We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is the Employment Cost Index?

By Tess C. Taylor
Updated: May 17, 2024
Views: 6,670
Share

Each year, quarterly to be exact, international labor organizations provide a detailed report called the employment cost index (ECI) that measures the growth of compensation and the cost of civilian labor by individual industries. The report is used by companies to measure the change in the cost of labor based on variable factors. The index is sometimes referred to as the “weighted average hourly cost of an hour of labor.”

The employment cost index is actually based on a random survey of company payrolls in the final month of each quarter. The data is pulled from employer payroll records provided by quarterly mandated employer wage statements and reports. This data is displayed according to industry and no direct or confidential information is provided about the companies or employees.

The purpose of the report is to evaluate if certain types of jobs are more costly, which gives companies the opportunity to adjust wages and other key benefits for the civilian working population. It provides evidence of the cost of each hour of labor that is performed by the civilian workforce. On average, the employment cost index is a good indicator if a business is profitable based on the findings of the report.

Another use for the employment cost index is as a gauge for the overall economy. If wage costs are on the low side while stock prices are on the mid to high level, this indicates that the economy is in good standing in any given region or industry. If the index rises above the profitability rates, the economy is suffering and businesses have the choice to either reduce their workforce or lower pay rates to stay afloat.

Despite its usefulness, the report has been criticized by business analysts because it tends to represent outdated data, pulled from previous quarters. Its delayed nature still leaves it as a somewhat less timely indicator of employment cost trends than monthly employment reports produced by national employment bureaus. In this respect, companies can maintain their own records of employment data to best monitor employment costs monthly.

In addition to displaying details about wages, the labor employment cost index also provides data about the costs for additional employee benefits. These benefit costs can be associated with health and wellness programs, retirement contributions, sick and vacation leaves, and employer sponsored educational and recreational benefits. The report can be used as a guide to carefully manage all aspects of benefit programs in order to manage employment costs overall.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Editors' Picks

Discussion Comments
Share
https://www.wisegeek.net/what-is-the-employment-cost-index.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.