STATEMENT OF EWAN CLAGUE COMMISSIONER OF LABOR STATISTICS U. S. DEPARTMENT OF LABOR BEFORE THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE OF THE HOUSE REPRESENTATIVES ON FEDERAL EMPLOYEE PAY LEGISLATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00965R000400110023-0
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 11
• Document Creation Date: December 15, 2016
• Document Release Date: January 9, 2004
• Sequence Number: 23
• Publication Date: April 26, 1960
• Content Type: STATEMENT

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STATEMENT OF EWAN CLAGUE
COMMISSIONER OF LABOR STATISTICS
U.S. DEPARTMENT OF LABOR
BEFORE THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE OF
THE HOUSE OF REPRESENTATIVES ON FEDERAL
EMPLOYEE PAY LEGISLATION
April 26, 1960
Mr. Chairman and Members of the Committee:
Your Committee has requested me to testify on the Consumer
Price Index in relation to salaries of Federal employees. Before
citing any figures, I would like to take a few minutes to outline
just what the index is--and what it is not.
Stated briefly, the index is designed as a measure of the
changes in the prices of goods and services purchased by wage and
clerical employees in private industry and in government. The first
step in the preparation of the index is a survey of the expenditures
of the families of employees. The last survey of this kind was con-
ducted in 1950-51, when the index was being revised. By visits to
representative city families we obtain information on the ways in
which each family spent its income over a period of a year. The
results, when averaged for the nation as a whole, provide us with
a list of the important items of expenditure--food, clothing, housing,
transportation, etc. The list includes both goods (commodities) and
services, such as medical care, reading and recreation, repairs and
maintenance on a home, personal care, etc.
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We call this complete list a "market basket." The present
list consists of about 300 different goods and services, which are
selected to be representative of the thousands of different things
which consumers buy. We do not consider it necessary to price every-
thing. The ones we have selected are the important ones. Further-
more, as a result of the expenditure data, we are able to assign a
weight or importance to each of these items in the average family's
budget. For example, food as a whole has a weight or importance of
nearly 29 percent; medical care, a little more than 5 percent;
apparel, about 9 percent, etc.
Having obtained the list of items, we then go out into the
stores and other establishments to get the prices. A few items,
such as street car fares, gas and electricity rates, etc., we can
collect by mail. Another group of items can sometimes be collected
by telephone. However, in the main, we get the information by
personal visit of our agents to the stores where the goods are
bought. We collect this price information from 46 cities and towns
throughout the United States. In the making of the index we process
a total of over 150,000 prices every month.
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When the prices are collected we assign to each price the
appropriate weight or importance in the total market basket, and
then we add the whole combination together. That gives us a figure
from which to start measuring the changes in prices. The next
month we repeat this performance and get another figure exactly
like the first, except for one difference, namely, the prices of.
various items have changed in the meantime and so this second
month''s compilation of prices comes out higher or lower than the
first one's. If we designate the first month as an index of 100,
which simply means we arbitrarily call it 100 percent, the results
for the second month might be 101 or 99. In other words, in one
case prices have risen one percent; in the other case, they have
fallen one percent.
This explanation I have given is oversimplified, but it
is basically correct. The base period we now use in the compila-
tion of the index is the 36-month average of January 1947 through
December 1949, as recommended by the Bureau of the Budget. We
regard one month as too narrow a base. In fact, we regard even a
L2-month average for one year as somewhat too narrow. The prewar
base period which we formerly used for the index was the average for
5 years--1935-1939.
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So today, with the 1947-49 average being designated as 100,
the index for recent months is a little higher than 125. This means
that consumer prices have risen about 25 percent above the 1947-49
average.
Of course, not all prices have risen to the same degree;
some have gone up much more than the average; others have gone up
much less. In every single month we find some prices that have
risen and some which have fallen. There is a great deal of move-
ment of prices every month, even though the average for the whole
group does not change very much.
I would like now to emphasize one point which is frequently
misunderstood. An index such as I have described measures the
chafe in prices of a fixed market basket of goods and services.
It measures the effect of price changes on the cost of living of
the average wage and clerical worker's family. It does not measure
the total change in their cost of living. When the index was first
developed back in World War I it was called the Cost of Living Index.
However, this led to so much misunderstanding that in 1945 the name
was changed.
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The reason for the misunderstanding is this. There are
many factors in family living which can lead to a change in the
cost of living. For example, if a new baby is born into the family,
their cost of living will certainly increase, but it is not due to
a rise in prices. Likewise, if the family decides to buy a car
instead of using public transportation, their costs are likely to
rise, but this is because their standard of living has risen. If
people move from one city to another, they may find their living
costs increased--in fact, they are quite likely to find it working
out that way. But this is not necessarily due to a change in
prices in either city. So, there are many factors which cause
families to pay more to live the way they want to live. What our
index does is to sort out one of these factors, namely, the rise,
or fall, in the prices of the goods and services the average family
buys.
With this brief, and perhaps inadequate, summary on the
index and its meaning, I turn now to the recent behavior of the
index. As you know, we released the March index to the public
yesterday. The index reported was 125.7, which means that in
March it was 25.7 percent above the 1947-49 average. I have been
asked to report the change since June 1958, which was the date of
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the last Congressional action on Federal salaries. The index in
that month was 123.7. So the increase since that time has been
2.0 points, or 1.6 percent.
I must make clear the difference between points of change
and the percentage change. When we measure from the base of 100,
the percents and the points are the same. However, when we start
measuring from some other date, such as June 1958, that month be-
comes 100 for the percentage calculation, and so the points and
the percents will differ. As you can readily see, one point in
125 is not 1 percent; it is 0.8 of 1 percent; and two points equal
1.6 percent.
I have brought with me the whole table of United States
monthly indexes, so I can supply information on the changes which
have taken place between any two dates in which you are interested.
We also publish indexes for 20 large cities. The city indexes
cannot be used to measure differences in price levels or in living
costs between cities. They show only how prices in one city have
changed over a period of time.
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Wage Surveys
Your Committee has also asked me to explain the wage
surveys which are now being conducted by the Bureau of ~abor
Statistics and which have been discussed earlier in these Commit-
tee hearings.
First of all, the Bureau for many years past has been
making Community Wage Surveys. Through these surveys the Bureau
has collected, analyzed, and. published wage and salary information
on some 60 occupations, both blue-collar and white-collar. These
are cross-industry occupations which are found both in manufac-
turing and in many nonmanufacturing industries, such as public
utilities, transportation, trade, finance, etc. in recent years,
these surveys had been confined to about 20 of the largest metro"
politan areas in the country.
Through the funds which were made available last year, the
Bureau was enabled to expand these Community Wage Surveys to in-
elude in this fiscal year a total of 60 metropolitan areas,-large,
intermediate, and small. These 60 areas were chosen $n such a way
as to represent the entire 188 such areas in the United States. In
the coming fiscal year, the Bureau will cover a total of $0 areas
(the 60 areas studied this year plus 20 areas to be studied for the
first time next year). These are the local surveys which are also
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used by the Defense Department and other government agencies in fixing
the wage rates of Federal blue-collar employees. This cooperative
effort on the part of the government agencies makes it possible to
use a single report from an employer to serve all these purposes.
Only one visit is needed to each employer. This is economical to
the government and advantageous to the cooperating employers.
The military establishment requires information on some
additional occupations not included in the Bureau list, and our
agents collect this information also. There is another important
point in this cooperation. The Bureau, from time to time, is re-
quired to adjust the timing of its surveys in order to fit the needs
of the Wage Boards. Thus, we may advance or postpone the timing of
a survey in a given community in order to fit the needs of a Wage
Board.
The Bureau plan for this fiscal year covers 9,500 establish-
ments in the 60 areas which are being surveyed.
The additional funds for this survey became available only
in September of last year. It required some time for the Bureau to
recruit and train the field staff to do the work. Nevertheless, wage
collection was completed in 15 cities by December. Preliminary re-
sults are now available on more than 30 cities, and collections
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will be completed on all 60 by the end of this fiscal year. As
each of these communities is completed, the results are published.
The Committee should note that Wage Board rates are estab-
lished on a local area basis, so that as each community is completed
the wage decisions can be made.
When our tabulations and analyses are completed, we shall
have detailed wage information on the 60 occupations in each of the
60 areas, as well as for the nation as a whole, and for four broad
regions. The nationwide averages for these blue-collar and cleri-
cal jobs will be available some time in the fall.
So much for the wage surveys of blue-collar and clerical
occupations. Much of the discussion before this Committee has
focused upon another nttr ey which was added on top of the above
program. This is a nationwide survey of pay rates for professional
and managerial personnel. This involves occupations such as managers,
supervisors, auditors and accountants, engineers, scientists, per-
sonnel directors, etc. Within most of these occupations separate
information will be obtained for a number of work level classifica-
tions. This is a survey of jobs in private industry, designed to be
comparable to Federal classification grades 5 through 15.
The need for a salary survey in industry covering the range
of Federal positions under the Classification Act has been recognized
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for several years in the Executive Branch. An interdepartmental
work group of technicians was established in May 1958 to develop
a design for such a study. Reflecting the joint work of the Bureau
of the Budget, Civil Service Commission, Office of the Special
Assistant to the President for Personnel Management, and the Bureau
of Labor Statistics, an initial survey plan was pre-tested by the
Bureau of Labor Statistics in late 1958 and early 1959. The special
work group filed a final report on the survey design with the Bureau
of the Budget in April 1959. The Bureau's ability to undertake this
survey was dependent on the appropriation which became available in
September of 1959. Collection of information began in January of
this year, as soon as experienced staff became available and pre-
paratory work, including special staff training, was completed.
For this survey, the Bureau expects to cover 1,400 estab-
lishments in 60 areas. These 1,400 are a subsample of the 9,500
that will be covered in the basic survey. Salary survey reports
have been completed for nearly 1,100 establishments, and the
remaining 30? will be completed in May. This is the survey on
which we promised a report to the Bureau of the Budget by next
September.
The Committee should note that this type of salary infor-
mation will not be available on a city-by-city basis, but only for
the nation as a whole.
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This was an especially difficult survey to make. In the
first place, it was new for the employers who have been accustomed
to reporting to the Bureau, for years past, on blue-collar wages
and clerical white-collar wages. They had not had the experience
of reporting on these higher-grade supervisory and professional
classifications.
In the second place, these salaries are a sensitive
subject in many business firms. Generally, these salaries are on
separate payrolls maintained in a different part of the organiza-
tion. Frequently it was necessary for the Bureau agents to
establish contact with top management in the firms in order to
obtain the voluntary cooperation that was needed. Special problems
were introduced by the collection of information on bonus pay for
professional and managerial positions.
Even after voluntary cooperation of firms has been obtained,
it is a time-consuming and technically difficult job to match the
job descriptions, developed for use in the survey, with the duties
and responsibilities of positions in industry.
Despite all these difficulties, the survey is on schedule
and we expect to complete our work in the time that we originally
planned. Furthermore, the experience gained in this survey will make
it possible to institute improvements in future surveys of this kind.
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