Employment Cost Trends

Change has come to the ECI

  1. How has the Employment Cost Index (ECI) changed?

  2. Why did the ECI change to the NAICS and SOC classification systems?

    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. NAICS was developed collaboratively with Mexico and Canada and is designed to provide comparability between the statistical systems of the three partners in the North American Free Trade Agreement (NAFTA).

    Information on NAICS and SOC, including background and definitions are available from the BLS websites: www.bls.gov/bls/naics.htm and www.bls.gov/soc/.

  3. How has the ECI changed due to the adoption of NAICS and SOC?

  4. As a result of the switch in industry and occupational classifications, some new series have been introduced, some series have been discontinued, and some series from the old structure are either continuous or not continuous with new series. This is not the result of a change in what an establishment or the employees have been doing, but instead stems from a reclassification based on the new hierarchy.

  5. How do the NAICS industry indexes compare to SIC indexes?

    Two criteria were applied to determine if the new and old series are comparable. The first criterion is based on the overlap of employment between the two series. For example, a NAICS series is deemed comparable to the corresponding SIC series only if at least 90 percent of the employment in the NAICS classification is also in the SIC classification, and at least 90 percent of the employment in the SIC classification is also in the NAICS classification. If the first test was passed, a second test compared the old and new index series. A series was considered continuous in the NAICS index when it was within 1.5 index points of the SIC series for the period December 1994 through December 2004. For the ECI, all of the industry and occupational series that met the first employment overlap criteria also passed the second index comparison test.

    Table 1 shows the NAICS industry indexes that were published starting March 2006, and indicates series which have met the comparability tests, as well as those with breaks or are new.

    Table 1. Continuity of Employment Cost Index (ECI) Industry series between the 2002 North American Industry Classification System (NAICS) and the 1987 Standard Industrial Classification (SIC)
    NAICS (code in parentheses) Series meet definition of continuity Break in series or new series

    All Civilian Workers

    X

    Goods-producing industries

    X

    Construction (23) 1

    X

    Manufacturing (31-33)

    X

    Aircraft manufacturing (336411) 1

    X

    Service-providing industries 2

    X

    Information (51) 1

    X

    Trade, transportation, and utilities (42, 44, 45, 48, 49, 22) 1

    X

    Wholesale trade (42) 1

    X

    Retail trade (44, 45) 1

    X

    Transportation and Warehousing (48, 49) 3

    X

    Utilities (22) 3

    X

    Financial activities4 (52, 53) 1

    X

    Finance and insurance (52) 1

    X

    Credit intermediation and related activities (522) 1

    X

    Insurance carriers and related activities (524)

    X

    Real estate and rental and leasing (53) 1

    X

    Professional and business services (54, 55, 56) 1

    X

    Professional, scientific, and technical services (54) 1

    X

    Administrative and support and waste management and remediation services (56)

    X

    Education and health services (61, 62)

    X

    Educational services (61)

    X

    Elementary and secondary schools (611110) 5

    X

    Junior colleges and colleges, universities, and professional schools (611210, 611310) 6

    X

    Healthcare and social assistance (62)

    X

    Hospitals (622)

    X

    Nursing and residential care facilities (623)

    X

    Leisure and hospitality (71, 72) 1

    X

    Accommodation and food services (72) 1

    X

    Other services (except Public administration) (81) 1

    X

    Public administration (92)

    X

    1 Private industry only.
    2 Previously titled service-producing industries.
    3 Continuous for private industry. An aggregate series for all civilian workers will be introduced later.
    4 Previously titled finance, insurance and real estate.
    5 Previously titled elementary and secondary education.
    6 Previously titled higher education.

  6. How do the SOC occupational indexes compare to OCS indexes?

    Tests similar to those used for the industry indexes were used for the occupational indexes.

    Table 2 shows information for SOC occupational series. Some series have the same name under the new and old classification systems but are not comparable.

    Table 2. Continuity of Employment Cost Index (ECI) Occupational Series between the 2000 Standard Occupational Classification (SOC) and 1990 Occupational Classification Series (OCS)
    SOC (code in parentheses) Series meet definition of continuity Break in series or new series

    All Civilian Workers

    X

    Management, professional, and related (11-29)

    X

    Management, business, and financial (11-13) 1

    X

    Professional and related (15-29) 2

    X

    Service (31-39)

    X

    Sales and office (41-43)

    X

    Sales and related (41)

    X

    Office and administrative support (43) 3

    X

    Natural resources, construction, and maintenance (45-49)

    X

    Construction and extraction (47)

    X

    Installation, maintenance, and repair (49)

    X

    Production, transportation, and material moving (51-53)

    X

    Production (51)

    X

    Transportation and material moving (53)

    X

    1 Previously titled executive, administrative, and managerial.
    2 Previously titled professional specialty and technical.
    3 Previously titled administrative support, including clerical.

  7. What will happen to the durable and nondurable series within manufacturing?

  8. These series will be discontinued in 2007. The NAICS structure is based on how products and services are produced, while the SIC structure focused on what is produced. The durable and nondurable designation stems from what is produced and does not coincide with how things are produced. The hierarchy under NAICS does not support this designation within manufacturing.
  9. Will the white collar and blue collar occupational series be retained?

  10. No, the white collar and blue collar series are no longer useful categories and will be discontinued in 2007. Occupational series are presented by the aggregate groups specified in the 2000 SOC manual. The white collar category consists of occupations (such as accountants and cashiers) with disparate wage and compensation rates. For example, in the September 2005 Employer Cost for Employee Compensation release, the hourly compensation rate for civilian workers in management, professional and related occupations was more than double the compensation rate of sales and office occupations ($42.84 and $20.04, respectively).

  11. What is involved in rebasing?

  12. Rebasing is simply the mechanical process of dividing historical indexes by an index for a particular quarter (or average over several years) and multiplying the result by 100. For example, to rebase a series to December 2005=100, simply divide the indexes for 1975 through 2005 by the index for December 2005, and multiply the result by 100. Thus, if the index on a June 1989=100 base is 150 in June 1999 and 180 in December 2005, the rebased index for June 1999 will be (150/180)*100=83.3, while the rebased index for December 2005 will be (180/180)*100=100.

  13. Why did you rebase the ECI?

  14. Rebasing normally is done when the index values become "very large" or there are significant changes in the index series. Indexes are useful for economic analysis, but even before the latest changes they were not available for all ECI series. For a few series that were first published since the last rebasing period, only percent changes were published. As many new series are introduced to reflect the switch to the 2002 North American Industry Classification System and the 2000 Standard Occupational Classification, this problem will grow. Therefore, this is an appropriate time to change the base period for all ECI series to December 2005=100 from June 1989=100.

  15. Why did you reweight the ECI?

  16. The ECI introduced new 2002 fixed employment weights in March 2006 to replace the 1990 weights used from 1995 through 2005. The ECI weights are updated periodically to reflect the current industry and occupational employment distributions. It was necessary to reweight in March 2006 because of the switch in industry and occupational classification systems to the North American Industry Classification System (NAICS) and Standard Occupational Classification (SOC).

  17. Where do the employment weights come from?

  18. The primary source of the new weights for the ECI is the Bureau's Occupational Employment Statistics (OES) program. In those instances where the data were not available from the OES, the Bureau's Quarterly Census of Employment and Wages (QCEW) program was used as a secondary source.

  19. What methodological changes were implemented for the imputation of missing data?

  20. Imputation is a method used to estimate values for data that are missing or unavailable. Since the ECI moved to a new computer processing system in March 2006, this was an opportune time to make methodological changes. In general, the new imputation procedure utilizes additional information available as a result of the integration of the ECI into the National Compensation Survey.

  21. How have the seasonally adjusted ECI series been affected by the changes in industry and occupational classification systems?

  22. The ECI publishes both seasonally adjusted and unadjusted series. As a result of the change in industry and occupational classifications, new seasonally adjusted series were introduced; some were dropped, while others were continued. New seasonally adjusted series will be phased in over time. The March 2006 ECI presents seasonally adjusted and unadjusted series based on NAICS. However, seasonally adjusted indexes for the new SOC aggregations will not be introduced until March 2007.

  23. What impact will dropping severance pay and supplemental unemployment benefit (SUB) plans have on the ECI compensation measures?

  24. Severance pay and supplemental unemployment benefit (SUB) plans have been dropped as a component of compensation from the ECI beginning with the March 2006 index. The combined cost of these two benefits accounts for less than one-tenth of one percent of compensation. Dropping these benefits will have virtually no impact on the index.

  25. Are the new estimates for the "excluding incentive paid occupations" series different from the estimates for "excluding sales occupations"?

  26. Yes. For some workers, variability in compensation is related to the way workers are paid. The ECI attempted to remove quarter-to-quarter volatility to allow users to understand underlying trends by publishing estimates for "excluding sales occupations." It became evident that "excluding sales occupations" did not include an important group of workers outside of sales whose pay is volatile, primarily managers in the finance sector who are paid commissions. In addition, sales occupations included many workers without volatile pay, such as cashiers and counter clerks. Research determined that a better measure of underlying compensation trends in the economy, which removed short-term volatility, were series "excluding incentive workers" rather than those "excluding sales workers." Beginning in March 2007, the "excluding sales occupations" series will be discontinued.

  27. There are two historical listings covering the period 2001-2005. Which data should I use?

  28. The SIC-OCS based data are the official BLS data for this period. Except for rebasing the index to December 2005=100.0 and regular adjustments to the seasonal adjustment factors, these data are the same as when originally published by BLS. The NAICS-SOC based data are for informational purposes only. The NAICS-SOC based estimates become the official BLS estimates starting in March 2006. The change reported for March 2006 is based on comparison to the December 2005 data under NAICS-SOC.

  29. Where can I get more information on changes in methodology for the ECI that began in March 2006?

  30. Details of various changes in methodology (rebasing, reweighting, imputation procedure, and seasonal adjustment) are available in a series of articles in the April 2006 Monthly Labor Review.

  31. How do I obtain more information on the ECI?

  32. Information at the Internet site www.bls.gov/opub/hom/ provides information from the BLS Handbook of Methods. Information is also available on the Compensation Cost Trends Internet site at www.bls.gov/ncs/ect/.

  33. When will other NCS products be changing to NAICS and SOC?

Last Modified Date: May 12, 2006

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