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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

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

“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

(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.

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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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  • $\begingroup$ Ah, thank you so much. This answer makes a lot of sense. $\endgroup$ – Atticus Nov 20 '18 at 14:49

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