Federal government wage indexes

Abstract

For nearly 50 years, the Employment Cost Index (ECI) has been providing the public with estimates of the change in employer labor costs. We explore the practicality of constructing federal wage indexes, in the spirit of the ECI, using Office of Personnel Management (OPM) salary data. To accomplish this task, we aggregate OPM records into occupation and industry groups. Although these salary data have a crosswalk for mapping OPM occupation codes into the Standard Occupational Classification system, no corresponding crosswalk exists for industries. A key hurdle, therefore, involves creating a crosswalk that assigns industry codes to OPM establishments. We create this crosswalk by developing an algorithm that uses Quarterly Census of Employment and Wages data and machine-learning tools to match agencies with a unique industry. With this agency-North American Industry Classification System crosswalk, we calculate annual Laspeyres, Paasche, and Fisher wage indexes for several aggregations. The resulting wage inflation rates are plausible and do not deviate substantially from the corresponding private industry and state and local wage inflation rates.