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CCH® BENEFITS — 11/08/06

Benefits Costs Outpace Salaries, Says BLS Report

Benefits costs rose more quickly than salaries for the period June 2006 to September 2006, according to the most recent Employment Cost Index from the Department of Labor’s Bureau of Labor Statistics (BLS). This continues a trend broken only once in the last five years, when in June 2006 benefits costs rose less quickly than salaries.

For the period June 2006 to September 2006, for civilian workers, benefits costs increased 1.1% in the March quarter, compared with a 0.8% gain in the June 2006 quarter. Private sector benefits costs rose 1.0% for the September quarter, following a 0.7% gain in the previous quarter. Benefits costs for state and local government workers increased 1.5% in the September quarter, unchanged from the gain in the prior quarter.

Increases in benefits costs accounted for one-third of the rise in compensation costs for civilian workers from June to September 2006. Among private industry workers, benefit costs accounted for about one-fourth of the compensation gains during the quarter. Among state and local government workers, benefit costs comprised approximately two-fifths of the compensation cost gains during the June to September quarter. Health insurance costs and defined benefit plan contributions represented more than one-fourth of the gain in compensation costs for state and local government workers from June to September 2006.

September 2005 To September 2006

In the year ended September 2006, for civilian workers, wages and salaries rose 3.2%, compared with a gain of 2.3% in September 2005. Benefit costs gained 3.3% for civilian workers for the year ended September 2006, slowing from an increase of 5.0% for the year ended September 2005.

Wages and salaries for union workers rose 2.8% for the 12 months ended in September 2006, down from the 3.0% increase in the year ended September 2005. Wages and salaries for nonunion workers rose 3.1% for the 12 months ended in September 2006, compared with a gain of 2.9% for the year ended in September 2005. Benefit costs for union workers rose 3.6%, compared with the 2.7% gain for nonunion workers in the year ended in September 2006.

The benefits covered by the Employment Cost Index are the following:

• Paid leave—vacations, holidays, sick leave, and other leave;
• Supplemental pay—premium pay for work in addition to the regular work schedule (such as overtime, weekends, and holidays), shift differentials, and nonproduction bonuses (such as referral bonuses and attendance bonuses);
• Insurance benefits—life, health, short-term disability, and long-term disability;
• Retirement and savings benefits—defined benefit and defined contribution plans; and
• Legally required benefits—Social Security, Medicare, and federal and state unemployment insurance.

For additional technical information on the Employment Cost Index, contact the BLS at (202) 691-6199.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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