Employment Costs Spike 1.3% in the First Quarter

April 29, 2003 (PLANSPONSOR.com) - Riding substantial increases in benefits costs, the Employment Cost Index (ECI) for total compensation rose 1.3% from December 2002 to March 2003.

Benefit costs increased 2.2% and continued to substantially outpace the 1%-gain in wages and salaries for civilian workers in March.   The first quarter’s increase is especially steep when compared to the seasonally adjusted 0.7% gain from September to December 2002, according to a Bureau of Labor Statistics (BLS) news release.

Overall, e mployer costs for benefits account for nearly a third of compensation costs and include such items as health and other insurance, retirement plans, paid leave, and legally required benefits like Social Security.   For the year ended March 2003, benefit costs increased 6.1%, greater than the 4.9% gain for the year ended March 2002.

Much of the increase in benefit costs stemmed from the continuing rise in the costs for health insurance and the recent upturn in retirement costs, particularly for defined benefit pension plans.   In the private sector, benefit costs shot up 2.4% for the March quarter, significantly higher than all quarterly gains since March 2000.   By contrast, the increase for state and local governments was 1.5% in the March 2003 quarter, following a 1.7%-increase in December 2002.

Compensation Costs

Compensation costs for private sector workers rose sharply, 1.4% from December 2002 to March 2003, after advancing 0.7% in the prior quarter.   For state and local government workers, the increase in compensation costs was 0.9% from December to March, compared with the gain of 1% for the quarter ended in December.   Gains in private sector compensation costs were led by large increases in durable manufacturing; finance, insurance, and real estate; and wholesale trade.

Gains in wages and salaries were 1% for civilian workers during the March quarter, following a 0.5% rise in the December quarter.   Private sector wages advanced 1% for the quarter after posting moderate gains during the prior two quarters.   Wage gains in the finance, insurance, and real estate and wholesale trade industries led the increase.   Comparatively, wages and salaries in state and local government advanced 0.7% during the December 2002 to March 2003 period, identical to the gain in the September to December 2002 quarter.

The ECI is a component of the National Compensation Survey and measures changes in compensation costs, which include wages, salaries, and employer costs for employee benefits.