Employment Quality Index

The Economic Policy Institute's (EPI's) Employment Quality Index (EQI) is a summary measure of aggregate employment quality designed to be both easily understandable and based upon economic theory.

The goal of the EQI is to "make sense" of a number of regularly released economic indicators that, individually, do not always give a complete picture of employment conditions. Indexed to 100 in January 1989, the EQI stood near 111 throughout 2003. EPF keeps an archive of all EQI releases. It recovered from a low of 94 during the recession of the early 1990s, and has risen strongly during the last two years. The EQI is calculated using data from publicly available series on employment, wages and public/employee opinion, which are categorized into four major sub-components:

Compensation: The EQI uses the BLS Employment Cost Index (ECI) private industry compensation series, adjusted for inflation. For 1990 forward we use the CPI-U-XG as our inflation measure and for years prior to 1990 we use the CPI-U (minus .8 percentage points to account for errors in the CPI-U). The ECI's quarterly observations are transformed into monthly figures by using a 3 month moving average.

Job Quality: The job quality series of the EQI is based on a ratio of employment in "higher-paying" and "lower-paying" jobs, defined by analyzing median wages for 90 industry and occupation categories. The categories that employed the higher paid 50 percent of the workforce in 1988 (based on median weekly earnings) were identified as higher-paying, while the categories in which the lower paid 50 percent were employed were classified as lower-paying.

Job Availability: The job availability component is based upon the Bureau of Labor Statistics series for the seasonally adjusted civilian unemployment rate. To maintain comparability with the other components, the job availability series is constructed so that an increase in the unemployment rate makes the series fall – higher unemployment means lower job availability.

Employee Attitudes and Preferences: This component of the EQI measures how employees feel about their employment prospects. It is comprised of three series:

-Unemployed workers who left their last job voluntarily
-Part-time workers who are voluntary
-Conference Board's series on the share of individuals who think that jobs are plentiful.

This month's EQI can be found here.