Employment and employee compensation in the 1977 input-output accounts.

Yuskavage, Robert E.

THIS article presents employment and employment-related estimates consistent with the output measures from the 1977 input-output (I-O) accounts. Similar estimates were published for 1967 and 1972. The estimates cover employment, employee compensation, wages and salaries, and supplements to wages and salaries (supplements) at both the summary 85-industry/commodity (two-digit) I-O level and the detailed 537-industry/commodity (six-digit) I-O level. The estimates also cover employment, hours worked, and wages and salaries for production workers in mining and manufacturing industries, and value added and total industry output for all industries (table 1).

The employment estimates are the annual average of the number of full-time and part-time employees on payrolls for selected months during the year. Self-employed persons are excluded.

The compensation estimates were published last year in the I-O accounts. For several industries, however, the estimates in table 1 differ from those published previously because they incorporate revisions. The revisions and previously published estimates for these industries are shown in table 2. The revisions do not affect an industry's output or value added, but rather the composition of value added. The estimates in the 1977 I-O accounts can be revised by adding the revision shown in table 2 to the compensation (I-O 88.0000) component of value added for each industry and subtracting the revision from the property-type income (I-O 90.0000) component.

Uses of the data

The estimates presented in this article can be used with the I-O tables to determine the direct and indirect effects of a change in final demand on employment, on compensation and its components, and on hours worked. For example, the estimates can be used to calculate an employment multiplier--the number of employees required (both directly and indirectly) by all industries to produce the output generated by a $1 change in final demand for a specific commodity. This calculation requires three steps. First, the ratios of employment to total output of each industry are computed; these are the direct requirements coefficients for employment. Next, each coefficient is multiplied by the particular industry's total requirements coefficient, which is obtained from the industry-by-commodity total requirements table and which shows the output of the industry generated by a $1 change in final demand for a specific commodity. This product is the employment required by an industry to produce the output generated by the $1 change in final demand. Finally, employment is summed over all industries to yield the employment multiplier. Multipliers can be calculated for each of the employment-related measures in table 1 by replacing employment with the appropriate measure in the above procedure.

Employment multipliers, in turn, can be used in several ways. The Bureau of Labor Statistics uses them in preparing occupation-specific employment tables to project occupational requirements by industry; these projections are helpful in formulating manpower training programs and in local and regional development planning. (See item 20 in appendix A, which provides references on employment multipliers and their uses.) Employment multipliers have also been used to investigate the impact of changes in technology and of changes in the pattern of U.S. foreign trade on employment and capital formation. (See items 8 and 9.)

Industry definitions

The industry classification system used in preparing the I-O accounts and the employment estimates is shown in appendix B. It is based on the 1977 Standard Industrial Classification (SIC), which classifies establishments into an SIC industry on the basis of their principal product or service. For the most part, six-digit I-O industries correpond to four-digit SIC industries. However, it is sometimes necessary to depart from the SIC and to shift an activity from the industry of the establishment in which the activity occurs to the industry in which it is the primary activity. These adjustments--redefinitions and force-account construction--are made to attain a greater degree of technological homogeneity within the I-O industry.

A redefinition shifts both the value of output and the required inputs for an activity--intermediate inputs and value added (along with the employment associated with the employee compensation component of value added)--from the industry producing the output to the industry where the activity is primary. For example, bars and restaurants located in hotels are redefined from the hotels and lodging places industry (the industry of the establishment in which the activity occurs) to the eating and drinking places industry (the industry in which the activity is primary). Thus, in effect, redefinitions convert industries into activities. The redefinitions of employment at the two-digit I-O industry level are shown in table 3.

Force-account construction is construction work (new as well as maintenance and repair) performed by employees of nonconstruction establishments on behalf of the establishments (and industries) in which they are employed. In the I-O accounts, all construction is included in the output of one of the construction industries regardless of which industry performs the work. Therefore, the inputs and the associated employment are shifted from the industries in which the force-account construction takes place to the appropriate I-O construction industry. In addition, the value of output of force-account construction, including property-type income, must be imputed--that is, a market value calculated for a nonmarket activity--and assigned to a construction industry. The treatment of force-account construction is very much like a redefinition, except that the value of the output is imputed. The force-account construction adjustments of employment at the two-digit I-O industry level are also shown in table 3.

Sources and methods

For most industries, initial estimates of employment, wages and salaries, supplements, and the measures for production workers were obtained from the econom ic censuses, as were the output measures for the 1977 I-O accounts. For industries not covered by the economic censuses, initial estimates were obtained, whenver possible, from the same sources that were used for output in the I-O accounts. Where this was not possible, estimates of employment and of wages and salaries were obtained from the Bureau of Labor Statistics. Where supplements were not available from the source used for output, they were derived from the more aggregated industry estimates in the national income and product accounts (NIPA's).

The initial estimates were converted to annual averages where necessary and then adjusted so that their totals would equal the totals of more aggregated NIPA industry estimates. The NIPA estimates for employment, wages and salaries, and supplements used as controls were consistent with the preliminary revised estimates of the NIPA's for 1977 published in the May 1984 issue of the SURVEY.

Finally, the estimates were adjusted to the I-O industry definitions. For each industry affected by a redefinition or by force-account construction, adjustments were made to employment, wages and salaries, and supplements. These adjustments, which are not necessary for production, workers, affect the industry distributions, but not the totals.