Is the ECI sensitive to the method of aggregation?

ECI ECI sensitive to the method sensitive to the method sensitive to the method sensitive to the method sensitive to the method of aggregation? of aggregation? of aggregation? of aggregation? of aggregation? Research by BLS economists indicates that the ECI is not particularly sensitive to the methodology used in constructing the index; also, because changes in the price of labor can be due to shifts in supply, demand, or both, caution should be used when applying standard index number analysis to the ECI T he Employment Cost Index (ECI), published quarterly by the U.S. Bureau of Labor Statistics (BLS), measures changes in the price of labor—defined as total compensation per employee hour worked. As a fixed-weight or Laspeyres index , the ECI controls for changes occurring over time in the industrial–oc-cupational composition of employment. The ECI is computed from survey data on compensation by occupation, collected from a sample of establishments and occupations, weighted to represent the universe of establishments and occupations in the economy. 1 The cost to employers for employee compensation has two components: wages or salaries paid to employees, and the cost of all nonwage benefits. The wage and salary component of the ECI is represented by straight-time average hourly earnings in an occupation, whether or not the employees are actually paid by the hour. Nonwage benefits, which account for about 30 percent of total compensation costs, include such things as employer contributions to employees' health and other insurance, pension plans, and Social Security, as well as paid vacations and sick leave, premium pay for overtime, and nonpro-duction bonuses. As with the wages portion of compensation, benefit cost data are converted to an hourly basis in the ECI. In computing the national ECI, the myriad wage quotes from the sample of individual jobs must somehow be aggregated into a single index number. This aggregation process involves two key steps. Each establishment surveyed for the ECI is placed within 1 of 73 two-digit SIC industries, and each surveyed job is placed within 1 of 10 major occupation groups. 2 Because all of the occupations are not represented in all of the industries, only 720 industry–occupation cells exist (as opposed to 730). Each job quote in the survey falls into exactly one of these cells. The first step in the aggregation process involves combining all of the job quotes within a given cell to obtain a cell average. The …