John E. Buckley is an economist in the Division of Compensation Data Analysis and Planning, Bureau of Labor Statistics.

Telephone: (202) 606-6204

E-mail: Buckley_J@bls.gov

TABLE 1. Percent of full-time workers for which data on selected

human capital variables were unavailable, selected areas, 1996

Length of service .. 40 38 19 33

Educational

 attainment ........... 71 73 66 71

Job certification .... 39 21 18 34

Rochester Human capital

variable

AllentownBethlehemEaston

New

Orleans

RaleighDurhamChapel Hill
30 Compensation and Working Conditions Fall 1998

sons are based on all white-collar workers combined, reflecting the mix of different jobs and pay levels within the

white-collar group.) White-collar workers in the 10-ormore-years category in Allentown and New Orleans had a

wider relative pay advantage over their short-term (under

1-year of service) counterparts than did blue-collar and service workers. In Raleigh and Rochester, service workers

with 10 or more years of service had a relative pay advantage over white- and blue-collar workers with comparable

longevity. (See table 2.)

Although pay generally increased with each arbitrarily

selected time segment, it did not increase in a straight line.

In Allentown, for example, white-collar workers with 3-

but less than 5-years of service had higher average pay than

did workers with 5- but less than 10-years of service. These

anomalies may reflect sampling and nonsampling errors

such as the respondents’ inability to provide correct information or mistakes in recording or coding the data.

Relative pay levels reflect a mix of different jobs within

the three occupational groups examined (white collar, blue

collar, and service). The white-collar group, for example,

includes: Professional specialty; technical; executive, administrative, and managerial; sales; and administrative support (including clerical) occupations. The pay advantage

of long-term workers over their short-term counterparts

differed considerably among individual occupations. In New

Orleans, the pay advantage for white-collar workers with

10-or-more-years of service (over those with less than 1-

year of service) ranged from about 60 percent for professional specialty occupations to about 125 percent for technical occupations. The overall white-collar advantage in

New Orleans was 101 percent (relative pay level of 201).

Educational attainment

The pay spread as measured by educational attainment varied considerably among the four test areas. In the Allentown area, workers with doctoral degrees earned about three

and one-half times the average rate for Allentown workers

with less than a high school degree. This difference was

the smallest among the four areas. In Rochester, the area

with the largest spread, the difference was about five to one.

(See table 3.) When comparisons are made using workers

with high school degrees as the base, Rochester employers

generally paid a higher premium for educational attainment

than employers in the other three areas, but by a lesser margin.

Except for New Orleans, employees in the other three

areas holding professional degrees—law, medical, or dental— had lower average pay than did employees with master degrees in such disciplines as business, education, engineering, and computer sciences. Differences, however,

were minor in New Orleans and Rochester. In Allentown,

the average wage of workers with master degrees was about

43 percent higher than that of workers with professional

degrees; in Raleigh, the average was about 31 percent

higher.

Educational attainment did not necessarily equate with

the educational requirements for the job. Even when the

degree was unrelated to the job, information was captured

on the highest degree obtained.

Job certification

For this study, job certification is defined as any licensing

or test completion requirement associated with an occupation that is administered outside the company and is a significant factor in the hiring, retention, or earnings for that

occupation. Information was captured on the existence,

but not on the type, of certification. Examples of certification include accountancy and bar examinations; medical

TABLE 2. Relative pay levels of full-time workers for selected lengths of service, selected areas, 1996

White collar ................... 108 146 133 181 123 141 166 201 105 112 108 142 103 117 128 163

Blue collar ..................... 106 117 126 146 112 117 126 159 110 106 114 122 103 119 138 170

Service ......................... 117 144 150 165 130 120 136 164 121 117 122 167 113 138 183 225

Relative pay levels

Allentown-BethlehemEaston New Orleans Raleigh-DurhamChapel Hill Rochester

Years of service

1

to

3

3

to

5

5

to

10

10

or

more

1

to

3

3

to

5

5

to

10

10

or

more

1

to

3

3

to

5

5

to

10

10

or

more

1

to

3

3

to

5

5

to

10

10

or

more

 NOTE: Relative pay levels are expressed as a percent of pay for workers with under 1 year of service (under 1 year = 100).

TABLE 3. Relative pay levels of full-time workers by educational

attainment, selected areas, 1996

High school .......... 132 125 116 136

Associate ............. 150 140 166 138

Bachelor ............... 218 234 192 254

Master .................. 311 264 273 366

Professional.......... 217 277 209 361

Doctoral ................ 352 415 423 517

NOTE: Relative pay levels are expressed as a percent of pay for

workers with less than a high school degree (less than a high

school degree = 100).

All occupational groups combined

Educational

attainment (degree)

AllentownBethlehemEaston

New

Orleans

RaleighDurhamChapel Hill

Rochester

Occupational group
 Compensation and Working Conditions Fall 1998 31

Human Capital Variables

board certification; and real estate, stationary engineers’,

and commercial drivers’ licenses.

Certification was an important pay factor among the three

occupational groups studied, especially in Rochester where

certified white-collar employees’ earnings averaged 181

percent of non-certified white-collar employees’ earnings.

Among the three occupational groups, the certification/nonTABLE 4. Relative pay levels of full-time workers meeting

certification requirements, selected areas, 1996

White collar .......... 158 141 123 181

Blue collar ............ 116 127 115 122

Service ................. 123 107 168 134

NOTE: Relative pay levels are expressed as a percent of pay for

workers without certification in the same occupational group (no

certification = 100).

AllentownBethlehemEastonRaleighDurhamChapel Hill

New

Orleans Occupational Rochester

group

certification pay gap was widest for white-collar workers,

except in Raleigh where the gap for service employees was

considerably wider than for the two other groups. (See table

4.) In three of the four areas (New Orleans being the exception), the pay gap was narrowest for blue-collar workers.

Summary

The unwillingness or inability of NCS respondents to provide sufficient details on human capital variables calls into

question the feasibility of seeking to measure such variables using only data collected from the employer without

interviewing an employee sample.2 Beyond confirming

broad results of national household surveys3 that earnings

increase with higher educational attainment, these tests of

establishments in four metropolitan areas produced little

useful data.4

1

 The establishments surveyed in these areas were selected from among

all private and State and local government establishments with at least one

employee. For more information on survey changes, see Kenneth Hoffmann,

“New Approach to Measuring Occupational Wages,” and Beth Levin Crimmel,

“COMP2000: Designing a New Wage Survey,” Compensation and Working Conditions, December 1996, pp. 4-8 and 9-11, respectively. The

COMP2000 survey title was later changed to the National Compensation

Survey. 2

 See Harley Frazis, Maury Gittleman, Michael Horrigan, and Mary

Joyce, “Results from the 1995 Survey of Employer-Provided Training,”

Monthly Labor Review, June 1998, pp. 3-13. In this study, in addition

to collecting data from establishments, BLS field economists interviewed

randomly-selected employees in the establishments that responded to the

survey. 3

 See Report on the American Workforce, U. S. Department of Labor,

1997, p. 35. Chapter 1 of an earlier (1995) report on the American Workforce

discusses the relationship between earnings and job tenure, citing studies that

show a positive relationship between tenure and wages. However, other researchers maintain that the higher earnings of long-tenured workers is not

because of greater seniority. 4

 For results of 1989-1990 tests of human capital variables, see Elizabeth Dietz and John Steinmeyer, "Testing Joint Collection of Wage and Demographic Data," Compensation and Working Conditions, October 1994.

pp. 7-11.