Insurance Spurs 5% Increase in Job Costs : Economy: Wage and salary gains lagged behind inflation last year, the Labor Department says.

WASHINGTON —  Employment costs rose 5% last year, largely because of rising health insurance costs, while wage and salary gains lagged behind inflation, the government reported today.

The Labor Department said its employment cost index, considered one of the best gauges of inflationary wage pressures, showed an increase equal to the 5% rise in 1988 in wages, salaries and benefits paid to American workers.

Benefit costs jumped 6.1% in 1989, compared to a 6.8% gain in 1988. But the 1988 increase was attributed in part to a 5% increase in the employer’s Social Security tax rate--a rate that stayed steady in 1989. Escalating health insurance costs last year kept the cost of benefits high even without a change in the Social Security tax, the Labor Department said.

Before 1988, benefit costs had grown steadily for the last three years at about 3.5%.

Although overall employment costs rose, the rate of wage and salary increases lagged behind inflation for the third straight year. Wage and salary gains rose 4.2% in 1989, below the year’s 4.6% inflation rate. In 1988, those gains were 4.1% while inflation was 4.4%.

According to the Labor Department, employment costs for state and local government workers rose 6.2%, up from 5.6% in 1988.

It cost private industry employers 4.8% more last year to pay wages, salaries and benefits than it did in 1988, the department said, compared with a 4.9% gain in 1988 over 1987. Federal government costs are not included in the report.

Sales workers, whose pay is heavily influenced by commissions, experienced a 7% wage jump in 1989, compared with a 6.6% gain in 1988 and just a 1% gain in 1987.

Workers in the rapidly expanding service sector of the economy, where the tight labor market is felt, experienced a 4.5% wage gain, while those working in goods-producing industries saw their pay increase on average by 3.9%.

For the sixth straight year, non-union workers in private industry received greater wage and salary increases than did their unionized counterparts, with increases averaging 4.1% and 3.1%, respectively.

State and local government workers received on average a 5.3% pay gain in 1989, up from the 4.8% increase of 1988, with the increase in that sector highest among hospital workers, who averaged 6.1% pay raises.