<p>The labour rate index is actually synonymous with a more popular term, the labour cost index.</p>

<p>In the same way that the consumer price index measures inflation of consumer prices, the labour cost index measures the cost of purchasing labour. For example, 12 dollars could buy you more labour 30 years ago than it can now. Inflation indexes like these can be used to normalize historical data. That way we can compare changes and trends across years without worrying about labour cost being inflated.</p>

<p><a href="https://nso.gov.mt/en/nso/Sources_and_Methods/Unit_C2/Labour_Market_Statistics/Pages/Labour-Cost-Index.aspx" rel="nofollow noreferrer">https://nso.gov.mt/en/nso/Sources_and_Methods/Unit_C2/Labour_Market_Statistics/Pages/Labour-Cost-Index.aspx</a></p>

<p><a href="https://www150.statcan.gc.ca/n1/en/pub/71-586-x/71-586-x2001001-eng.pdf?st=mrJ1RXhQ" rel="nofollow noreferrer">https://www150.statcan.gc.ca/n1/en/pub/71-586-x/71-586-x2001001-eng.pdf?st=mrJ1RXhQ</a></p>

CC BY-SA 4.0
2018-11-20T03:26:40.843Z
2018-11-20T03:26:40.843Z
Lee Sin
<p>For an report (professional not academic) I was asked for the Labor Rate Index of my region, which is a data point I've never been asked for before. </p>

<p>After some googling I've found the term referred to in a small number of papers (listed below) and oddly they seem to be from military organizations. Often times when I'm asked for a datapoint that uses the word "index", it comes from a proprietary report that costs money. I apologize if that's the case. Anyways, here are some references I've found to a Labor Rate Index with no explanation of what it is: </p>

<p><a href="http://cade.osd.mil/content/cade/files/csdr/guidance/Escalation%20Handbook__20170118.pdf" rel="nofollow noreferrer">INFLATION AND ESCALATION BEST PRACTICES FOR COST ANALYSIS: ANALYST HANDBOOK</a></p>

<blockquote>
  <p>The term Constant Price (CP$) may be used to refer to costs normalized
  with an escalation index. Constant Price indicates what a narrowly
  defined basket of goods or services would cost had it been fully
  produced and purchased in the base year. Examples of Constant Prices
  include contractor labor rates normalized with a <strong>labor rate index</strong>;
  aircraft unit costs normalized with an aircraft index; and fuel costs
  normalized with a fuel price index. Constant Prices remove both
  inflation and real price change from observed dollars, returning the
  base period’s price.</p>
</blockquote>

<p><a href="https://www.dau.mil/locations/midwest/Documents/Cost%20Estimating%20and%20Escalation2.pdf" rel="nofollow noreferrer">Inflation &amp; Escalation</a></p>

<blockquote>
  <p>“Constant Price” (CP) may be used to refer to costs normalized with an escalation index</p>
  
  <p>– Constant Price indicates what a narrowly defined basket of goods
  would have cost in a base year</p>
  
  <p>– Examples of Constant Price include contractor labor rates divided by
  an <strong>labor rate index</strong>, aircraft unit costs divided by an aircraft
  index, etc.</p>
  
  <p>– CP addresses market forces (supply and demand) with respect to goods
  and services</p>
  
  <p>– CP is the normalization used for estimating purposes</p>
</blockquote>

<p><a href="http://www.dtic.mil/dtic/tr/fulltext/u2/a046977.pdf" rel="nofollow noreferrer">A STUDY OF SHIP ACQUISITION COST ESTIMATING IN THE NAVAL SEA SYSTEMS COMMAND</a></p>

<blockquote>
  <p>(2) A <strong>Labor Rate Index</strong> Provides Similar Allowance For Inflation In The
  Labor Portion Of The Estimate Since 1970, the Branch has produced an
  annual guidance table for use by estimators in selecting labor bid
  rotes. Data sources for this task are some 80 union-management
  agreements. Bureau of Labor
  Statisticsstudies,historicalbids,U.S.DepartmentofCommercesta- tistics,
  naval shipyard employment figures and other sources. This guidance
  promotes consistency in all estimates and is intended to narrow ihe
  margin of error over previous personalized methods.</p>
</blockquote>

<p>Anyways, as you can see the term is never defined or sourced. I've tried reaching out to the company to find out why they asked for this, but I'm working through a consultant and so many degrees of separation make it hard to get nit-picky questions answered. </p>

<inflation><data-request>
What is a Labor Rate Index
Atticus
# What is a Labor Rate Index

(Asked by: username_0 on 2018-11-19)

For an report (professional not academic) I was asked for the Labor Rate Index of my region, which is a data point I've never been asked for before.

After some googling I've found the term referred to in a small number of papers (listed below) and oddly they seem to be from military organizations. Often times when I'm asked for a datapoint that uses the word "index", it comes from a proprietary report that costs money. I apologize if that's the case. Anyways, here are some references I've found to a Labor Rate Index with no explanation of what it is:

[INFLATION AND ESCALATION BEST PRACTICES FOR COST ANALYSIS: ANALYST HANDBOOK](http://cade.osd.mil/content/cade/files/csdr/guidance/Escalation%20Handbook__20170118.pdf)

> The term Constant Price (CP$) may be used to refer to costs normalized
> with an escalation index. Constant Price indicates what a narrowly
> defined basket of goods or services would cost had it been fully
> produced and purchased in the base year. Examples of Constant Prices
> include contractor labor rates normalized with a **labor rate index**;
> aircraft unit costs normalized with an aircraft index; and fuel costs
> normalized with a fuel price index. Constant Prices remove both
> inflation and real price change from observed dollars, returning the
> base period’s price.

[Inflation & Escalation](https://www.dau.mil/locations/midwest/Documents/Cost%20Estimating%20and%20Escalation2.pdf)

> “Constant Price” (CP) may be used to refer to costs normalized with an escalation index
>
> – Constant Price indicates what a narrowly defined basket of goods
> would have cost in a base year
>
> – Examples of Constant Price include contractor labor rates divided by
> an **labor rate index**, aircraft unit costs divided by an aircraft
> index, etc.
>
> – CP addresses market forces (supply and demand) with respect to goods
> and services
>
> – CP is the normalization used for estimating purposes

[A STUDY OF SHIP ACQUISITION COST ESTIMATING IN THE NAVAL SEA SYSTEMS COMMAND](http://www.dtic.mil/dtic/tr/fulltext/u2/a046977.pdf)

> (2) A **Labor Rate Index** Provides Similar Allowance For Inflation In The
> Labor Portion Of The Estimate Since 1970, the Branch has produced an
> annual guidance table for use by estimators in selecting labor bid
> rotes. Data sources for this task are some 80 union-management
> agreements. Bureau of Labor
> Statisticsstudies,historicalbids,U.S.DepartmentofCommercesta- tistics,
> naval shipyard employment figures and other sources. This guidance
> promotes consistency in all estimates and is intended to narrow ihe
> margin of error over previous personalized methods.

Anyways, as you can see the term is never defined or sourced. I've tried reaching out to the company to find out why they asked for this, but I'm working through a consultant and so many degrees of separation make it hard to get nit-picky questions answered.

**Tags:** inflation, data-request

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## 1 answers

### Answer by username_1 on 2018-11-20. Score: 2 | Accepted answer

The labour rate index is actually synonymous with a more popular term, the labour cost index.

In the same way that the consumer price index measures inflation of consumer prices, the labour cost index measures the cost of purchasing labour. For example, 12 dollars could buy you more labour 30 years ago than it can now. Inflation indexes like these can be used to normalize historical data. That way we can compare changes and trends across years without worrying about labour cost being inflated.

<https://nso.gov.mt/en/nso/Sources_and_Methods/Unit_C2/Labour_Market_Statistics/Pages/Labour-Cost-Index.aspx>

<https://www150.statcan.gc.ca/n1/en/pub/71-586-x/71-586-x2001001-eng.pdf?st=mrJ1RXhQ>


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