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Replicate estimates of the average
October, 2000, Vol. 123, No. 10
Anthony J. Barkume and Michael K. Lettau
Average hourly earnings data, produced each month as part of the Current Employment Statistics (CES) program, have become an integral part of U.S. economic intelligence.1 Besides their customary use in assessing the economic outlook, average hourly earnings data have been incorporated into a wide variety of analyses, such as simulations of the effects of policy changes (for example, the introduction of the North American Free Trade Agreement, NAFTA) on locality and industry earnings levels.
The CES program is based on employment, hours, and earnings data from a sample of nonfarm establishments, including government. However, the CES has always restricted the coverage of both earnings and jobs to those most likely to be reflected in employer’s current payroll records on a regular basis.2 Earnings coverage excludes "bonuses, commissions, and other lump-sum payments (unless earned and paid regularly each pay period or month)."3 Job coverage (for the reporting of earnings) is restricted to production workers in goods-producing industries and nonsupervisory workers in the service-producing industries.
In recent years, several analysts4 have noted that the trend rate of growth in the private industry aggregate of the average hourly earnings measure has been slower than that of other economy-wide average wage measures, such as those derived from unemployment insurance records or Current Population Survey data. The slower growth in the average hourly earnings relative to other aggregate earnings measures may simply reflect the restrictions on job coverage if the relative earnings of production and nonsupervisory workers have fallen relative to all workers over time. However, this divergence between the series may also reflect differences in how employers, who report payroll data in the CES define "production and nonsupervisory" employees from what data users assume is the case. For example, employers are instructed to include earnings and hours data for "working supervisors," defined as workers whose supervisory duties are incidental to their job. But some employers may not include hours and earnings of working supervisors in their payroll records because such employers might consider those employees as supervisors in the organization. If working supervisors generally received above-average earnings, then an employer’s omission of these earnings from their statistical reports would tend to reduce reported average hourly earnings.
This excerpt is from an article published in the October 2000 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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Acknowledgment: The authors appreciate the comments and suggestions they received on earlier drafts from Shail Butani, Patricia Getz, Jack Galvin, John Ruser, Al Schwenk, Jim Spletzer, Jay Stewart, and Sandra West.
1 For more information on the Current Employment Statistics program and the average hourly earnings series, see BLS Handbook of Methods, Bulletin 2490 (Bureau of Labor Statistics, 1997), pp. 15 and 17.
2 The Current Employment Statistics program is researching and tentatively planning for transition to all employee hours and earnings estimates. However, existing historical data cannot be revised to correspond with this potential new series.
3 See BLS Handbook of Methods, p. 17.
4 See American Statistical Association Panel for the Bureau of Labor Statistics Current Employment Statistics Survey, "A Research Agenda to Guide and Improve the Current Employment Statistics Survey," Mimeo (American Statistical Association, January 1994); and Barry Bosworth, and George Perry, "Productivity and Real Wages: Is There a Puzzle?" Brookings Papers on Economic Activity, 1994, no. 1, pp. 317–43.
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