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April 30, 2003
Employment Costs Rise in First Quarter
The Employment Cost Index for total compensation rose 1.3 percent from December 2002 to March 2003, following a 0.7 percent gain from September to December 2002, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported. The index measures quarterly changes in compensation costs, which include wages, salaries, and employer costs for employee benefits.

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Benefit costs increased 2.2 percent and continued to substantially outpace the 1.0- percent gain in wages and salaries for civilian workers in March.

Employer costs for benefits account for nearly 30 percent 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 percent, greater than the 4.9 percent 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.

Compensation costs for private sector workers rose sharply, 1.4 percent from December 2002 to March 2003, after advancing 0.7 percent in the prior quarter. For State and local government workers, the increase in compensation costs was 0.9 percent from December to March, compared with the gain of 1.0 percent 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. Retail trade, transportation and public utilities, and construction dampened private sector compensation gains.

Benefit costs accelerated during the quarter, increasing 2.2 percent for civilian workers (nonfarm private industry and State and local government) in the March 2003 quarter following a gain of 1.3 percent in the December 2002 quarter. In the private sector, benefit costs shot up 2.4 percent 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 percent in the March 2003 quarter, following a 1.7- percent increase in December 2002.

Gains in wages and salaries were 1.0 percent for civilian workers during the March quarter, following a 0.5 percent rise in the December quarter. Private sector wages advanced 1.0 percent 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. Wage and salary increases were slowed by smaller gains in nondurable manufacturing industries, transportation and public utilities, services industries, and among service workers.

Wages and salaries in State and local government advanced 0.7 percent during the December 2002 to March 2003 period, identical to the gain in the September-December 2002 quarter.

Annual compensation costs for civilian workers (not seasonally adjusted) increased 3.9 percent for the year ended March 2003, identical to the over-the-year increase for March 2002. Compensation costs in private industry rose 3.8 percent in the year ended March 2003, compared with increases of 3.9 percent for March 2002, and 4.2 percent for March 2001. In State and local government, compensation costs increased 4.2 percent for the year ended March 2003; over-the-year gains were 3.9 percent in March 2002 and 3.3 percent in March 2001.

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