TECHNICAL NOTE
The Employment Cost Index (ECI) is a measure of the change in the cost of labor, free from the influence of
employment shifts among occupations and industries. The compensation series includes changes in wages and salaries
and employer costs for employee benefits. The wage and salary series and the benefit cost series provide the changes
for the two components of compensation.
Wages and salaries are defined as the hourly straight-time wage rate or, for workers not paid on an hourly basis,
straight-time earnings divided by the corresponding hours. Straight-time wage and salary rates are total earnings before
payroll deductions, excluding premium pay for overtime and for work on weekends and holidays, shift differentials, and
nonproduction bonuses. Production bonuses, incentive earnings, commission payments, and cost-of-living adjustments are
included in straight-time wage and salary rates.
Benefits covered by the ECI are: Paid leave--vacations, holidays, sick leave, and personal leave; supplemental
pay--premium pay for work in addition to the regular work schedule (such as overtime, weekends, and holidays), shift
differentials, and nonproduction bonuses (such as year-end, referral, and attendance bonuses); insurance benefits--life,
health, short-term disability, and long-term disability; retirement and savings benefits--defined benefit and defined
contribution plans; and legally required benefits--Social Security, Medicare, federal and state unemployment insurance,
and workers’ compensation.
The ECI provides data for the civilian economy, which includes the total private nonfarm economy excluding private
households, and the public sector excluding the federal government. The private industry series and the state and local
government series provide data for the two sectors separately.
Sample establishments are classified by industry categories based on the 2007 North American Industry Classification
System (NAICS). All industries are classified into two sectors--goods-producing and service-providing. Within a sample
establishment, specific job categories are selected and classified into about 800 occupational classifications according
to the 2000 Standard Occupational Classification (SOC) system. Individual occupations are combined to represent one of
ten intermediate aggregations, such as professional and related occupations, or one of five higher-level aggregations
such as management, professional, and related occupations. Both the NAICS and the SOC classification systems are defined
by the U.S. Office of Management and Budget (OMB). For more detailed information on NAICS and SOC, including background
definitions, see the BLS Web sites: www.bls.gov/bls/naics.htm and www.bls.gov/soc/home.htm.
To be included in the ECI, employees in occupations must receive cash payments from the establishment for services
performed and the establishment must pay the employer’s portion of Medicare taxes on that individual’s wages. 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.
Data for the March 2009 reference period were collected from a probability sample of approximately 63,800
occupational observations selected from a sample of about 13,400 establishments in private industry and approximately
11,800 occupations from a sample of about 1,900 establishments in state and local governments. The state and local
government sample, which is replaced less frequently than the private industry sample, was replaced in its entirety
in September 2007. The private industry sample is rotated over approximately 5 years, which makes the sample more
representative of the economy and reduces respondent burden. Data are collected for the pay period including the
12th day of the survey months of March, June, September, and December. The sample is replaced on a cross-area,
cross-industry basis.
Fixed employment weights are used each reference period to calculate the most aggregate series--civilian, private,
and state and local government. These fixed weights are also used to derive all of the industry and occupational
series indexes. Beginning with March 2006 estimates, 2002 fixed employment weights from the Bureau’s Occupational
Employment Statistics survey were introduced.
For the series based on bargaining status, census region and division, and for series excluding incentive paid
occupations, fixed employment data are not available. The employment weights are reallocated within these series for each
reference period based on the current ECI sample. The nursing care facilities indexes in private industry are estimated
using fixed-employment weights derived from staffing patterns estimated from the four-digit industry NAICS group 6231,
nursing care facilities, a sub-industry of the larger industry group, nursing and residential care facilities (NAICS 623).
The indexes for these series, consequently, are not strictly comparable with those for the aggregate, occupational, and
industry series. A fuller explanation of the calculation of index numbers appears in chapter 8 of the BLS Handbook of
Methods, at the web site www.bls.gov/opub/hom/pdf/homch8.pdf.
Beginning with the release of the March 2006 data, indexes were rebased to December 2005=100 from June 1989=100.
The percentage changes shown in the current- and constant-dollar historical tables were calculated from the rebased
indexes. Thus, changes may differ from those originally published because of rounding.
The ECI state and local government sample consists of 152 areas that represent the Nation's 361 metropolitan statistical
areas and 573 micropolitan statistical areas as defined by OMB in December 2003 and the remaining portions of the 50 states.
The private industry estimates started the conversion to December 2003 OMB areas definitions in the December 2008 reference
period with replacement of one-fifth of the sample under the new area definitions.
Seasonally adjusted data for selected ECI series began with the December 1990 ECI release. Seasonal adjustment removes
the effects of events that follow a more or less regular pattern each year. These adjustments make nonseasonal patterns
easier to identify. The seasonal adjustment factors are recalculated once per year. The March release contains data
reflecting the newly updated seasonal adjustment factors. The historical data for the last five years are then revised
based on the newly estimated factors. The seasonal factors for 2009 and revised seasonally adjusted indexes for the past
5 years are available at www.bls.gov/ect/ectsfact.htm or upon request.
Because the ECI is a sample survey, it is subject to sampling errors. Sampling errors are differences that occur between
the results computed from a sample of observations and those computed from all observations in the population. The estimates
derived from different samples selected using the same sample design may differ from one other. A measure of the variation
among these differing estimates is the standard error. It can be used to measure the precision with which an estimate
from a particular sample approximates the expected result of all possible samples. The chances are about 68 out of 100
that an estimate from the survey differs from a complete population figure by less than the standard error. The chances
are about 90 out of 100 that this difference would be less than 1.6 times the standard error. The statements of comparisons
appearing in this publication are significant at a 1.6 standard error level or better, unless otherwise indicated. This
means that for differences cited, the estimated difference is greater than 1.6 times the standard error of the difference.
The ECI uses standard errors to evaluate published series. To assist users in ascertaining the reliability of series,
the standard errors for all estimates (excluding seasonally adjusted series) are available on the BLS Web site at
www.bls.gov/ect/ectvar.htm shortly after the publication of the news release.
When determining data to be used in contract negotiations, it is important to note that differences by bargaining
status may be due to factors other than union status, such as occupational and industry mix. An important consideration
when choosing a series for escalation is the sampling error. For more information, see www.bls.gov/ect/escalator.htm.
More detailed information on the ECI is available from several sources. These include a chapter, "National Compensation
Measures," (www.bls.gov/opub/hom/pdf/homch8.pdf) from the BLS Handbook of Methods, and several articles published in the
Monthly Labor Review and Compensation and Working Conditions. The articles and other descriptive pieces are available at
www.bls.gov/ect/#publications, by calling (202) 691-6199, or sending e-mail to NCSinfo@bls.gov.
Historical ECI data, using industry categories based on the Standard Industrial Classification (SIC) System and
classifying jobs into occupational classifications according to the Census of Population, are available dating from the
first publication of each series to December 2005 at: www.bls.gov/web/echistry.pdf. Data are also available for series
based on the 2002 and 2007 North American Industry Classification Systems (NAICS) and the 2000 Standard Occupational
Classification (SOC) beginning in March 2001, using December 2005=100 as the base period at:
www.bls.gov/web/echistrynaics.pdf.
In addition, constant-dollar ECI series derived from the Consumer Price Index for All Urban Consumers (CPI-U) are
available. The constant-dollar series are calculated by converting the CPI-U to the same base as the ECI. The ECI for
each reference period is then divided by the converted CPI-U for the same reference period. The CPI-U U.S. City Average
All Items is used to compute all series except for the regional estimates, which use corresponding CPI regional data.
Supplemental data from the ECI, providing 12-month percent changes in employer costs for health insurance in private
industry, are also available at www.bls.gov/ect/sp/echealth.pdf.
The costs per hour worked of compensation components, based on data from the ECI, are published in a separate news
release titled "Employer Costs for Employee Compensation" (ECEC). The next ECEC release is scheduled for 10:00 AM EDT,
Wednesday, June 10, 2009. Historical ECEC data are available in summary documents. Both the release and historical data
are available at www.bls.gov/ect, by email to NCSinfo@bls.gov, or by calling (202) 691-6199. Since the ECEC is calculated
with current employment weights rather than the fixed weights used in computing the ECI, year-to-year changes in the cost
levels usually differ from those in the ECI.
