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CCH® PENSION — 8/10/07

Benefits Cost Increases Rebound, Rise More Quickly Than Wages In Second Quarter

From Spencer's Benefits Reports: Benefits costs rose more quickly than salaries for the period from March to June 2007, according to the most recent Employment Cost Index from the Department of Labor’s Bureau of Labor Statistics (BLS). This is in contrast to last quarter’s BLS statistics, when benefits costs rose less quickly than salaries for only the second time in the last five years.

For the period from March to June 2007, benefit costs increased 1.3% for civilian workers, up dramatically from the 0.1% increase in the March 2007 quarter.

Benefit costs for private industry rose sharply by 1.1%, compared to a decline of 0.3% the previous quarter. For state and local government, benefit costs increased 1.7%, compared to 2.1% in the previous quarter. In the same period wages and salaries rose 0.8% for state and local government workers.

Because of the increases in benefits costs for the private sector, increases in wages and salaries accounted for only 63% of the rise in compensation costs for civilian workers from March to June 2007. In state and local governments, wages and salaries accounted for 47% of the change in compensation. In state and local governments, benefits cost increases were due primarily to increases in defined benefits plan costs and health care benefits costs.

June 2006 To June 2007

In the year ended June 2007, wages and salaries for civilian workers rose 3.3%, compared with a gain of 3.0% in June 2006. Benefit costs gained 2.6% for civilian workers for the year ended June 2007, about the same as the increase of 2.7% for the year ended June 2006.

Wages and salaries for union workers rose 2.5% for the 12 months ended in June 2007, the same as the 2.5% in the year ended June 2006. Wages and salaries for nonunion workers rose 3.4% for the 12 months ended in June 2007, compared with a gain of 2.9% for the year ended June 2006. Benefit costs for union workers rose 1.4%, compared with the 2.8% gain for nonunion workers in the year ended June 2007.

The Employment Cost Index covers the following benefits:

• 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.

Visit our News Library to read more news stories.

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

Visit our News Library to read more news stories.