Supplementary Remuneration for Factory Workers, 1959 *

THE DYNAMICS of wage determination in this country have been radically altered by the rapid and extensive growth of supplementary remuneration practices. Two or three decades ago, employer expenditures for such practices as paid leave, premium pay, legally required insurance, and the many private welfare plans currently existing were relatively unimportant for production workers in manufacturing as a wholealthough a number of individual employers have contributed to such programs for years. The diversified system of wage supplements which now exists, however, has so substantially altered the framework of wage measurement that data relating solely to wages are inadequate for many types of analysis, as measures of employee remuneration.

The

For the year 1959, the Bureau of Labor Statistics conducted a survey in manufacturing which represents its first appraisal of the magnitude of employer expenditures for supplementary employee remuneration practices on a national basis. results of this survey, briefly, indicated that gross factory payrolls for production workers included 6.0 percent for paid leave and 4.3 percent for premium pay for overtime and work on holidays and late shifts. Manufacturers spent additional amounts, not included in payroll, equal to 4.5 percent for legally required payments such as social security, unemployment compensation, and workmen's compensation, and 5.4 percent for private welfare plans such as pensions and health, accident, and life insurance. In terms of total hours paid for, these expenditures amounted to 13.5 cents an hour for paid leave, 9.7 cents for premium pay, 10.1 cents for legally required payments, and 12.1 cents for private welfare plans.

The survey was conducted principally by mail, using a highly stratified sample of manufacturing

establishments selected in accordance with industry, location, and establishment size. The sample was designed to permit presentation of data for major industry groups on a national level, and for four broad regions on the all-manufacturing level. Data were obtained from approximately 4,400 establishments employing some 3.5 million workers. The data from each sampling unit were weighted in accordance with its probability of selection and then aggregated and adjusted to gross hours paid for in 1959 derived from the revised Bureau of Labor Statistics monthly series on hours and earnings (table C-1, p. 100 of this issue).

Each respondent to the survey provided the annual (1959) aggregates of payroll (comparable to the amounts reported on the W-2 withholding tax form) and the establishment's expenditures for each of the selected items of supplementary remuneration shown in table 1. In addition, the aggregate hours related to the gross payroll and to each of the leave categories were provided. These aggregates permitted the calculation of expenditures as a percent of gross payroll and as cents per hour paid for and of the proportion of leave hours (or, conversely, plant hours-gross hours minus leave hours) to total hours paid for. Plant hours include such nonwork time as paid rest periods, lunch periods, and standby or reporting time and leave hours were defined as the number of hours for which pay was given rather than the time spent away from the plant. The data also permitted calculation of expenditures as a percent of straight-time payroll (gross pay minus premium pay) and as cents per plant hour. Each establishment was also asked to report

whether a majority of its production workers were covered by union agreements.

Although some of the practices surveyed have a longer history, most of them did not become prominently identified with production worker remuneration until World War II, when wage control policy permitted, within limits, a variety of "fringe adjustments." By 1959, contributions I were made for some form of legally required insurance on behalf of all production workers in manufacturing. Establishments employing 96 percent of the production workers reported expenditures for paid leave, those employing 94 percent for premium pay, and 92 percent for private welfare plans. These proportions indicate only the production worker employment in establishments that reported expenditures for such practices in 1959. If an establishment with provisions for overtime premium pay scheduled no overtime in 1959, for example, its employees would not be included in these figures. Conversely, the figures include some production workers in the establishments reporting expenditures who did not actually receive the supplementary remuneration for such reasons as failure to meet eligibility requirements for vacations, sick leave, or participation in the pension plan.

The survey covers only the itemized supplementary remuneration practices and is confined to expenditures for production and related workers only, although such expenditures are common for nonproduction workers as well. Among the excluded practices were in-plant nonwork time paid for (rest periods, etc.), stock bonus plans, suggestion plans, and some other irregular payments. Generally, the omitted practices either were not commonly applicable to production workers or were largely on an informal basis which precluded valid measurement. Although some of the omitted practices may occasion important expenditures in particular plants, those covered constitute the the major elements of supplementary employee remuneration practices in the broad industry groups for which they are presented.

These expenditures cannot be used with wages to measure labor costs, since they do not account for a variety of employment expenses such as

2 These laws exist in four States. The employer must contribute in New Jersey and may, under certain circumstances, contribute in New York and California. In Rhode Island, the program is employee financed.

recruitment and training costs or provision for parking, in-plant medical, and other facilities. Neither do the expenditures take into account possible offsetting savings. The money costs of vacations, for example, might be offset, at least in part, by increased productivity during the remainder of the year, lower labor turnover, and less absenteeism.

Although subject to the foregoing limitations, the survey represents a significant advance in statistics of employee compensation. It provides measures useful in making productivity estimates, international comparisons of labor compensation, and analyses of domestic wage movements.

Relation to Hours Paid For and Gross Payroll

Each of the major categories of supplementary remuneration studied included several major and minor components. The definitions of the components and the levels of employer expenditures for each in relation to gross production worker payroll are summarized in this section.

Paid Leave. Paid leave was defined to include only company payments made directly to workers; employer payments to vacation and holiday funds which in turn disburse benefits to workers were included among private welfare plans. Similarly, company payments to insurance carriers or special funds which pay sickness and accident benefits to workers were classified as private welfare plans rather than paid sick leave. In the few States where temporary disability insurance is required by law, company payments made directly to the worker under self-insurance provisions of the law were considered legally required payments rather than sick leave.2

The 6.0 percent of production worker gross payroll expended for leave by all establishments in manufacturing consisted primarily of 3.6 percent for paid vacations and 2.1 percent for paid holidays (table 1). Paid sick leave accounted for 0.2 percent and military, jury, witness, voting, and personal leave for the remainder. These leave expenditures, when related to production worker hours paid for, came to 8.0 cents for vacations, 4.8 cents for holidays, 0.5 cent for sick leave, and 0.1 cent for the miscellaneous leave categories.

Paid leave expenditures were almost identical in the Northeast and North Central regions, averaging 6.3 and 6.2 percent, respectively, of gross payroll, compared with 6 percent for the country as a whole. In the West, such expenditures averaged 5.8 percent and in the South, 5.0 percent. These regional variations were largely due to differences in industrial composition.

By industry group, paid leave expenditure ratios tended to vary directly with the level of average hourly earnings; they ranged from 3.1 percent of gross payroll for the lumber industries and 3.5 percent for the apparel industries to 7.7 percent for ordnance and 10.4 percent for petroleum. (See table 2.) Contributions to union vacation and holiday funds by plants employing about 18 percent of the apparel production workers were counted in private welfare plan expenditures rather than in paid leave.

Premium Pay. Premium pay for overtime was defined to include only the pay above regular straight-time rates. Thus, if overtime was paid at time and one-half, only the halftime was considered. Premium pay for work on a paid holiday

excluded the straight-time pay for the work performed and any holiday pay the worker would have received if he had not worked; only the extra pay above these was considered premium pay. Shift differential included only the extra pay above the regular hourly rates for the day shift.

Premium pay included 2.6 percent of gross production worker payroll for overtime, 0.1 percent for work on paid holidays, 0.9 percent for shift differential, and 0.7 percent for premiums not reported separately (primarily for overtime and holiday work), for a total of 4.3 percent. For each hour paid for, these expenditures amounted to: overtime premiums, 5.9 cents; premium pay for holiday work, 0.2 cent; shift differential, 1.9 cents; and premiums not reported separately, 1.7 cents. The ratios for the individual practices, particularly those for overtime premiums would be higher if the expenditures not reported separately could be allocated properly.

By region, expenditures for premium pay varied very little. They averaged 4.1 percent of gross payroll in the Northeast, 4.2 percent in the West, and 4.5 percent in both the South and North Central regions.

The regions used in this study are: Northeast-Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont; South-Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia; North Central-Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and

Premium pay expenditures were highest in the paper; printing; stone, clay, and glass; and rubber industries, where they averaged 6.9, 5.9, 5.3, and 5.2 percent, respectively. The lowest expenditure ratios were found in the tobacco industries (2.5) percent), apparel (1.8 percent), and leather (1.7 percent). The industry ratios for premium pay are a product of various factors-the rates at which the work is paid, the production processes, the industry's levels of activity, etc. In some printing crafts, for example, the overtime rate is double time, whereas in many industries it seldom goes above time and one-half. The nature of operations within the continuous process industries would tend to make holiday and shift work more prevalent and overtime less prevalent than in other industries and produce industry differences in expenditure ratios even where there are no material differences in the rates. Similarly, the level of economic activity within an industry would affect the amount of overtime scheduled during the year and could produce year-to-year

Wisconsin; and West-Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming. 'Straight-time payroll amounts to gross pay less premium pay.

* Less than 0.05 percent or 0.05 cent.

Plant hours are the total hours paid for less leave hours.

NOTE: Because of rounding, sums of individual items may not equal totals.

differences in the expenditure ratios for the industry and for all manufacturing, without any changes in the overtime rates.

Legally Required Payments. Social security constituted about half (2.2 percent) of the 4.5 percent of gross production worker payroll contributed by employers for legally required payments. The remainder was made up of 1.4 percent for unemployment insurance taxes, 0.8 percent for workmen's compensation, and a relatively minor proportion for other legally required payments, almost entirely temporary disability insurance. For each payroll hour, the employer contributions were 4.9 cents for social security, 3.2 cents for unemployment insurance, 1.9 cents for workmen's compensation, and 0.1 cent for other payments, or a total of 10.1 cents.

Among the regions, variation in expenditures for legally required programs ranged from 4.0 percent in the North Central region to 5.0 percent in the West. The higher expenditure ratio in the

West was primarily due to relatively high workmen's compensation expenditures. Differences among the regions for the other benefits were smaller.

There were indications of an inverse relationship between industry expenditure ratios for the sum of legally required payments and average hourly earnings in the respective industries, reflecting a decided inverse relationship in the principal component, social security. Contributions for old-age, survivors', and disability insurance are based on the first $4,800 earned by each worker during the year, and once the statutory maximum

is passed, the expenditure ratio declines. The expenditure ratios for unemployment insurance taxes were influenced by both statutory maximums on the earnings base (generally $3,000) and contribution rates (which in some States depend on the individual employer's unemployment experience rating), and the ratios for workmen's compensation were probably determined by the nature of the industry. The lowest ratios for the sum of the legally required benefits were reported by the higher paying industries-3.0 percent of gross payroll in petroleum refining and 3.3 percent in printing. The lower paying lumber and wood