Pay, Benefits Up 5.2%; Inflation Fears Fanned

Wages, salaries and other benefits paid to American workers shot up 5.2% in the 12 months ending in June, the government reported today.

The Labor Department said its employment cost index, considered one of the best gauges of inflationary wage pressures, was pushed ahead both by rising wage costs and higher benefit costs.

The 5.2% jump was well above the 4.5% increase of a year ago for the 12-month period ending June, 1989, the department said.

Today’s report was sure to add to analysts’ worries that the nation is suffering from entrenched inflation. Last week, the government reported that consumer inflation has risen 5.9% so far this year, well above the 4.6% inflation rate for all of last year.

In another sign of higher wage pressures, the Labor Department said today that major collective settlements reached so far this year provided average wage increases of 3.8% over the life of the pacts, up from a 2.5% average increase the last time those contracts were negotiated.

Allen Sinai, chief economist at the Boston Co., called the government’s data on rising labor costs “more of the same story on inflation.”

“The message is that there is no relief in sight. . . . It is stable, but stable at a high and entrenched rate,” Sinai said.

Following the bad news on inflation last week, analysts said it is unlikely that the Federal Reserve will be able to stray any time soon from its inflation-fighting campaign and lower interest rates.

The 5.2% rise in the cost index for private industry workers covered total compensation, which includes wages, salaries and the employer costs of providing such benefits as health insurance.

The wage and salary component of the index climbed by 4.5% in the 12 months ending in June while benefit costs rose a sharper 6.9%.

Part of the jump in wages and salaries reflected the rise in the minimum wage that took effect April 1, when the minimum wage went from $3.35 an hour to $3.80 an hour, the Labor Department said.

However, the impact of that increase--the first rise in the minimum wage in 10 years--was probably minimal, the agency said.

Workers in the service sector of the economy fared better than the manufacturing sector in pay gains, the government said.

Service industries saw wages and salaries go up by 4.6% in the last 12 months compared to a 4.2% rise for the manufacturing sector.