Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, April 24, 1990                   TAG: 9004240514
SECTION: BUSINESS                    PAGE: A-5   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

JOB COSTS UP 5.5 IN PAST YEAR

The Labor Department attributed much of the increase in its Employment Cost Index, one of the best measures of wage inflation, to the continued soaring cost of health insurance and other benefits.

Health insurance alone increased 12.1 percent for the year ending in March, following the 13.4 percent rise registered for the 12-month period ending in March 1989.

The 5.5 percent rise in overall employment costs was the largest 12-month surge since March 1984, when wages, benefits and salaries increased by 5.9 percent, the government said. A year ago, employment costs had gone up 4.8 percent for the same period.

Economists have been concerned that tight labor markets are pushing labor costs higher and worsening the nation's inflation problems. Last month, the nation's already relatively low unemployment rate fell a notch to 5.2 percent.

Allen Sinai, chief economist for the Boston Co., called the report a "big negative on the inflation outlook."

"It shows that we have a rock-hard, high employment cost lump facing American business that is being passed on at the retail level," Sinai said.

Today's report showed that wages and salaries rose 4.2 percent over the year ending in March, the same as the increase from a year earlier, while benefit costs jumped 7.2 percent, compared with a 5.4 percent rise a year before.

The jump in benefit costs was blamed on higher health insurance and an increase in social security taxes, up from 7.51 percent to 7.65 percent.

Workers in the service sector of the economy fared slightly better than the manufacturing sector in pay gains. Service industries saw wages and salaries go up by 4.2 percent in the past 12 months compared to a 4.0 percent rise for the manufacturing sector.

The gain reflects the fact that service industries have been more affected by shortages of workers in the past year.

However, there was a wide split in pay gains in the services category. At the low end, wages in food stores and banking rose just 2.8 percent while wages at hospitals and health care clinics shot up 6.3 percent.

Non-union workers continued on a six-year pattern of gaining better wage and salary advances than their union counterparts. Over the past 12 months, wages and salaries rose 4.4 percent for non-union workers while increasing 3.4 percent for union workers.

With benefits included, compensation costs rose 5.4 percent for non-union workers while increasing 4.3 percent for those in unions.

State and local government workers gained 5.6 percent increases in wages and salaries over the past year, compared with the 4.7 percent increases gained a year ago. Health services workers received the highest increases, 6.7 percent.