September 1999

 

Compensation Costs in Private Industry

March 1987 to March 1999

  • Total private-sector compensation costs in March 1999 were $19.00 per hour worked, up from $13.42 in 1987. Since March 1987, total private-sector compensation costs have increased at an average annual rate of 2.9 percent, according to data from the U.S. Bureau of Labor Statistics (BLS).
  • The costs of private-sector employee benefits increased at an average annual rate of 3.0 percent from March 1987 to March 1999. In March 1987, benefit costs were $3.60 per hour worked, or 26.8 percent of total compensation, and by March 1994, they had risen to 28.9 percent of compensation. In March 1999, benefit costs were $5.13 per hour worked, and had declined to 27.0 percent of total compensation.
  • One of the major causes of this decline in benefit costs as a percentage of total private-sector compensation costs is the decline in insurance costs. Insurance costs increased steadily from March 1987 ($0.72 per hour worked) to March 1994 ($1.23 per hour worked). By March 1999, insurance costs had declined to $1.13 per hour worked.
  • Legally required benefits (Social Security, federal and state unemployment, and workers' compensation) have always been the highest-cost benefits to private-sector employers. Legally required benefits accounted for 8.4 percent of total compensation costs ($1.13 per hour worked) in March 1987, and increased to 9.4 percent of total compensation costs ($1.60 per hour worked) by March 1994. Like insurance benefits, legally required benefits declined as a percentage of total compensation costs by March 1999, representing 8.7 percent of total compensation ($1.65 per hour worked).
  • March 1996 was the first time that BLS reported separate cost data for Medicare and Social Security (the Old-Age and Survivors and Disability Insurance program, or OASDI). That month, the OASDI cost to private-sector employers was $0.84 per hour worked (or 4.8 percent of total compensation), while the Medicare cost was $0.21 per hour worked (or 1.2 percent of total compensation). By March 1999, the costs of these benefits as a percentage of total compensation costs had not changed, but the dollar costs had increased to $0.93 per hour worked for OASDI and $0.23 per hour worked for Medicare. The major characteristics affecting employers' 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 amounted to $16.27 per hour worked in March 1999, compared with $26.37 per hour worked for establishments with 500 or more employees.

—Goods-producing industries have higher total compensation costs ($22.86 per hour worked) than service-producing industries ($17.82 per hour worked).

—White-collar occupations have the highest total compensation costs ($23.02 per hour worked), compared with blue-collar occupations ($17.98 per hour worked) and service occupations ($9.58 per hour worked).

—Total compensation costs were higher for union workers ($24.75 per hour worked) than for nonunion workers ($18.20 per hour worked).

—Total compensation costs were higher for full-time workers ($21.55 per hour worked) than for part-time workers ($10.20 per hour worked).

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, News, 24 June 1999.

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