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Labour Cost Index (Salary and Wage Rates): September 2014 quarter
Embargoed until 10:45am  –  05 November 2014
Commentary

Annual wage rates grow 1.6 percent

The labour cost index (LCI) increased 1.6 percent in the year to the September 2014 quarter. This follows a 1.7 percent increase in the year to the June 2014 quarter.

At the same time last year, the LCI had an annual increase of 1.7 percent.

 

 

Salary and ordinary time wage rates increased 1.7 percent in the year to the September 2014 quarter. This follows a 1.6 percent increase in the year to the June 2014 quarter.

Overtime wage rates increased 2.2 percent in the year to the September 2014 quarter. This follows a 2.3 percent increase in the year to the June 2014 quarter.

Private sector annual wage rate growth edges up, public sector eases

Private sector salary and wage rates (including overtime) increased 1.9 percent in the year to the September 2014 quarter. This follows a 1.8 percent increase in the year to the June 2014 quarter.

Public sector salary and wage rates (including overtime) increased 1.0 percent in the year to the September 2014 quarter. This follows a 1.2 percent increase in the year to the June 2014 quarter. The latest annual growth in the public sector came from increases in central government (up 1.0 percent) and local government (up 1.9 percent). This is the lowest annual increase for central government since the year to the March 1995 quarter.

 

Mean and median increases both up over the year

Of all salary and ordinary time wage rates in the LCI sample, 57 percent rose in the year to the September 2014 quarter. In contrast, 57 percent increased in the year to the June 2014 quarter and 54 percent increased in the year to the September 2013 quarter.

Of the 57 percent that increased in the year to the September 2014 quarter, there was:

  • a median (middle) annual increase of 2.5 percent (up from 2.4 percent in the year to the June 2014 quarter)
  • a mean annual increase of 3.3 percent (up from 3.1 percent in the year to the June 2014 quarter).

In the September 2014 quarter, 18 percent of all salary and ordinary time wage rates rose. In contrast, 16 percent increased in the June 2014 quarter and 15 percent increased in the September 2013 quarter.

Of the 18 percent that increased in the latest quarter, there was:

  • a median (middle) quarterly increase of 2.5 percent
  • a mean quarterly increase of 2.9 percent.

In the year to the September 2014 quarter, the mean increases by sector were:

  • private sector, 3.5 percent
  • public sector, 2.3 percent.

In the year to the September 2014 quarter:

  • 36 percent of salary and wage rates rose no more than 3 percent
  • 21 percent of salary and wage rates rose more than 3 percent.

In contrast, in the year to the September 2013 quarter:

  • 35 percent of salary and wage rates rose no more than 3 percent
  • 19 percent of salary and wage rates rose more than 3 percent. 

Analytical unadjusted LCI shows annual growth of 2.5 percent

The analytical unadjusted series is an additional measure that complements the official LCI and Quarterly Employment Survey (QES) indicators. Like the LCI, the unadjusted series measures changes in salary and wage rates for a fixed quantity of labour, but reflects quality change within occupations in addition to price change.

Unadjusted salary and ordinary time wage rates increased 2.5 percent in the year to the September 2014 quarter, after increasing 2.9 percent in the year to the June 2014 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 3.0 percent in the year to the September 2014 quarter, after increasing 3.4 percent in the year to the June 2014 quarter.

Analytical unadjusted and adjusted salary and ordinary time wage rates
Private sector and all sectors combined
September 2014 quarter
Sector Percentage change from previous quarter  Percentage change from same quarter of previous year 
Adjusted  Unadjusted  Adjusted  Unadjusted 
Private sector 0.5 0.7 1.9 3.0
All sectors 0.5 0.6 1.7 2.5

QES and LCI ordinary time rises

Annual percentage changes in salary and ordinary time wage rates vary between the QES and LCI measures. For the year to the September 2014 quarter:

  • LCI salary and ordinary time wage rates were up 1.7 percent
  • QES average ordinary time hourly earnings increased 2.3 percent
  • the LCI analytical unadjusted series was up 2.5 percent.  

 

The QES average earnings statistics are often compared with the LCI salary and ordinary time wage rates. However, the QES average earnings statistics reflect not only changes in salary and wage rates, but also compositional changes between and within businesses in surveyed industries.

In comparison, the LCI measures changes in salary and wage rates that employers pay to have the same job done to the same standard. Rises to match the market, retain staff, or reflect the cost of living are shown in the LCI, while rises reflecting individual performance or years of service are filtered out.

The LCI analytical unadjusted series fixes the amount of work, but reflects quality changes within the occupations (such as individual performance or years of service) in addition to price change.

For more information about the differences between the LCI and the QES, please see 'Comparing the QES and the LCI' under the data quality section of  Quarterly Employment Survey: September 2014 quarter.

Comparison with consumer prices

The prices of goods and services bought by households, as measured by the consumers price index (CPI), increased 1.0 percent in the year to the September 2014 quarter (see Consumers Price Index: September 2014 quarter). The LCI salary and wage rates (including overtime) increased 1.6 percent over the same period.

GST rose from 12.5 percent to 15 percent on 1 October 2010. This affected annual CPI movements from the December 2010 quarter to the September 2011 quarter. The graph below shows what the annual CPI percentage increases would be if prices collected from the December 2010 quarter to the September 2011 quarter were processed with GST of 12.5 percent for goods and services that are subject to GST. 

 

Personal income tax rates decreased at the same time as the GST rate rose. However, since the LCI measures changes in gross salary and wage rates, it did not directly reflect the reductions in income tax rates.

Construction wage growth eases in Canterbury, edges up for rest of New Zealand

In the year to the September 2014 quarter, salary and wage rate growth (including overtime) in the Canterbury construction industry increased 2.5 percent. This compares with a 3.0 percent increase in the year to June 2014 quarter. For the rest of New Zealand, wage rate growth in the construction industry rose 2.4 percent in the year to the September 2014 quarter, up from a 1.9 percent increase in the year to the June 2014 quarter.

The first earthquake in Canterbury occurred in September 2010. Salary and wage rates for the September 2010 quarter were collected as at 15 August. Since then, wage rates have increased 14.1 percent in the Canterbury construction index. This compares with an 8.4 percent increase for the rest of New Zealand. 

In the year to the September 2014 quarter, the mean increase for surveyed salary and ordinary time wage rates that rose in the Canterbury construction industry continued to be higher than the rest of New Zealand.

The mean increases of the rates that rose for the year to the September 2014 quarter were:

  • 4.5 percent for the Canterbury region
  • 4.2 percent for the rest of New Zealand.

For further information, refer to the supplementary tables with this information release.

In response to the Canterbury earthquakes, we created six new regional analytical series from the existing LCI sample. These may be revised as the classification by region is refined.

The LCI is designed to measure changes in salary and wage rates at a national level and is not intended to provide accurate regional estimates. See data quality for more information. 

For more detailed data, see the Excel tables in the 'Downloads' box.

LCI expenditure weights updated

We reweighted the LCI salary and wage rate indexes to reflect changes in the industry and occupation structures of the labour market.

The changes in the LCI expenditure weights reflect real changes in the labour market, and to some extent changes to the data sources and methods used to calculate the weights. Real changes are the result of relative changes in quantity and price levels. For example, if an industry has experienced higher growth in paid employees and higher-than-average wage increases over the five years between reweights, then that industry will experience an increase in its expenditure weight percentage. Industries with decreases or below-average increases will have a lower percentage weight in 2014 compared with 2009.

The main data sources we used were:

  • 2013 Census of Population and Dwellings information on the relative importance of occupations within each sector of ownership by industry group
  • Quarterly Employment Survey (QES) figures for the year to June 2014 on the relationship between full- and part-time paid employees, and June 2014 quarter figures on average earnings per full-time equivalent (FTE) job and relationship between ordinary time earnings and overtime earnings
  • linked employer-employee database (LEED) figures for the year to June 2013 on the number of jobs filled by under-15-year-olds
  • Business Register (BR) 2014 information on the relative importance of industry groups within each sector of ownership
  • pay rates surveyed in the Labour Cost Survey (LCS) for the June 2014 quarter
  • 2013 Household Economic Survey (HES) salary and wage information
  • 2013 Annual Enterprise Survey (AES) salary and wage totals for the ‘agriculture’ and ‘fishing, aquaculture and agriculture, forestry, and fishing support services’ industries.

We based the review on existing industry and occupation groups – the New Zealand Standard Industrial Output Categories and the Australian and New Zealand Standard Classification of Occupations, respectively.

We have not re-expressed the LCI – it is still based on the June 2009 quarter (=1000). The LCI was last reweighted using 2006 Census information.

For all sectors, and industries (and occupations) combined, the BR and other information showed a 5.1 percent increase from 2009 to 2014 in full-time equivalent (FTE) jobs. The salary and wage rates (including overtime) LCI for all sectors, industries, and occupations combined increased 9.2 percent over the same period. The overall level of expenditure on wages and salaries (which the weights are based on) increased 17.9 percent over the five-year period.

Sector of ownership

Overall, the public and private sectors retained their expenditure shares at 24.4 percent and 75.6 percent, respectively, in the 2014 reweight. Within the public sector, the local government expenditure share increased, while central government expenditure share decreased from 2009 to 2014.

Graph, Base expediture weights by sector of ownership, all salary and wage rates, 2009 and 2014.

Compared with 2009, public sector weights changed slightly in 2014: salary and ordinary time wage rates increased from 98.1 percent to 98.3 percent; overtime wage rates decreased from 1.9 percent to 1.7 percent.

The private sector weights for salary and ordinary time wage rates were unchanged at 97.1 percent. Overtime wage rates were also unchanged at 2.9 percent.

For all sectors combined, the weights changed slightly: salary and ordinary time wage rates increased from 97.3 percent to 97.4 percent; overtime wage rates decreased from 2.7 percent to 2.6 percent.

Industry

The following graph shows the industry weight movements since the 2009 reweight.

Graph, Base expenditure weights by industry, all sectors combined, all salary and wage rates, 2009 and 2014.

The largest relative increases were in:

  • professional, scientific, and technical services (9.0 percent to 9.5 percent)
  • financial and insurance services (4.4 percent to 4.8 percent)
  • food, beverage, and tobacco product manufacturing (4.4 percent to 4.7 percent)
  • construction (7.3 percent to 7.5 percent)
  • local government administration (1.3 percent to 1.5 percent)
  • health care and social assistance (9.8 percent to 10.0 percent).

The upward movements in weights can be attributed to the increase each industry experienced in FTE counts and growth for salary and wage rates over the five-year period.

For example, FTEs for the ‘professional, scientific, and technical services’ industry increased 8.0 percent, while salary and wage rates according to LCI increased 11.1 percent from 2009 to 2014. Similarly, ‘financial and insurance services’ increased 6.9 percent in FTE counts and rose 8.7 percent in LCI salary and wage rates over the same period.

The largest relative decreases were in:

  • agriculture (3.1 percent to 2.5 percent)
  • wholesale trade (6.6 percent to 6.0 percent)
  • retail trade (6.6 percent to 6.3 percent)
  • arts and recreation services (1.7 percent to 1.4 percent)
  • fishing, aquaculture and agriculture, forestry, and fishing support services (1.1 percent to 0.9 percent)
  • printing (0.6 percent to 0.4 percent)
  • transport equipment, machinery, and equipment manufacturing (2.6 percent to 2.4 percent).

For most industries, the downward movements can be attributed to a decrease or lower-than-average growth in FTE counts over the same period. Manufacturing, as a whole, had a 5.1 percent decline in FTEs, with the largest falls in these industries: ‘textile, leather, clothing, and footwear manufacturing’ (down 21.3 percent), ‘printing’ (down 18.6 percent), and ‘furniture and other manufacturing’ (down 11.2 percent). From 2009 to 2014, low growth in FTEs occurred in the ‘wholesale trade’ (up 1.1 percent) and ‘retail trade’ (up 0.1 percent) industries.

Expenditure shares of the ‘agriculture’ and ‘fishing, aquaculture and agriculture, forestry, and fishing support services’ industries fell. The falls were due to benchmarking the expenditure weights to salary and wage totals from the Annual Enterprise Survey and LEED, which was not done in the 2009 LCI review.

Occupation

Expenditure shares by broad occupation group have changed over the five-year period, showing strong growths in ‘managers’ and ‘professionals’.

Graph, Base expenditure weights by occupation, all sectors combined, all salary and wage rates, 2009 and 2014.

Higher-than-average growths in expenditure occurred for ‘managers’ (up 1.1 percentage points) and ‘professionals’ (up 2.5 percentage points). The increases were due to higher FTE counts for these occupation groups and growth in salary and wage rates. FTEs for ‘managers’ increased 16.1 percent, while ‘professionals’ increased 15.0 percent from 2009 to 2014. Salary and wage rates based on the LCI grew 8.2 percent and 8.9 percent, respectively.

The expenditure share for ‘clerical and administrative workers’ group fell from 13.2 percent to 10.9 percent. The fall can be attributed to lower FTEs (down 12.0 percent) over the five-year period. The largest falls came from general clerical workers (down 30.9 percent), followed by personal assistants and secretaries (down 19.8 percent). Industry groups that showed strong falls in ‘clerical and administrative workers’ were ‘manufacturing’ and ‘professional, scientific, technical, administrative and support services’.

Skill level

By skill level, large movements in expenditure shares can be noted in skill levels 1 and 4.

Graph, Base expenditure weights by skill level, all sectors combined, all salary and wage rates, 2009 and 2014.

Skill level 1, which are occupations that require a bachelor’s degree or higher qualification, or at least five years of relevant work experience, increased in expenditure share from 45.1 percent in 2009 to 48.3 percent in 2014. The increase can be attributed to increases in FTE counts (up 15.6 percent) and in salary and wage rates (up 8.6 percent according to LCI). The increase in expenditure share is consistent with the higher expenditure shares for ‘managers’ and ‘professionals’ in the broad occupation groups, which are typically the composition of this skill level.

Skill level 4, which are occupations that require New Zealand Register levels 2 or 3 qualification, has decreased in expenditure share from 21.2 percent in 2009 to 18.7 percent in 2014. This decrease can be attributed to lower FTE counts (down 3.0 percent) over the same period. The expenditure share decrease is consistent with the lower expenditure shares for ‘clerical and administrative workers’, ‘sales workers’, and ‘machinery operators and drivers’, which are typically the composition of this skill level.

Reweighting the labour cost index (salary and wage rates) has more details about the methods used to compile the new expenditure weights.

For technical information on the updated expenditure weights contact:

Ludeth Mariposa
Wellington 04 931 4600
Email: info@stats.govt.nz

We’re changing the way we report our labour market statistics

We are strongly focused on delivering the information New Zealand needs to grow and prosper, and one of the ways we’re doing this is by presenting our information in a more holistic and joined-up way.

We can provide a more complete picture of the labour market by combining the Household Labour Force Survey, the Quarterly Employment Survey, and the Labour Cost Index information releases. Doing this doesn’t involve any changes to the surveys themselves, but will ensure that labour market information is easy for our users to understand. In developing this approach we worked with users to ensure this change will meet our customers’ needs.

We’re keen to get your feedback and comments. See contacts for our contact details.

The first joint labour market information release is scheduled for the December quarter results on 4 February 2015.

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