August 2001

Compensation Costs in Private Industry March 1987 to March 2001

  • Total average private-sector compensation costs in March 2001 were $20.81 per hour worked, up from $13.42 in 1987. Since March 1987, total compensation costs have increased at an average annual rate of 3.2 percent, according to data released by the U.S. Bureau of Labor Statistics (BLS).

  • In March 1987, benefit costs per hour worked were $3.60, or 26.8 percent of total hourly compensation. In March of 2001, benefit costs were $5.63, or 27.1 percent of total hourly compensation.

  • From March 1987 to March 1994, employee benefits accounted for an increasing percentage of total compensation costs, rising from 26.8 percent to 28.9 percent. After March 1994, benefit costs declined as a percentage of total compensation, and from March 1998 to March 2001, they leveled off to 27.0 percent (in 1998) to 27.1 percent (in 2001).

  • One of the major causes of the 1994-1997 decline in benefit costs as a percentage of total compensation costs was a decline in insurance costs. Insurance costs increased steadily from March 1987 ($0.72 per hour worked) to March 1994 ($1.23). After March 1994 insurance costs declined, hitting a low of $1.09 in March 1997. However, these costs have risen since March 1997, with the largest increase occurring between March 2000 ($1.19) and March 2001 ($1.28).

  • Legally required benefits-Social Security, federal and state unemployment insurance, and workers' compensation-have always been private-sector employers' highest-cost benefits. Legally required benefits accounted for 8.4 percent of total hourly compensation costs ($1.13) in March 1987, and increased to 9.4 percent of total compensation costs ($1.60) by March 1994. Legally required benefits declined as a percentage of total compensation costs by March 2001, falling to 8.3 percent ($1.73).

  • In March 1996, for the first time, the BLS reported separate cost data for Old-Age and Survivors and Disability Insurance (OASDI), known as Social Security, and Medicare. OASDI costs to private-sector employers amounted to $0.84 per hour worked in 1996, or 4.8 percent of total compensation. Medicare costs to employers were $0.21 per hour worked, or 1.2 percent of total compensation costs. By March 2001, the cost of Medicare, as a percentage of total compensation, had not changed, and the cost of OASDI had increased 0.1 percent. The dollar amounts had increased to $1.02 per hour worked for OASDI and $0.25 for Medicare.

  • Key employer characteristics affecting total compensation costs are establishment size, industry, occupation group, union status, and work status.

  • Large establishments have higher total compensation costs than small establishments. Total compensation costs in establishments with fewer than 100 employees were $17.86 per hour worked in March 2001, compared with $28.17 for establishments of 500 or more employees.

  • Goods-producing industries have higher total compensation costs, $24.40 per hour worked, than service-producing industries, $19.74.

  • White-collar occupations have the highest total compensation costs, $25.34 per hour worked, compared with blue-collar occupations, $19.35, and service occupations, $10.32.

  • Total compensation costs were higher for union workers, $27.80 per hour worked, than for nonunion workers, $19.98.

  • Total compensation costs were higher for full-time workers, $23.55 per hour worked, than for part-time workers, $11.65.

For more information, contact Ken McDonnell (202) 775-6342.

Source: EBRI Databook on Employee Benefits, fourth edition (Washington, DC: Employee Benefit Research Institute, 1997); and U.S. Department of Labor, Bureau of Labor Statistics, Employer Costs for Employee Compensation, stats.bls.gov/ecthome.htm

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