Employment Cost Index

“Since 2003, wages in China have gone up 19 percent annually. Average yearly salaries in India – the preferred offshoring destination for U.S. businesses – have grown 15 percent a year in that time. By contrast, annual wage increases in America have averaged only 3 percent over the last five years.” Financial Week, November 23, 2008

Obviously if these wage trends continue, wages in China and India will eventually catch up with those in the U.S. But how do we know how fast wages are growing?

Here in the U.S. the Bureau of Labor Statistics produces a measure called the Employment Cost Index (ECI) on a quarterly basis. The ECI not only measures changes in wages, but also provides data on benefits and on total compensation (wages and benefits combined).

Wages change for many reasons. For instance, an employer’s wages need to remain competitive with other employers’ wages to retain and attract workers. Also, changes in the cost of living - the prices paid for food, fuel, and more - are often included in compensation. These are just a couple of the many factors that influence compensation changes.

Starting in 1975, the ECI has provided a measure of how private-sector wages are changing over time. Over the years, various changes and additions have been made to the ECI. Benefits and total compensation were added in 1981. State and local government workers have also been added to the index.

All of the ECI data are available at www.bls.gov/ncs/ect.

Get the full version of this article, written by analyst Dwayne Stevenson (Dwayne.Stevenson@state.or.us or 503-947-1261).