Chapter 8.
National Compensation Measures

Description of the Survey

Major exclusions from the survey are the self-employed, individuals who set their own pay (for example, proprietors, owners, major stockholders, and partners in unincorporated firms), volunteers, unpaid workers, family members being paid token wages, individuals receiving long-term disability compensation, and U.S. citizens working overseas.

The following section presents a description of the sample design as well as general information on how each of the NCS measures is computed.

Sample design

Selecting areas. The NCS uses Office of Management and Budget (OMB) area definitions in selecting areas. OMB makes major revisions to the classification of areas after each decennial Census. In June 2003, OMB issued area definitions based on the 2000 census. These definitions were updated in December 2003. OMB defined 361 Metropolitan Statistical Areas and 573 Micropolitan Statistical Areas in the Nation.¹ OMB also defined a list of Combined Statistical Areas (CSAs) such that, adjacent Metropolitan and Micropolitan Statistical Areas, in various combinations, may be combined to form a CSA, if specified criteria are met. There are 1,359 counties in the Nation that are not included in either type of statistical area. Any county not included in a Metropolitan or Micropolitan Statistical Area is referred to as an Outside Core Based Statistical Area (CBSA).² For additional information about the process used to select areas, see Kenneth J. Hoffmann, “New Sample Areas Selected for BLS National Compensation Survey Program,” Compensation and Working Conditions, spring 1997, available on the Internet at www.bls.gov/opub/cwc/archive/spring1997art4.pdf.

In 2004, a new area sample was selected for the NCS that contains 152 areas. Initially, the certainty areas were identified. Certainty areas are any individual areas with employment greater than 80 percent of the sampling interval. The sampling interval is the total employment across all areas divided by the total number of areas to be selected. Data from the sample of areas can be aggregated to represent geographic divisions and the United States as a whole. Larger areas (the certainty areas) represent only themselves in these broader estimates, but smaller areas represent other areas that are not part of the sample in addition to themselves. After the certainty areas were identified, the remaining sample areas were allocated approximately proportionally to total employment across the Metropolitan Areas, Micropolitan Areas, and Outside CBSA county clusters by nine census divisions. This resulted in a sample of 57 certainty areas, 60 noncertainty Metropolitan Areas, 22 noncertainty Micropolitan Areas, and 13 noncertainty Outside CBSA county clusters.

In the past, the NCS considered any county that was outside OMB-defined areas as a single sampling unit. However, a county with particularly small employment can cause weighting, variance, and publication problems if it is selected for the NCS sample. Instead of continuing to treat these counties as single sampling units, most Outside CBSA counties are clustered to create larger sampling units. These larger sampling units help to prevent some of the problems associated with small survey areas. With some exceptions, contiguous counties within the same census division were combined to form clusters with a total employment of at least 10,000 workers and with heterogeneous wage levels. The employment minimum of 10,000 was chosen after research was conducted to measure the impact of clustering on the component of variance arising from the sampling of areas.³ Clusters with heterogeneous wage levels were formed because clusters with wide wage distributions lead to lower between-area variances. The result is a list of 436 county clusters formed from an original list of 1,359 Outside CBSA counties

For more information on the new area sample, see Jason Tehonica, “New Area Sample Selected for the National Compensation Survey,” Compensation and Working Conditions Online, April 25, 2005, available on the Internet at www.bls.gov/opub/cwc/cm20050318ar01p1.htm.

Selecting establishments. Within each selected area, BLS selects a sample of business establishments and State and local government operations to represent the economic activity in that area. The individual business establishments and government operations to be studied are selected using a probability-proportionate-to-size (PPS) technique. That is, larger establishments, in terms of total nonagricultural employment, have a greater chance of selection than smaller establishments.

The NCS uses the 2002 North American Industry Classification System (NAICS) for defining industries. All new establishment samples are selected using NAICS as one of the stratification variables. The NCS began the transition from establishment samples based on the Standard Industrial Classification (SIC) to NAICS-based establishment samples in 2001. This transition will be completed in 2008. The private industry establishment sample is divided into five panels, with the sample being fully replaced over approximately a 5-year period. Each panel is a cross-section of the sampled industries and geographic areas. A new replacement panel is introduced every year, with the other four panels being updated.

The State and local government establishment sample is replaced approximately once every 10 years.

The selection and identification of surveyed occupations within an establishment require the following four steps:

1. Selecting jobs to survey within an establishment
2. Identifying job characteristics
3. Classifying each job to a standard occupation
4. Evaluating work level of job

Selecting jobs. Field economists use the PPS technique to select jobs in the surveyed establishment. A complete list of employees, or a list of jobs with employment totals, is used and the number of jobs selected is based on the total employment of the establishment. The number of jobs selected varies by the size of the establishment and the industry it is in. Random sampling gives those occupations with greater employment a higher probability of selection.

Identifying job duties and responsibilities. Field economist identify the duties and responsibilities of the selected jobs. The analysis is not based on job duties.

Classifying jobs. The selected jobs are classified into occupations based on job duties and responsibilities, according to an occupational classification system. (The selected occupations also are referred to as sampled occupations or quotes.) The NCS uses the 2000 Standard Occupational Classification (SOC) system, replacing the Census Bureau’s Occupational Classification System (OCS). In addition, for each job, NCS records the union or nonunion status, the full-time or part-time status, and the time-based or incentive-pay status.⁴

Evaluating work level of jobs. Field economists rate the level of work for the selected job by evaluating its duties and responsibilities. This process is known as point-factor leveling because it categorizes certain aspects of a job to specific levels of work with assigned point values. The NCS system uses four distinct factors: Knowledge, job controls and complexity, personal contacts, and physical environment. Each factor consists of several levels, each with an associated description and assigned points. The knowledge factor is described separately for broad categories of occupations and contains relevant examples as well as short definitions for the point levels. The remaining three factors use identical descriptions for all occupational categories.

Field economists choose the description within each factor that best matches the surveyed job. The full performance level of the job is used as the basis for evaluation, not the hiring criteria nor the qualifications of the current incumbents. The point levels describe thresholds of distinct levels of work, and only the stated point values are used. The job is assigned a point level when it fulfills the full requirement of that level. The points for each factor are then totaled to determine the overall level of work for the job.

There are 15 work-level classifications. The work levels reflect a hierarchy of the primary duties and responsibilities that can be used to compare dissimilar occupations. Work levels vary by occupation. Lower levels are found in occupations that require limited training, such as equipment cleaners, cashiers, and personal care workers. Higher levels are found in occupational groups that require extensive knowledge and independence, such as operations managers, engineers, and lawyers.

NCS also records whether an occupation has supervisory responsibilities, including the level of that responsibility. Most supervisory jobs are evaluated based on the levels of the four factors described above. A modified approach is used for professional and administrative supervisors when they direct professional work and are paid primarily for their supervisory and managerial skills: such supervisory jobs are leveled based on the duties and responsibilities of the highest reporting position. Additional information on this approach, as well as detailed information on the point-factor levels, is provided in the NCS publication “Guide for Evaluating Your Firm’s Jobs and Pay,” www.bls.gov/ncs/ocs/sp/ncbr0004.pdf.

Data collection

The collection of data from survey respondents requires detailed procedures. Field economists collect the data, while working out of regional offices and visiting the establishments to be surveyed. Other contact methods, such as mail and telephone, are used to follow up and update data. Information on detailed benefit provisions is obtained through an analysis of plan booklets.

Footnotes
¹ The criteria for defining Metropolitan, Micropolitan, and Combined Statistical Areas are published in the Federal Register (65 FR 82228–82238, December 27, 2000), on the Internet at www.census.gov/population/www/estimates/00-32997.pdf.

² The criteria for defining Core Based Statistical Areas are published in the Federal Register (65 FR 82228–82238, December 27, 2000), on the Internet at www.census.gov/population/www/estimates/00-32997.pdf.

³ For more information, see Izsak, Y.; Ernst, L. R.; Paben, S. P.; Ponikowski, C. H.; and Tehonica, J., “Redesign of the National Compensation Survey,” 2003 Proceedings of the American Statistical Association, Section on Survey Research Methods [CD-ROM], Alexandria, VA: American Statistical Association, 2003.

⁴ Union workers are those whose wages are determined through collective bargaining. Employees are classified as working either full time or part time based on the definitions used by each establishment. Time workers are those whose wages are based solely on an hourly rate or salary. Incentive workers are those whose wages are at least partially based on productivity payments, such as piece rates, commissions, and production bonuses.

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