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

Period-specific information
This section contains data information that has changed since the last release.

General information
This section contains information that does not change between releases.

Period-specific information

Reference period

For the September 2014 quarter, the salary and wage rates surveyed were those that employers paid at 15 August 2014.

Response rate

Key firms
Achieved: 100 percent
Target: 100 percent

Total response rate
Achieved: 94.88 percent
Target: 94 percent

Data influencers

Index numbers are rounded to the nearest index point, which affected some percentage increases in the September 2014 quarter. If percentage changes were calculated on unrounded index numbers, the labour cost index (LCI) all salary and wage rates for:

  • the private sector would have increased 0.4 percent over the quarter (instead of 0.5 percent) and 1.8 percent over the year (instead of 1.9 percent)
  • central government would have increased 0.3 percent over the quarter (instead of 0.4 percent)
  • the public sector would have increased 1.1 percent over the year (instead of 1.0 percent).

The labour cost index (LCI) salary and ordinary time wage rates for:

  • all sectors would have increased 0.4 percent over the quarter (instead of  0.5 percent) and 1.6 percent over the year (instead of 1.7 percent)
  • the private sector would have increased 0.4 percent over the quarter (instead of 0.5 percent) and 1.8 percent over the year (instead of 1.9 percent)
  • local government would have increased 0.4 percent over the quarter (instead of 0.5 percent) and 1.9 percent over the year (instead of 1.8 percent)
  • central government would have increased 0.3 percent over the quarter (instead of  0.4 percent).

General information

Data source

Salary and ordinary time and overtime wage rates for a fixed set of job descriptions are obtained using a quarterly postal survey of employers. Each quarter, salary and wage rates are surveyed for what employers pay at the 15th of the middle month of the quarter.

Coverage

The LCI covers jobs filled by paid employees in all occupations and in all industries except private households employing staff. We extended coverage to include jobs filled by paid employees under 15 years of age when the index was reweighted and re-expressed on a base of the June 2001 quarter (=1000).

Sample size

There are about 6,000 job descriptions for which salary and ordinary time wage rates are collected each quarter.

Nearly 1,000 overtime descriptions designed to survey changes in overtime wage rates, are attached to ordinary time wage descriptions in the survey.

Approximately 2,000 respondents provide information.

Implementation of new classifications

The September 2009 quarter release was the first that used the updated 2006 version of the Australian and New Zealand Standard Industrial Classification (ANZSIC06) and the Australian and New Zealand Standard Classification of Occupations (ANZSCO).

ANZSIC06 and ANZSCO have been jointly developed by Statistics NZ and the Australian Bureau of Statistics to ensure that the classifications remain current and relevant, reflecting the changes that have occurred in the structure and composition of industry and occupation.

How skill levels are determined

ANZSCO assigns each occupation to one of five skill levels. A skill level is based on the range and complexity of tasks performed in a particular occupation. The greater the range and complexity of the tasks, the higher the skill level of an occupation.

In general, a skill level is measured by:

  • the level or amount of formal education and training
  • the amount of previous experience in a related occupation
  • the amount of on-the-job training.

Under ANZSCO, skill level is not a measure of an individual working in a particular job. Rather, it is seen as a measure of those skills that are typically required to competently perform the tasks of a particular occupation. It is irrelevant whether a particular individual working in a job has a certain amount of training or a particular level of competence or not.

The definitions of the five skill levels are:

Skill level 1
A bachelor's degree or higher qualification is required for this skill level. It may be possible to replace the formal qualification with at least five years of relevant work experience. In some instances, relevant work experience and/or on-the-job training may be needed in addition to the formal qualification. These occupations are typically drawn from major groups 1 – managers, and 2 – professionals.

Skill level 2
A New Zealand Register diploma or at least three years of relevant work experience is required. In some instances, relevant experience and/or on-the-job training may be required in addition to the formal qualification. These occupations are typically drawn from major groups 1 – managers, 3 – technicians and trade workers, 4 – community and personal service workers, 5 – clerical and administrative workers, and 6 – sales workers.

Skill level 3
A New Zealand Register level 4 qualification, or at least three years of relevant experience is required. For some occupations relevant experience and/or on-the-job training may be required in addition to the formal qualification. These occupations are typically drawn from major groups 3 – technicians and trade workers, 4 – community and personal service workers, 5 – clerical and administrative workers, and 6 – sales workers.

Skill level 4
A New Zealand Register level 2 or 3 qualification is required to perform the work. It may also be possible to replace the formal qualification with at least one year of relevant work experience and, in some instances, relevant experience and/or on-the-job training may be required in addition to the formal qualification. These occupations are typically drawn from major groups 4 – community and personal service workers, 5 – clerical and administrative workers, 6 – sales workers, 7 – machinery operators and drivers, and 8 – labourers.

Skill level 5
A New Zealand Register level 1 qualification is required. In some instances these occupations may require a short period of on-the-job training in addition to or instead of the formal qualification. Other occupations require no formal qualification or on-the-job training. These occupations are typically drawn from major groups 4 – community and personal service workers, 5 – clerical and administrative workers, 6 – sales workers, and 8 – labourers.

Index calculation formula and base

The LCI is calculated using the price-relatives form of the base-weighted Laspeyres formula, and is expressed on a base of the June 2009 quarter (=1000). The index’s calculation base is periodically updated to reflect changes in the sector of ownership of organisations.

Index number rounding

Index number rounding uses standard Statistics NZ rounding procedures. It can occasionally result in movements for a particular cost being slightly higher or lower than would be expected, given movements recorded for component costs.

For example, the all sectors combined increase for salary and ordinary wage rates of 0.4 percent from the September 2009 quarter to the December 2009 quarter is larger than the 0.3 percent increases for both the public sector and the private sector. The lower figure for the private sector was mainly caused by the index number for the September 2009 quarter being rounded up to the nearest index point and the index number for the December 2009 quarter being rounded down to the nearest index point.

Weights

Each job description used in calculating the index was assigned a weight that reflected the relative importance of the job description within its sector of ownership, industry, and occupation group.

Weights were calculated using 2013 Census of Population and Dwellings information on the relative importance of occupations within each sector by industry group, Business Register (previously known as Business Frame) information on the relative importance of industry groups within each sector, and pay rates surveyed in the June 2014 quarter.

The following tables show the occupation group weights at the June 2014 quarter for all salary and wage rates and for the skill levels under ANZSCO.

Occupation group Weight
(Percent)
Managers    22.8
Professionals    28.4
Technicians and trades workers    11.8
Managers, professionals, technicians, and trades workers    63.0
Community and personal service workers      6.3
Clerical and administrative workers    10.9
Sales workers      6.1
Service, clerical, and sales workers    23.3
Machinery operators and drivers      5.5
Labourers      8.3
Machinery operators, drivers, and labourers    13.8
All occupations combined  100.0
Note: Percentages may not sum to totals due to rounding.

 

Skill level   Weight
(Percent)
 1    48.3
 2      9.8
 3    11.6
 4    18.7
 5    11.6
All skill levels combined  100.0

Quality control

The LCI is a quality-controlled measure. Only changes in salary and wage rates for the same quality and quantity of work are reflected in the index. This is achieved in practice by asking respondents to provide reasons for movements in salary and wage rates. If a movement is due to more than one reason, the respondent is also asked to indicate how much of the movement is due to each reason. To further assist the measurement of movements in pay rates for a fixed level of labour input, job descriptions are specified in detail. Surveyed job descriptions typically specify the duties involved, qualifications required, years of service, and number of hours worked.

In theory, these job descriptions should remain fixed between index revisions. In practice, many descriptions change over time, usually as a result of changes to contractual arrangements or because specific employees are being tracked through time. If a newly negotiated contract involves an increase in the number of ordinary time hours worked per week, then the description is amended and an adjustment is made to ensure that the pay rate movement used in the index relates to the same quantity of work as specified in the new contract.

Similarly, rates being paid for job descriptions in the survey may change partly or wholly because employees undertaking these jobs have become more experienced, more (or less) proficient or productive, better qualified, have taken on additional responsibilities, or have been promoted. Components of salary and wage rate movements that are due to changes of this type in the quality of work are not reflected in index movements. The policy of excluding increases due to service increments and merit promotions is consistent with this approach.

One-off payments in lieu of pay rises are also excluded, as they do not result in changes to pay rates, as such. 

Regular fixed allowances and regular fixed bonuses are included in surveyed pay rates. Where included, these are specified in job descriptions. Payments such as commissions and irregular bonuses are excluded, however, as these payments are usually performance related.

In instances where allowances, penal rates, and other payments (eg commissions), which have not previously been included in surveyed rates, are incorporated into base rates, only the overall effect of such changes is reflected in the index.

Contract indexation

Parties that engage in commercial contracts use a range of price indexes produced by Statistics NZ in their indexation clauses (also known as contract escalation clauses). An indexation clause provides both parties to a contract with an agreed procedure for adjusting an originally contracted price, to reflect changes in costs or prices during the life of the contract.

Contract indexation: A Guide for Businesses provides information on the price indexes produced by Statistics NZ and issues relating to their use in indexation clauses. The guide also outlines some points to consider when preparing an indexation clause, and includes an example of the mechanics of a simple indexation formula.

Mean and median increases

The latest quarterly and annual results for the median and mean increases are discussed in the 'commentary' section of this release. The mean tends to be higher than the median because the distribution of changes in pay rates is skewed to the right, with a bulge at the low end and a tail at the high end. The relatively few large increases boost the mean increase but have little effect on the median increase.

The median and mean increases are calculated using the percentage change in recorded salary and ordinary time wage rates. This differs from the quarterly and annual index movements, which measure the percentage change between calculated index numbers.

Analytical unadjusted series

An analytical unadjusted index series, based on ordinary time pay rates collected in the LCI sample, is available in the tables of this release (see the 'Downloads' box of this information release).

The analytical unadjusted series is an additional measure intended to complement the official LCI and Quarterly Employment Survey (QES) indicators and provide users with a fuller picture on the wages front. The analytical unadjusted series is not affected by relative employment shifts between industries and between occupations, but, in addition to price change, it does reflect quality change within occupations.

In simple terms, the approaches taken in compiling the published and analytical unadjusted series could be summarised as follows:

Published index:

  • often tracks employees, but does not show performance-related increases or service increments
  • commonly links in new employees (without showing change).

Analytical unadjusted index:

  • often tracks employees, and shows performance-related increases and service increments
  • shows any change when new employees replace incumbents.

The LCI is a price index that measures change in pay rates for a fixed quality and quantity of labour input. Price-related change in rates reported by respondents, such as those to reflect the cost of living, to match market rates, to retain staff, and to attract staff, are shown in the index. Changes in reported rates that are the result of service increments, merit promotions, increases (and decreases) relating to the performance of individual employees, and change in hours worked are not shown in the index, as they are considered to represent quality or quantity change.

The analytical unadjusted index retains fixed weights for occupations within industries within sectors of ownership, but is based on a matched sample of reported rates for the previous and current quarters before quality control. In addition to price change, it reflects quality change within occupations, such as change in the performance of individual employees, change in the qualifications, responsibility or experience of employees filling surveyed positions, and the effect of different employees replacing incumbent employees in surveyed positions at lower or higher rates.

Rates for which the pay periods reported by respondents (eg per annum, per week, per hour) differ from those for the previous period, and rates where change is wholly or partly due to change in hours worked, are excluded from the matched sample. Typically, between 1 and 2 percent of surveyed rates are excluded from the unadjusted index each quarter for these reasons.

The analytical unadjusted index is calculated using a matched sample of reported rates for the previous and current quarters. Expenditure weights are used to weight movements in reported rates from the previous quarter to the current quarter. To derive the expenditure weights, the price changes (after quality control) of job positions in the sample (from the base period to the previous quarter) are used to scale base-period expenditure weights (which are then assigned to job positions in the sample).

It should be noted that the LCI is designed to measure change in pay rates for a fixed quality and quantity of labour input. The sample of surveyed pay rates is not particularly suitable for preparing a measure that includes quality change. This is due in part to the fact that some positions in the survey follow individual employees (with corresponding pay rates subject to both quality and price change) and some positions specify particular points on pay scales (which are usually subject only to price change). In general, individual employees are tracked for positions surveyed in the private sector, and for positions surveyed in the public sector there is a mix of points on pay scales and individual employees being tracked.

The analytical unadjusted index reflects quality change within occupations. How well this is measured partly depends on how well the sample represents entrances and exits of employees, and on whether the sample replacement practice is unbiased in this regard (eg in some cases, replacement employees are incumbent employees filling other positions rather than new employees filling the existing positions – this can happen when there is a delay filling vacancies in surveyed positions). In addition, the analytical unadjusted index tends to reflect the effect of turnover in, and the cessation of, existing positions, but not the price and/or quality effect associated with employees being hired to fill new positions. An unadjusted measure designed from scratch might make use of the average pay rate within each surveyed firm of all employees filling jobs in each surveyed occupation.

The published LCI is a fixed-weight price index that measures changes in pay rates for a fixed quality and quantity of labour input. The index is not affected by relative shifts in the occupational and industrial composition of the pool of paid employees. It is useful in the context of the extent to which changes in businesses' input labour costs might put pressure on the output prices they charge for goods and services.

The analytical unadjusted LCI series has fixed weights for occupations within industries within sectors of ownership, so is not affected by relative employment shifts between industries and occupations. However, it does reflect quality shifts within occupations. The index uses weights based on the mix of employment in occupations and industries evident in 2013. It does not take account of the effect of any subsequent shifts in the mix of employment in occupations and industries. In addition, it will not reflect:

  • the effect of very new or emerging occupations and industries
  • the effect of employers mitigating the effect of skill shortages by substituting away from occupations showing high relative price change to occupations showing lower relative price change (eg from carpenter to builder's labourer, or from registered nurse to nurse aide).

In addition to changes in pay rates, change in the QES measures of total and average gross earnings fully reflect compositional change, such as change from period to period in the proportions of employees and paid hours in different industries and different occupations. The measures reflect relative employment shifts both between and within industries and occupations. These measures are useful in the context of the potential effect that change in gross and average income earned by paid employees might have on the demand for goods and services purchased by the household sector.

An example of how a specific position would be treated in the published LCI and in the analytical unadjusted index follows: 

Year Salary scale
Step 1 Step 2 Step 3 Step 4 Step 5
1 $30,000 $40,000 $50,000 $60,000 $70,000
2 $30,900 $41,200 $51,500 $61,800 $72,100
3 $31,827 $42,436 $53,045 $63,654 $74,263
4 $32,782 $43,709 $54,636 $65,564 $76,491
5 $33,765 $45,020 $56,275 $67,531 $78,786
 
Year & quarter Reported pay rate
(per annum)
Reason for change Treatment Published LCI Analytical unadjusted index
Y1Q1  $40,000 1000 1000
Y1Q2 $40,000 1000 1000
Y1Q3 $40,000 1000 1000
Y1Q4 $40,000 1000 1000
Y2Q1 $41,200

Price adjustment to step 2 of scale to match market rates and reflect the cost of living.

Price change; shown in the published and unadjusted indexes.

1030 1030
Y2Q2  $51,500

Service increment from step 2 to step 3. 

Quality change; shown only in the unadjusted index. 

 1030  1288 
Y2Q3  $51,500      1030  1288 
Y2Q4   $51,500       1030 1288
Y3Q1  $53,045

Price adjustment to step 3 of scale to match market rates and reflect the cost of living. 

Price change; shown in the published and unadjusted indexes. 

 1061  1326 
Y3Q2   $42,436 

New, less experienced employee placed on step 2 replaces the incumbent. 

Quality change; shown only in the unadjusted index. 

  1061   1061 
Y3Q3   $42,436        1061  1061
Y3Q4  $42,436       1061   1061
Y4Q1  $43,709

Price adjustment to step 2 of scale to match market rates and reflect the cost of living. 

Price change; shown in the published and unadjusted indexes. 

  1093   1093
Y4Q2  $54,636

Service increment from step 2 to step 3.

Quality change; shown only in the unadjusted index. 

 1093  1366
Y4Q3  $54,636       1093   1366
Y4Q4  $54,636      1093  1366
Y5Q1  $56,275

Price adjustment to step 3 of scale to match market rates and reflect the cost of living. 

Price change; shown in the published and unadjusted indexes. 

 1126  1407
Y5Q2  $45,020

New, less experienced employee placed on step 2 replaces the incumbent.

Quality change; shown only in the unadjusted index. 

 1126  1126
Y5Q3  $45,020       1126    1126 
Y5Q4  $45,020       1126    1126 

 

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

Regional analytical series for construction industry

After the September 2010 and February 2011 Canterbury earthquakes, there has been interest in the changes to salary and wage rates in the Canterbury construction industry. In response, we created six regional analytical series from the existing LCI sample. These series are provisional and 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. However, given the continued interest in the impact of the Christchurch rebuild, we classified surveyed positions in the construction industry into ‘Canterbury’ and ‘rest of New Zealand’. We based these classifications on the addresses of construction industry respondents, location information in job descriptions, and other information obtained from construction industry respondents. We used the same weights for the regional price indexes as the occupational shares at the 1-digit Australian and New Zealand Standard Classification of Occupations (ANZSCO) level for the national construction industry, based on the 2006 Census of Population and Dwellings. These were updated to the occupational shares of the 2013 Census as part of the 2014 reweight.

These six regional analytical series are available on Infoshare.

Series references are:
LCIQ.SG53E9C – All salary and wage rates for the construction industry – Canterbury
LCIQ.SG53E9R – All salary and wage rates for the construction industry – rest of New Zealand
LCIQ.SG51E9C – Salary and ordinary time wage rates for the construction industry – Canterbury
LCIQ.SG51E9R – Salary and ordinary time wage rates for the construction industry – rest of New Zealand
LCIQ.SW512AE9C – Annual mean salary and ordinary time increase for the construction industry – Canterbury
LCIQ.SW512AE9R – Annual mean salary and ordinary time increase for the construction industry – rest of New Zealand.

Reweighting the labour cost index (salary and wage rates)

Information sources

We reweighted the labour cost index (LCI) salary and wage rate indexes to reflect changes in the industry and occupation structures of the labour market. The weights were calculated based on shares of expenditure (quantity multiplied by price) by employers on salaries and wages. We used information from: the 2013 Census of Population and Dwellings, Quarterly Employment Survey (QES) for the year to June 2014 and for the June 2014 quarter, linked employer-employee database (LEED) for the year to June 2013, Business Register (BR) March/April 2014, Household Economic Survey (HES) 2013, Annual Enterprise Survey (AES) 2013, and surveyed pay rates from the Labour Cost Survey (LCS) for the June 2014 quarter.

Specifically, we used the following information from the above sources.

  1. The 2013 Census gave (i) the numbers of full-time and part-time paid employees at the detailed (ie six-digit) occupational level within industry groups and sectors of ownership, and (ii) the ratios of arithmetic mean hours worked by part-time employees to arithmetic mean hours worked by full-time employees at the sector of ownership by industry group level.
  2. The QES gave (i) annual ratios of full-time to part-time employees at the sector by industry level, (ii) ordinary time weekly earnings per full-time equivalent (FTE) job at the sector by industry group level, and (iii) ratios of ordinary time earnings to overtime earnings at the sector by industry group level.
  3. LEED gave an indication of the number of jobs filled by paid employees under 15 years of age for the year to June 2013 at the sector by industry group level.
  4. The BR gave an annual average number of jobs filled by paid employees at the sector by industry group level as at March/April 2014.
  5. Surveyed pay rates collected from the Labour Cost Survey (LCS) for the June 2014 quarter, converted to weekly pay rates, gave the price information needed for weight calculation.
  6. Salary and wage information from HES 2013 year, applied to 2013 Census income ranges at unit record level, gave average wages that validated surveyed pay rates collected from the LCS.
  7. AES 2013 gave benchmark salary and wage totals for the ‘agriculture’ and ‘fishing, aquaculture and agriculture, forestry, and fishing support services’ industries.

Quantity benchmarking

Discrepancies arise between the census, BR, and QES due to people holding more than one job. In the census, people are counted only once and classified for status in employment, occupation, and industry on the basis of main job. Part-time/full-time status is on the basis of usual hours worked in all jobs. However for the purpose of this LCI reweight, we used usual hours in main job, as this aligned best with the BR and QES, which count each job separately.

We used BR paid-employee numbers to determine quantity figures at the sector of ownership by industry group level. The 2013 Census data gave the mix of occupations within industry groups and sectors of ownership, but not absolute levels (ie census full-time and part-time employee numbers at the six-digit occupational level within sectors of ownership by industry groups, were adjusted so that industry by sector of ownership totals matched those from the BR).

We used the part-time to full-time ratios from the QES to split the number of jobs filled by paid employees from the BR into full-time and part-time jobs. The part-time to full-time ratios calculated from census hours-worked information at the sector by industry group level were used to convert the part-time BR count to  FTE number of paid employees. Multipliers were then calculated to convert census full-time and part-time figures at the sector by industry group by occupation level to match BR FTE figures at the sector by industry group level. We used FTE paid employee numbers to calculate the ordinary time weights, while full-time employees were used for calculating the overtime weights.

A simple example illustrates this:

Sector 1 Census Quarterly Employment Survey
Full-time employees Part-time employees Full-time (FT) employees Part-time (PT) employees FT/(FT+PT)
Industry group 1
Occupation 1 22 7 .. .. ..
Occupation 2 16 10 .. .. ..
Occupation 3 29 11 .. .. ..
Total 67 28 72 33 0.6857
Sector 1 Business Register  Multipliers
 Employees Full-time employees  Part-time employees   Full-time employees  Part-time employees
Industry group 1
Occupation 1 ..   ..  .. ..  .. 
Occupation 2 ..  ..   .. ..   ..
Occupation 3  ..  ..  .. ..  .. 
Total  96 65.66   30.24 0.98   1.08
Symbol: .. figure not available

 

Sector 1 Benchmarked counts
Full-time benchmarked Part-time benchmarked

Full-time
equivalent(1) 

Industry group 1
Occupation 1  21.56 7.56 24.52
Occupation 2  15.68 10.80 19.91
Occupation 3  28.42 11.88 33.08
Total  65.66  30.24 77.51 
1. Part-time to full-time ratio, from the census, is equal to 0.392.

The benchmarked FTE counts were multiplied by the wages collected in the LCS to calculate the initial base expenditure levels.

Adjusting for under-15-year-olds

The employment questions in the census are restricted to people aged 15 years and over. However, the QES and BR count jobs filled by paid employees of all ages, including those under 15. The LCI also covers jobs filled by under-15-year-olds.

We modified occupation figures at the sector by industry group level due to the exclusion from the census of under-15-year-olds, using LEED. About 5,000 jobs were filled by under-15 year-olds based on LEED for the year to June 2013. The private sector was determined to have significant numbers of these in the following industries:

  • agriculture (eg mixed crop and livestock farm worker, dairy cattle farm worker)
  • information media and telecommunications (eg leaflet or newspaper deliverer, ticket collector or usher)
  • accommodation and food services (eg sales assistant, kitchenhand)
  • retail trade (eg sales assistant, checkout operator)
  • professional, scientific, and technical services (eg general clerk, leaflet or newspaper deliverer)
  • construction (eg labourers, commercial cleaner)
  • other services (eg hair or beauty salon assistant, commercial cleaner)
  • wholesale trade (eg sales assistant, storeperson)
  • arts and recreation services (eg sports umpire, lifeguard).

No public sector industries were deemed to have a significant number of jobs filled by under-15-year-olds.

We added the LEED figures for jobs filled by under-15-year-olds to specific occupations within sector by industry groups, based on census information on occupations typically filled by 15- to 17-year-olds.

Ordinary time wage adjustments at the sector by industry by occupation level

Generally, the pay rates collected through the LCS were higher than average across all jobs. This is because jobs tracked in the LCS are selected using the judgement of businesses and tend to be filled by permanent, full-time employees with higher-than-average experience.

We calculated a census average wage using salary and wage information from HES 2013 for each sector by industry by occupation represented in the LCI sample. HES provided average income values within each census income range for paid employees who received salary and wages for the June 2013 year. These were applied to census income ranges at the unit record level and averaged at sector by industry by occupation. The average wages were then updated using sector by industry salary and wage rate LCI movements from the year to the June 2013 quarter to the June 2014 quarter.

We modified the LCI average wage figures that were significantly different to the census averages. Further modifications were made for some occupations that have overtime in the LCI. Where LCI was significantly lower than the census average, but significant overtime is likely to be worked, the LCI was taken. This was done as the census average wage would have included overtime pay. 

These adjustments helped to ensure the accuracy of the occupational expenditure shares within industry groups.

Ordinary time wage adjustments at the sector by industry level

To further ensure the accuracy of the new LCI weights, we multiplied the June 2014 quarter ordinary time average earnings per FTE job from the QES at the sector of ownership by industry level by the quantity figures calculated from the BR information. This determined the expenditure total each sector of ownership by industry group was to represent.

Determining the overtime expenditure levels

Using the QES ordinary time to overtime earnings ratios and the LCI reweight ordinary time expenditure (based on the BR FTE quantity figures and QES earnings per FTE job), we derived an overtime expenditure total. The overtime expenditure levels calculated by the LCI reweight (BR benchmarked full-time figures multiplied by overtime prices collected from the LCS) were benchmarked to the overtime expenditure totals at the sector by industry group level.

Adjusting for annual leave

The final adjustment we needed to make was to remove the component of the wage and salary payments that represents paid annual leave and statutory holidays. This could not be done earlier as QES and LEED included paid leave in their figures.

Payments for annual leave and statutory holidays were taken from the June 2014 quarter of the LCI all labour costs. We calculated leave ratios based on the number of annual leave entitlement days and statutory holidays that employees receive on an annual basis. We applied these ratios to the average wages to get leave-adjusted average wages. These wages were then used with the BR-adjusted quantity levels and the QES ordinary and overtime expenditure benchmark-level multipliers to determine the final new LCI weights.

The component of the wage and salary payments that represent paid annual leave and statutory holidays will be used to reweight the LCI annual leave and statutory holidays index.

Undercoverage in ‘agriculture’ and ‘fishing, aquaculture and agriculture, forestry, and fishing support services’

QES does not survey businesses in ‘A01 Agriculture’, ‘A02 Aquaculture, ‘A04 Fishing, hunting, and trapping’, and ‘A052 Agriculture and fishing support services’. As such, we calculated the LCI expenditure weights for the ‘agriculture’ and ‘fishing, aquaculture and agriculture, forestry, and fishing support services’ industries using information from the 2013 Census, the BR, and LCI, and benchmarked these against salary and wage totals from AES 2013.

We updated salary and wage totals from AES using sector and industry salary and wage rate LCIs from the year to the March 2013 quarter (when most financial accounts close) to the June 2014 quarter.

We adjusted the overall expenditure weights for the ‘agriculture’ and ‘fishing, aquaculture and agriculture, forestry, and fishing support services’ industries to align with the updated AES totals at the sector and industry level, while keeping the relative importance of the occupations within sectors and industries.

Sample changes

We refreshed the LCI sample to adequately represent the current labour market. Companies new to the sample were selected, new positions were added, and companies that have changed sector of ownership and/or industry were reclassified.

We added about 270 positions to the LCI sample and removed about 190 to reflect relative growth and decline in occupations and industries. About 6,000 positions are in the sample.

What’s next

The next phase involves reweighting the non-wage indexes for the June 2015 quarter.

More information

Statistics in this release have been produced in accordance with the Official Statistics System principles and protocols for producers of Tier 1 statistics for quality. They conform to the Statistics NZ Methodological Standard for Reporting of Data Quality.

Liability

While all care and diligence has been used in processing, analysing, and extracting data and information in this publication, Statistics NZ gives no warranty it is error-free and will not be liable for any loss or damage suffered by the use directly, or indirectly, of the information in this publication.

Timing

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