Although these measures relate output to hours of employees or all persons engaged in an industry, they do not measure the specific contribution of labor, capital, or any other factor of production. The annual changes in an industry's productivity are based on sample data, which are likely to differ from data generated by a census of establishments in the industry. The unit labor cost series in this release describe the cost of labor input required to produce one unit of output. Unit labor costs are calculated as the ratio of current dollar labor compensation to constant dollar output. The indexes of unit labor costs for each industry are computed by dividing an index of current dollar compensation by an index of constant dollar output.
Compensation is a measure of the cost to the employer of securing the services of labor.
It is defined as payroll plus supplemental payments. Payroll includes salaries, wages, commissions, dismissal pay, bonuses, vacation and sick leave pay, and compensation in kind. Supplemental payments are divided into legally required expenditures and payments for voluntary programs. The legally required expenditures include employers contributions to Social Security, unemployment insurance taxes, and workers compensation. Payments for voluntary programs include all programs not specifically required by legislation, such as the employer portion of private health insurance and pension plans.