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Labour Cost Index (Salary and Wage Rates): December 2011 quarter
Embargoed until 10:45am  –  07 February 2012
Commentary

Annual wage rates grow 2.0 percent

The labour cost index (LCI) increased 2.0 percent in the year to the December 2011 quarter, after increasing 2.0 percent in the year to the September 2011 quarter. Before that, annual growth in wage rates had been below 2.0 percent since the year to the December 2009 quarter.

All salary and wage rates (including overtime) rose 0.6 percent in the December 2011 quarter, following a 0.6 percent rise in the September 2011 quarter and a 0.4 percent rise in the June 2011 quarter.

 Graph, Salary & ordinary time and overtime wage rates, all sectors combined, percentage change from same quarter of previous year, December 2006 to December 2011.
Salary and ordinary time wage rates increased 2.0 percent in the year to the December 2011 quarter, following an increase of 2.0 percent in the year to the September 2011 quarter. In the December 2011 quarter, salary and ordinary time wage rates rose 0.6 percent, after rising 0.6 percent in the September 2011 quarter and 0.5 percent in the June 2011 quarter.

Overtime wage rates increased 2.3 percent in the year to the December 2011 quarter. This follows an increase of 2.2 percent in the year to the September 2011 quarter. In the December 2011 quarter, overtime wage rates rose 0.5 percent, down from a 0.6 percent rise in the September 2011 quarter and a 0.9 rise in the June 2011 quarter.

Private sector pay rates increase 2.0 percent

Private sector salary and wage rates (including overtime) increased 2.0 percent in the year to the December 2011 quarter, following increases of 2.0 percent in the years to the September, June and March 2011 quarters. The latest annual increase was affected by rounding of index numbers. If percentage changes were calculated on unrounded index numbers, then the LCI salary and wage rates (including overtime) for the private sector would have risen 2.1 percent (please see Data quality for more information). In the December 2011 quarter, private sector salary and wage rates (including overtime) rose 0.7 percent – following 0.5 percent rises in both the September 2011 and June 2011 quarters.

In the December 2011 quarter, salary and ordinary time wage rates for the private sector rose 0.7 percent and overtime rates rose 0.6 percent.

 Graph, all salary and wage rates by sector, percentage change from same quarter of previous year, December 2006 to December 2011.

Public sector pay rates increase 1.8 percent

All salary and wage rates (including overtime) for the public sector increased 1.8 percent in the year to the December 2011 quarter, after increasing 1.8 percent in the year to the September 2011 quarter. The increase in salary and wage rates (including overtime) in the year to the December 2011 quarter resulted from a 1.8 percent increase in central government and a 2.3 percent increase in local government salary and wage rates.

In the December 2011 quarter, all salary and wage rates (including overtime) for the public sector rose 0.4 percent. This follows a rise of 0.6 percent in the September 2011 quarter. In the latest quarter, the increase was a result of 0.4 percent and 1.0 percent rises in the central government and local government salary and wage rates (including overtime), respectively.

In the December 2011 quarter, salary and wage rates (including overtime) for local government rose 1.0 percent, after rises of 0.5 percent and 0.3 percent in the September 2011 and June 2011 quarters, respectively. The latest quarterly rise is the largest since a 1.0 percent increase in the year to the December 2010 quarter. The main reason respondents gave for the latest quarterly rise was due to collective employment agreements coming into effect.

Majority of increases no more than 3 percent

In the year to the December 2011 quarter, 30 percent of salary and ordinary time wage rates in the surveyed sample increased by no more than 3 percent, while 27 percent increased by more than 3 percent. In contrast, in the year to the September 2008 quarter, 12 percent of salary and ordinary time wage rates in the surveyed sample increased by no more than 3 percent in the year to the September 2008 quarter, and 51 percent increased more than 3 percent.

 Graph, Distribution of annual movements, all sectors combined, surveyed salary and wage rates, December 2006 to December 2011.

In the year to the December 2011 quarter, 57 percent of salary and ordinary time wage rates in the surveyed sample rose. After the 2008/09 recession, the proportion of salary and ordinary time wage rates that rose fell to a low of 43 percent in the year to the March 2010 quarter.

While the proportion of the sample increasing has risen since the recession, the mean increase has remained relatively flat. In the year to the December 2011 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 3.7 percent. Between the March 2010 and December 2011 quarters, the annual mean increase has remained within 3.5 to 3.9 percent – while the proportion increasing has risen from 43 percent to 57 percent.

Graph, Annual proportion increasing and mean increase, all sectors combined, surveyed salary and wage rates, December 2006 to December 2011.

The median (or middle) increase for all surveyed salary and ordinary time wage rates that rose in the December 2011 quarter was 3.0 percent. The mean increase for all surveyed salary and ordinary time wage rates that increased was 3.4 percent in the December 2011 quarter.

Median and mean increases for salary and ordinary time wage rates by sector
December 2011 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  2.7 3.1 3.0 3.6
Central government 2.1 2.5 2.5 2.9
Public sector 2.5 2.8 2.6 3.1
Private sector 3.0 3.6 3.0 3.9
All sectors 3.0 3.4 3.0 3.7
*Does not include decreases or rates that remained unchanged.

 

Eighteen percent of salary and ordinary time wage rates in the sample rose in the December 2011 quarter, unchanged from 18 percent in the December 2010 quarter, but up from 12 percent in the December 2009 quarter. For the five years from 2006 to 2010, an average of 16 percent of pay rates rose in the December quarter.

The historical LCI distributional information will be available on Infoshare on 20 February 2012. Please see Data quality for more information.

Analytical unadjusted LCI grows 3.2 percent

The analytical unadjusted series is an additional measure that is intended to complement 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 3.2 percent in the year to the December 2011 quarter, after increasing 3.3 percent in the year to the September 2011 quarter. In the December 2011 quarter, unadjusted salary and ordinary time wage rates rose 0.9 percent – after rising 0.9 percent in the September 2011 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 3.4 percent in the year to the December 2011 quarter. This follows a 3.5 percent increase in the year to the September 2011 quarter. Unadjusted salary and ordinary time wage rates in the private sector rose 0.9 percent in the December 2011 quarter – after rising 1.0 percent in the September 2011 quarter.

Analytical unadjusted and adjusted salary and ordinary time wage rates
Private sector and all sectors combined
December 2011 quarter 
Sector Percentage change from previous quarter  Percentage change from same quarter of previous year 
Adjusted  Unadjusted  Adjusted  Unadjusted 
Private sector 0.7 0.9 2.0  3.4
All sectors 0.6 0.9 2.0  3.2

Related measures

The prices of goods and services bought by households, as measured by the consumers price index (CPI) (see Consumers Price Index: December 2011 quarter), increased 1.8 percent in the year to the December 2011 quarter. The LCI salary and wage rates (including overtime) increased 2.0 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 have been if prices collected from the December 2010 quarter to the September 2011 quarter had been processed with GST of 12.5 percent for goods and services that are subject to GST. The latest CPI annual increase of 1.8 percent does not include most of the effects of the GST increase. 

 Graph, Annual percentage change in LCI and CPI, December 2006 quarter to December 2011 quarter.

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. 

QES and LCI ordinary time rises

The Quarterly Employment Survey (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 the Quarterly Employment Survey: December 2011 quarter information release.

Annual percentage changes in salary and ordinary time wage rates vary between the QES and LCI measures. For the December 2011 year, QES average ordinary time hourly earnings rose 2.8 percent, the LCI analytical unadjusted series rose 3.2 percent, and LCI salary and ordinary wage rates were up 2.0 percent. While the LCI annual increase of 2.0 percent was steady from the September 2011 quarter to the December 2011 quarter, both the QES and the LCI analytical unadjusted increases were down slightly.

 Graph, annual percentage change in salary and ordinary time wage rates, December 2006 quarter to December 2011 quarter.

Christchurch earthquakes

In the December 2011 quarter, the response rate of Christchurch respondents was 97 percent, up from 93 percent in both the September and June 2011 quarters. This is back to the normal level before the earthquakes occurred. The average response rate for Christchurch in the four quarters of 2010 was 96 percent.

In the construction industry, the proportion of salary and ordinary time wage rates that rose, the median increase and the mean increase continue to be significantly higher in Christchurch than nationally. 

Proportion increasing and mean increase
Surveyed salary and ordinary time wage rates
Construction industry
December 2011 quarter 

Region

Proportion increasing
from same quarter of previous year
(percent)

Mean increase
from same quarter of previous year
(percent)
Christchurch     59 7.8
Total New Zealand 46 4.9

 

For more detailed data see the Excel tables in the ‘Downloads’ box.

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