Comparing Current and Former Industry and Occupation ECEC Series
by Harriet G. Weinstein and Mark A. Loewenstein

Originally Posted: August 25, 2004

The BLS data series Employer Costs for Employee Compensation (ECEC), which measures employers' costs per hour worked for total compensation, switched to new industry and occupation classification systems with the release of the March 2004 data.¹ The 2002 North American Industry Classification System (NAICS) is now used to classify industries, replacing the 1987 Standard Industrial Classification (SIC) system.² The 2000 Standard Occupational Classification (SOC) system is used to classify occupations, replacing the Occupational Classification System (OCS).³ SIC- and OCS-based estimates will no longer be produced for the ECEC.

The United States adopted NAICS and SOC as the standard industrial and occupational classification systems to be used by all Federal statistical agencies to provide a means of comparing data across agencies.⁴ The U.S. Office of Management and Budget (OMB) has mandated that all statistical agencies switch to NAICS and SOC.⁵

The conversion to NAICS reflects changes in the economy since the last SIC revision, in 1987. NAICS focuses on how products and services are produced, while the SIC system focuses on what is produced. Under NAICS, establishments using similar raw material inputs, similar capital equipment, and similar labor are classified in the same industry.

The SOC is designed to cover all occupations in which work is performed for pay or profit, and reflects the current occupational structure in the United States. It contains many new occupations, especially in the service and information fields.

The ECEC was the first product of the National Compensation Survey (NCS)⁶ to be published using NAICS and SOC. The ECEC measures employers' costs per hour worked for total compensation, as well as costs as a percent of total compensation. Total compensation consists of wages and salaries and the cost of employee benefits.

The ECEC switched to NAICS in 2004 because it uses employment estimates from the Current Employment Statistics (CES) survey for its industry weights; the CES had already converted to NAICS, and CES employment estimates are no longer available under the SIC classifications. Current plans call for the NCS products that are not dependent on the CES to convert to NAICS and SOC during the next two years.

Data Comparability

The higher-level occupational and industrial categories, such as civilian workers and private industry workers, are comparable under the new and old classification systems. However, many detailed occupation and industry categories differ in the new systems and thus may not be comparable, even when they have the same title as in the old system. Consequently, caution should be used when comparing industry and occupation estimates across surveys or over time.⁷

From the NCS perspective, a series in the ECEC is defined as comparable under the new and old classification systems if it meets three criteria.⁸ The first criterion is based on the overlap of employment between the two series. A NAICS series is deemed comparable with the corresponding SIC series only if at least 90 percent of the employment in the NAICS classification is also in the SIC category, and at least 90 percent of the employment in the SIC classification is also in the NAICS category. For example, the construction industry meets the first criterion because 97.2 percent of the employees in the SIC-based construction industry are in the NAICS-based construction industry, and 98.9 percent of those in NAICS-based construction are also in SIC-based construction. In contrast, retail trade does not meet this criterion: Although 94.4 percent of the employees in NAICS-based retail trade are also in SIC-based retail trade, only 61.4 percent of those in the SIC-based retail trade are also in NAICS-based retail trade. Similarly, SOC and OCS series are deemed comparable only if there is at least a 90-percent overlap of employment in each direction.

Table 1 shows the employment overlaps in the NAICS- and SIC-based industry series using data from the Current Employment Statistics survey. Table 2 provides a similar summary for the SOC- and OCS-based occupation series utilizing the data that were used to produce the Employment Cost Index (ECI).

The second comparability criterion is based on a comparison of the average wage of the old and new series. To be deemed comparable, mean wages in the new series must be close to mean wages in the old series. The third criterion is similar to the second, but it is based on a comparison of average rates of total compensation (wages plus benefits). Table 3 presents the ratios of mean wages and mean compensation for the NAICS- and SIC-based industries that met the first criterion of comparability. Table 4 presents the ratios of mean wages and mean compensation for the SOC- and OCS-based occupations. Series are viewed as comparable if the ratios are close to 1.⁹ All industries and occupations that meet the first criterion of a 90-percent employment overlap also meet the wage and compensation criteria. Tables 5 and 6 identify series that meet the three criteria for comparability, as well as those that are new or fail to meet the criteria.

New Series

The March 2004 ECEC introduced several series (the information industry, for example) that did not exist under the former classification systems (SIC and OCS). These industrial and occupational categories were formed by recombining pieces of the previous classification systems. In addition, the following NAICS-based industries meet the three comparability criteria described earlier, but they have not been published previously (NAICS codes in parentheses):

• Finance and insurance (52)
• Credit intermediation and related activities (522)
• Insurance carriers and related activities (524)
• Leisure and hospitality (71, 72)
• Accommodation and food services (72)

Occupational series are presented by the aggregate groups specified in the 2000 Standard Occupational Classification (SOC) system. The white-collar and blue-collar series that appeared in previous releases were dropped. The white-collar group consisted of occupations with disparate wage and compensation rates. For example, as shown in the March 2004 ECEC release, the hourly total compensation rate for civilian workers in management, professional and related occupations was twice that of those in sales and office occupations, ($40.64 and $18.81, respectively).

The ECEC conversion to the SOC system resulted in the introduction of a new series, "primary, secondary, and special education school teachers."¹⁰ BLS will continue to publish data for the broader group "teachers," which includes the new category, as well as "postsecondary teachers" and "other teachers and instructors," (the latter group includes "adult literacy, remedial education and GED teachers and instructors").¹¹

Harriet G. Weinstein
Senior Labor Economist, Office of Compensation Levels and Trends, Bureau of Labor Statistics.
Telephone: (202) 691-6232; E-mail: Weinstein.Harriet@bls.gov

Mark A. Loewenstein
Senior Research Economist, Compensation Research and Program Development Group, Bureau of Labor Statistics.
Telephone: (202) 691-7385; E-mail: Loewenstein.Mark@bls.gov

Notes

Acknowledgment: The authors would like to thank John L. Bishow for compiling data used in this article.

1 Employer Costs for Employee Compensation--March 2004, USDL 04-1105 (U.S. Department of Labor, June 24, 2004); available on the Internet at http://www.bls.gov/ncs/ect/sp/ecnr0050.pdf

2 For more information on NAICS, including background and definitions, see North American Industry Classification System: United States, 2002; or visit the NAICS page of the BLS website at http://www.bls.gov/bls/naics.htm. For more information on the SIC system, see Standard Industrial Classification Manual: 1987 (Office of Management and Budget, 1987).

3 For more information on the 2000 SOC system, see Standard Occupational Classification Manual: 2000 (Office of Management and Budget, October 2000); or visit the SOC page of the BLS website at http://www.bls.gov/soc/. For more information on the OCS, see Occupational Classification System Manual (OCSM), on the Internet at http://www.bls.gov/ncs/ocs/ocsm/commain.htm.

4 In the case of NAICS, the new classification system also was developed to provide a means of comparing statistical data from the United States, Canada, and Mexico.

5 For background information on the conversion to NAICS, see North American Industry Classification System: United States, 2002; or visit the NAICS page of the BLS website at http://www.bls.gov/bls/naics.htm. For background information on the conversion to SOC, see Standard Occupational Classification Manual: 2000; or visit the SOC page of the BLS website at http://www.bls.gov/soc/.

6 In the National Compensation Survey (NCS), from which the ECEC is derived, the data cover all civilian workers, defined by NCS as those employed in private industry and in State and local government. Other NCS products provide comprehensive measures of occupational earnings, compensation cost trends, benefit incidence, and detailed benefit provisions. Detailed occupational earnings are available for localities, broad geographic regions, and the Nation. The index component of the NCS, the Employment Cost Index (ECI), measures changes in labor costs, holding employment composition fixed.

7 In addition, it should be noted that users who need percent changes in employer costs with the composition of employment held constant should use the Employment Cost Index (ECI). The ECEC, in contrast to the ECI, reflects changing employment structure.

8 Industries and occupations that meet the NCS comparability criteria are not necessarily deemed comparable for other BLS statistical series, which have their own comparability criteria.

9 A more technical discussion that presents 95-percent confidence intervals for the ratio of mean SOC- and OCS-based wages and that of mean NAICS- and SIC-based wages can be found in "Wage and Compensation Comparisons across SOC/OCSM Occupational Categories and to NAICS/SIC Industry Categories," available from the authors upon request.

10 See Employer Costs for Employee Compensation--March 2004, p. 7, table 2. The new category includes "preschool and kindergarten teachers," "elementary and middle school teachers," "secondary school teachers," and "special education teachers."

11 Under the former (OCS) system, the group "teachers" included the following subgroups: "teachers, college and university" (now "postsecondary"); "prekindergarten and kindergarten teachers"; "elementary school teachers"; "secondary school teachers"; "teachers, special education"; "teachers, not elsewhere classified"; "substitute teachers"; and "vocational and educational counselors." Under SOC, the group "teachers" includes only "postsecondary teachers"; "primary, secondary, and special education school teachers"; and "other teachers and instructors."