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Labour Cost Index (Salary and Wage Rates): December 2010 quarter
Embargoed until 10:45am  –  01 February 2011
Commentary

Overview

The labour cost index (LCI) increased 1.7 percent in the year to the December 2010 quarter, up from 1.6 percent increases in the years to the September 2010 and June 2010 quarters. Annual wage growth had declined from a peak of 4.0 percent in the year to the September 2008 quarter to 1.5 percent in the year to the March 2010 quarter. At the time, the year to the March 2010 quarter rise was the lowest in nine years.

Statistics from the Quarterly Employment Survey (QES) show that average hourly earnings increased 1.9 percent in the year to the December 2010 quarter. The QES average earnings statistics reflect not only changes in wages and salaries, but also compositional and other changes across and within the paid workforce. In contrast, the LCI measures changes in salary and wage rates for a fixed quantity and quality of labour input. Service increments, merit promotions, and changes to salary and wage rates relating to the performance of the individual employee are not shown in the LCI. 

In the LCI, all salary and wage rates (including overtime) rose 0.5 percent in the December 2010 quarter, which is the same as in the September 2010 quarter.

 Graph: Salary and ordinary time and overtime wage rates, percentage change from same quarter of previous year.

Salary and ordinary time wage rates increased 1.7 percent in the year to the December 2010 quarter, following 1.6 percent increases in both the years to the September 2010 and June 2010 quarters. In the December 2010 quarter, salary and ordinary time wage rates rose 0.5 percent, the same rise as in the September 2010 quarter.

Overtime wage rates increased 2.2 percent in the year to the December 2010 quarter. This follows increases of 2.2 percent in the year to the September 2010 quarter and 2.1 percent in the year to the June 2010 quarter. In the December 2010 quarter, overtime wage rates rose 0.4 percent, down from rises of 0.6 percent in the September 2010 quarter and 0.7 percent in the June 2010 quarter.

In the year to the December 2010 quarter, the mean increase for all surveyed salary and ordinary time wage rates that increased was 3.6 percent, which is the same as in the year to the September 2010 quarter. In the December 2010 quarter, the mean increase for all surveyed salary and ordinary time wage rates that increased was 3.1 percent, down from 3.4 percent in the September 2010 quarter.

Sector movements

Public sector

All salary and wage rates (including overtime) for the public sector increased 1.4 percent in the year to the December 2010 quarter. This follows increases of 1.3 percent in the year to the September 2010 quarter and 2.1 percent in the year to the June 2010 quarter. The increase in salary and wage rates (including overtime) in the year to the December 2010 quarter resulted from a 1.3 percent increase for central government and a 1.9 percent increase for local government.

In the December 2010 quarter, all salary and wage rates (including overtime) for the public sector rose 0.4 percent, following rises of 0.3 percent in the September 2010 quarter and 0.2 percent in the June 2010 quarter. In the December 2010 quarter, the increase was a result of a 0.3 percent rise for central government and a 1.0 percent rise for local government.

Graph: All salary and wage rates by sector, percentage change from same quarter of previous year.  

Private sector

Private sector salary and wage rates (including overtime) increased 1.9 percent in the year to the December 2010 quarter, following increases of 1.6 percent in the year to the September 2010 quarter and 1.5 percent in the year to the June 2010 quarter. The latest annual increase is the largest since a 2.0 percent increase in the year to the September 2009 quarter. In the December 2010 quarter, private sector salary and wage rates (including overtime) rose 0.6 percent, following 0.5 percent rises in both the June 2010 and the March 2010 quarters.

Index numbers are rounded to the nearest index point and this affected the percentage increases for the December, September, and June quarters. If percentage changes were calculated on unrounded index numbers, then private sector salary and wage rates (including overtime) would have risen 0.5 percent in the December 2010 quarter, 0.6 percent in the September 2010 quarter, and 0.4 percent in the June 2010 quarter.

Salary and ordinary time wage rates for the private sector grew 0.6 percent and overtime rates grew 0.4 percent in the December 2010 quarter.

Industry movements

In the December 2010 quarter, the largest industry group rises in salary and wage rates (including overtime) were:

  • financial and insurance services – up 1.2 percent
  • local government administration – up 1.0 percent
  • information media and telecommunications – up 0.9 percent.

In the year to the December 2010 quarter, the largest industry increases in salary and wage rates (including overtime) were:

  • professional, scientific, and technical services – up 2.8 percent
  • metal product manufacturing  – up 2.6 percent.

Professional, scientific, and technical services industry

Salary and wage rates (including overtime) for the professional, scientific, and technical services industry (which includes accounting, business, and law services) increased 2.8 percent in the year to the December 2010 quarter, up from a 2.4 percent increase in the year to the September 2010 quarter.

In the December 2010 quarter, salary and wage rates (including overtime) for professional, scientific, and technical services rose 0.7 percent. This follows rises of 1.2 percent and 0.5 percent in the September 2010 and June 2010 quarters, respectively. The main reason respondents gave for the latest quarterly rise was 'to match market rates'.

Metal product manufacturing industry

In the year to the December 2010 quarter, salary and wage rates (including overtime) for the metal product manufacturing industry increased 2.6 percent, following a 1.9 percent increase in the year to the September 2010 quarter.

In the December 2010 quarter, salary and wage rates (including overtime) for the metal product manufacturing industry rose 0.8 percent. This follows rises of 1.0 percent in the September 2010 quarter and 0.4 percent in both the June 2010 and March 2010 quarters. Respondents gave 'cost of living' as the main reason for salary and wage rate increases in the December 2010 quarter.

Occupation movements

In the December 2010 quarter, the largest occupation group rises in salary and wage rates (including overtime) were:

  • managers – up 0.7 percent
  • automotive and engineering trades workers  – up 0.7 percent
  • clerical and administrative workers – up 0.7 percent.

In the year to the December 2010 quarter, overall annual increases in salary and wage rates (including overtime) for the three broad occupation groups were:

  • managers, professionals, technicians, and trades workers – up 1.6 percent
  • service, clerical, and sales workers – up 1.9 percent
  • machinery operators, drivers, and labourers – up 1.9 percent.

Across all groups, annual increases ranged from 0.9 percent (for health professionals) to 2.5 percent (for general clerical workers). The 0.9 percent annual increase for health professionals is the lowest since a 0.8 percent increase in the year to the March 1994 quarter.

General clerical workers

In the year to the December 2010 quarter, salary and wage rates (including overtime) for general clerical workers increased 2.5 percent. This follows a 2.3 percent increase in the year to the September 2010 quarter.

General clerical workers' salary and wage rates (including overtime) rose 0.4 percent in the December 2010 quarter, following a 0.8 percent rise in the September 2010 quarter and a 0.7 percent rise in the June 2010 quarter. The main reason respondents provided for the latest quarterly increase was 'to reflect the cost of living'.

Distribution of pay rates

In the year to the December 2010 quarter, 53 percent of salary and ordinary time wage rates in the surveyed sample increased, up from 49 percent in the year to the September 2010 quarter. Forty-seven percent of the survey sample remained unchanged in the year to the December 2010 quarter, the lowest percentage since 44 percent remained unchanged in the year to the June 2009 quarter.

In the December 2010 quarter, 18 percent of salary and ordinary time wage rates in the surveyed sample rose, up from 17 percent in the September 2010 quarter. In comparison, 12 percent of the salary and ordinary time wage rates in the surveyed sample rose in the December 2009 quarter. For the five years from 2004 to 2008, an average of 17 percent of rates rose in the December quarter.

In the year to the December 2010 quarter, the distribution of annual movements was:

  • 12 percent of salary and ordinary time wage rates increased by no more than 2 percent
  • 17 percent increased by more than 2 percent but not more than 3 percent
  • 14 percent increased by more than 3 percent but not more than 5 percent
  • 9 percent increased by more than 5 percent.

Fifty-eight percent of overtime wage rates increased in the year to the December 2010 quarter, while 42 percent were unchanged.

Surveyed respondents were asked to give one or more reasons for each movement in pay rates. In the year to the December 2010 quarter, increases in salary and ordinary time wage rates were due to a combination of the following reasons:

  • cost of living – 45 percent
  • collective employment agreements – 32 percent
  • match market rates – 25 percent
  • retain staff – 9 percent
  • attract staff – 1 percent.

Median and mean increases

The median (ie middle) increase for all surveyed salary and ordinary time wage rates that rose in the year to the December 2010 quarter was 2.9 percent, the same as in the year to the September 2010 quarter.

The mean increase for all surveyed salary and ordinary time wage rates that rose in the year to the December 2010 quarter was 3.6 percent, the same as the September 2010 quarter mean increase.

In both the years to the September and December 2010 quarters, both the median and mean increases were the lowest since the year to the March 2001 quarter, when the median increase was 2.7 percent and the mean increase was 3.5 percent.

Median and mean increases for salary and ordinary time wage rates by sector
December 2010 quarter
Sector Percentage change from previous quarter Percentage change from same quarter of previous year
Median increase* Mean increase* Median increase* Mean increase*
Local government 2.8 3.0 2.8 3.4
Central government 2.0 2.5 2.0 3.0
Public sector 2.5 2.7 2.5 3.1
Private sector 2.7 3.2 3.0 3.7
All sectors 2.7 3.1 2.9 3.6
* Does not include decreases or rates that remained unchanged.

 

In the December 2010 quarter, the median increase was 2.7 percent, down from a 2.8 percent increase in the September 2010 quarter.

The mean increase in the December 2010 quarter was 3.1 percent, down from a 3.4 percent increase in the September quarter and the same as the increase in the June 2010 quarter.

Analytical unadjusted series

The analytical unadjusted series is an additional measure that is intended to complement the official LCI and 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 in addition to price change.

Unadjusted salary and ordinary time wage rates increased 3.6 percent in the year to the December 2010 quarter, up from a 3.1 percent increase in the year to the September 2010 quarter. The 3.6 percent increase in the year to the December 2010 quarter is the largest since a 3.8 percent rise in the year to the September 2009 quarter.

In the December 2010 quarter, unadjusted salary and ordinary time wage rates rose 1.0 percent, down from a 1.1 percent rise in the September 2010 quarter. This was the first time since the December 2008 quarter that these wage rates have risen for three consecutive quarters by 1.0 percent or more.

Private sector unadjusted salary and ordinary time wage rates increased 4.0 percent in the year to the December 2010 quarter, following a 3.4 percent increase in the year to the September 2010 quarter. Unadjusted salary and ordinary time wage rates in the private sector rose 1.0 percent in the December 2010 quarter, down from a 1.3 percent rise in the September 2010 quarter.

Analytical unadjusted and adjusted salary and ordinary time wage rates
Private sector and all sectors combined
December 2010 quarter
Sector Percentage change from previous quarter Percentage change from same quarter of previous year
Adjusted Unadjusted Adjusted Unadjusted
Private sector 0.6 1.0 1.9 4.0
All sectors 0.5 1.0 1.7 3.6

 

For technical information contact:
Ludeth Mariposa or Dion Gamperle
Wellington 04 931 4600
Email: info@stats.govt.nz

Christchurch earthquakes

The Christchurch earthquakes on and after 4 September 2010 did not affect the LCI response rate for the December 2010 quarter. Pay rates collected from Christchurch reached the normal response level and all 'key' firms located in Christchurch responded to the survey.

In the December 2010 quarter, the proportion of salary and ordinary time and wage rates that rose, and the mean increase, were similar in Christchurch to those for the country as a whole.

In the construction industry, the median and mean increases for Christchurch were broadly in line with national movements. However, the proportion of salary and ordinary time and wage rates that increased for the construction industry was higher in Christchurch than nationally.

Implementation of new classifications

The 2006 version of the Australian and New Zealand Standard Industrial Classification (ANZSIC06) and the Australian and New Zealand Standard Classification of Occupations (ANZSCO) were implemented in the LCI (salary and wage rates) in the September 2009 quarter.

The LCI was re-expressed on a base of the June 2009 quarter (=1000). The sample of surveyed job descriptions was refreshed to better reflect the structure of the ANZSIC06 classification. New positions representing about 3 percent of the expenditure weight were added to the survey in ANZSIC06 industries that had been under-represented in the old sample.

Official industry and occupation movements for the LCI (salary and wage rates) are those of the ANZSIC06 and ANZSCO series from the September 2009 quarter (that is, for the September 2009 quarter compared with the June 2009 quarter) onwards, and of the ANZSIC96-based and NZSCO-based series up to the June 2009 quarter inclusive.

As there is a high level of discontinuity between the old and new occupation and industry breakdowns, the new series were not linked to the old series. The indexes of all industries/occupations combined were linked to the existing series and re-expressed on a base of the June 2009 quarter (=1000).

The ANZSIC06-based industry and ANZSCO-based occupation indexes were not backcast further than the September 2009 quarter. However, the LCI (salary and wage rates) series on the old classifications were published until the June 2010 quarter, providing a year-long overlap. The series on the old classifications are not available after the June 2010 quarter.

For technical information contact:
Daniel Hubbard or Chris Pike
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...

Labour Cost Index (Salary and Wage Rates): March 2011 quarter will be released on

3 May 2011.

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