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Labour Cost Index (Salary and Wage Rates): June 2010 quarter
Embargoed until 10:45am  –  03 August 2010
Commentary

Overview

The labour cost index (LCI) increased 1.6 percent in the year to the June 2010 quarter, compared with an increase of 1.5 percent in the year to the March 2010 quarter. Annual wage growth had declined for six quarters, from a peak of 4.0 percent in the year to the September 2008 quarter (the largest annual increase since the series began in the December 1992 quarter), to 1.5 percent in the year to the March 2010 quarter. The Quarterly Employment Survey (QES) average hourly earnings increased 2.1 percent in the year to the June 2010 quarter.

The QES average earning 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 0.4 percent in the June 2010 quarter. This follows rises of 0.3 percent in the March 2010 quarter and 0.4 percent in the December 2009 quarter.

Salary and ordinary time wage rates increased 1.6 percent in the year to the June 2010 quarter. This follows increases of 1.5 percent and 1.8 percent in the years to the March 2010 quarter and the December 2009 quarter, respectively. In the June 2010 quarter, salary and ordinary time wage rates rose 0.4 percent, up from a 0.3 percent rise in the March 2010 quarter and the same as in the December 2009 quarter.

Overtime wage rates increased 2.1 percent in the year to the June 2010 quarter. This follows increases of 1.9 percent in the year to the March 2010 quarter and 2.2 percent in the year to the December 2009 quarter. In the June 2010 quarter, overtime wage rates rose 0.7 percent, up from rises of 0.5 percent in the March 2010 quarter and 0.4 percent in the December 2009 quarter.

In the year to the June 2010 quarter, the mean increase for all surveyed salary and ordinary time wage rates that increased was 3.7 percent, down from 3.9 percent in the year to the March 2010 quarter. In the June 2010 quarter, the mean increase for all surveyed salary and ordinary time wage rates that increased was 3.1 percent. This was the same as in the March 2010 quarter.

 Graph, Salary and ordinary time and overtime wage rates.

Sector movements

All salary and wage rates (including overtime) for the public sector increased 2.1 percent in the year to the June 2010 quarter. This is the lowest annual increase for the public sector since a 1.9 percent increase in the year to the September 2001 quarter. The latest annual increase is down from a 2.3 percent increase in the year to the March 2010 quarter and a 2.4 percent increase in the year to the December 2009 quarter. The increase in the year to the June 2010 quarter resulted from a 2.1 percent increase in salary and wage (including overtime) rates in both central government and local government.

In the June 2010 quarter, all salary and wage rates (including overtime) for the public sector rose 0.2 percent, following rises of 0.5 percent in the March 2010 quarter, and 0.3 percent in the December 2009 quarter. The 0.2 percent rise in the latest quarter is the lowest since an identical rise in the June 1999 quarter. In the June 2010 quarter, the rise was a result of a 0.2 percent rise in both central government and local government.

Private sector salary and wage rates (including overtime) increased 1.5 percent in the year to the June 2010 quarter, following increases of 1.3 percent in the year to the March 2010 quarter and 1.6 percent in the year to the December 2009 quarter.

In the June 2010 quarter, the private sector salary and wage rates (including overtime) rose 0.5 percent, up from 0.3 percent rises in both the March 2010 and the December 2009 quarters. The June 2010 quarter rise was affected by the index number for the June quarter being rounded up to the nearest index point. If percentage changes were calculated on unrounded index numbers, the rise would have been 0.4 percent. See the 'index number rounding' section of the technical notes for more details.

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

Industry movements

In the June 2010 quarter, the highest Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06)-based industry rises in salary and wage rates (including overtime) were:

  • mining – up 0.9 percent
  • printing – up 0.9 percent
  • wholesale trade – up 0.8 percent.

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

  • education and training – up 3.3 percent
  • mining – up 2.5 percent
  • transport equipment, machinery, and equipment manufacturing – up 2.0 percent
  • transport, postal, and warehousing – up 2.0 percent.

Since the ANZSIC06-based time series have only four quarters, no comparisons can be made with the annual movements of previous quarters.

In the June 2010 quarter, salary and wage rates (including overtime) for the education and training industry rose 0.4 percent. This follows rises of 0.5 percent, 0.1 percent, and 2.3 percent in the March 2010, December 2009, and September 2009 quarters, respectively. The main reason respondents gave for the latest quarterly rise was due to collective employment agreements coming into effect.

The ANZSIC96-based series graph for the education industry is shown below.

Graph, All salary and wage rates for education and all industries.

In the June 2010 quarter, salary and wage rates (including overtime) for the mining industry rose 0.9 percent. This is up from rises of 0.3 percent in the March 2010 quarter and 0.4 percent in the December 2009 quarter, and is the same as in the September 2009 quarter. Collective employment agreements coming into effect in the June 2010 quarter were the main reason provided by respondents for salary and wage rate increases.

Occupation movements

In the June 2010 quarter, the highest Australian and New Zealand Standard Classification of Occupations (ANZSCO)-based occupation series rises in salary and wage rates (including overtime) were:

  • construction trades workers – up 0.7 percent
  • general clerical workers – up 0.7 percent.

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

  • managers, professionals, technicians, and trades workers – up 1.6 percent
  • service, clerical, and sales workers – up 1.5 percent
  • machinery operators, drivers, and labourers – up 1.8 percent.

Across all groups, annual increases ranged from 1.0 percent (for farm, forestry, and garden workers) to 3.6 percent (for education professionals).

Since ANZSCO-based time series have only four quarters, no comparisons can be made with the annual movements of previous quarters.

In the June 2010 quarter, salary and wage rates (including overtime) for education professionals rose 0.3 percent, down from a 0.6 percent rise in the March 2010 quarter, up from no change in the December 2009 quarter, and down from a 2.7 percent rise in the September 2009 quarter. The main reason respondents gave for the latest quarterly rise was as a result of collective employment agreements coming into effect.

Professionals’ (which is the broad occupation group that include education professionals) salary and wage rates (including overtime) rose 0.3 percent in the June 2010 quarter. This is down from a 0.4 percent rise in the March 2010 quarter, identical to the December 2009 quarter, and down from a 1.0 percent rise in the September 2009 quarter. Collective employment agreements coming into effect were the main reason provided by respondents for the latest quarterly increase.

Skill levels

Statistics New Zealand now produces the LCI broken down into skill levels. Each skill level corresponds to a certain level of qualifications or experience. (For more information on the different skill levels and requirements see the technical notes section of this release.)

In the year to the June 2010 quarter, increases in salary and wage rates (including overtime) for the five skill levels ranged from 1.5 to 1.7 percent, with skill levels 3 and 5 recording the highest growth. In the June 2010 quarter, rises in salary and wage rates (including overtime) for the skill levels were between 0.3 and 0.5 percent.

The adult minimum wage increased from $12.50 per hour to $12.75 per hour on 1 April 2010. This had the most impact on occupations in skill level 5. Skill level 5 includes occupations that require New Zealand Register level 1 qualification (eg clerical and administrative workers, labourers, sales workers) or a short period of on-the-job training. Surveyed respondents were asked to give reasons for each movement in pay rates, and 'minimum wage' contributed 7.2 percent of the June 2010 quarter increases in skill level 5 occupations. This compares with 2.2 percent for all skill levels combined.

If the minimum wage had remained unchanged, skill level 5 occupations would have recorded a 0.4 percent rise in salary and wage rates (including overtime) in the June 2010 quarter instead of 0.5 percent. For the private sector all skill levels combined, this would have been a 0.4 percent rise in the June 2010 quarter instead of 0.5 percent.

Distribution of pay rates

In the year to the June 2010 quarter, 46 percent of salary and ordinary time wage rates in the surveyed sample increased, up from 43 percent in the year to the March 2010 quarter. In the June 2010 quarter, 14 percent of salary and ordinary time wage rates in the surveyed sample rose, up from 11 percent in the March 2010 quarter and 10 percent in the June 2009 quarter.

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

  • 23 percent of salary and ordinary time wage rates increased by no more than 3 percent
  • 16 percent increased by more than 3 percent but not more than 5 percent
  • 8 percent increased by more than 5 percent.

Fifty-five percent of overtime wage rates increased in the year to the June 2010 quarter, while 45 percent were unchanged.

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

  • collective employment agreements – 40 percent
  • cost of living – 40 percent
  • match market rates – 21 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 June 2010 quarter was 3.0 percent, down from a 3.3 percent median increase in the year to the March 2010 quarter. The latest median increase is the lowest since an identical median increase in the year to the March 2005 quarter.

The median increase in the June 2010 quarter was 2.5 percent, identical to that in the March 2010 quarter.

The mean increase for all surveyed salary and ordinary time wage rates that rose in the year to the June 2010 quarter was 3.7 percent, down from the previous mean increase of 3.9 percent. The latest mean increase is the lowest since a 3.5 percent mean increase in the year to the March 2001 quarter.

In the June 2010 quarter, the mean increase was 3.1 percent, identical to that in the March 2010 quarter.

Median and mean increases for salary and ordinary time wage rates by sector
June 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 2.5 3.1 2.9 3.9
Central government 2.0 2.6 4.0 3.8
Public sector 2.1 2.7 3.5 3.9
Private sector 2.5 3.2 3.0 3.6
All sectors 2.5 3.1 3.0 3.7
* Does not include decreases or rates that remained unchanged.

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 2.9 percent in the year to the June 2010 quarter, up from a 2.5 percent increase in the year to the March 2010 quarter. In the June 2010 quarter, unadjusted salary and ordinary time wage rates rose 1.0 percent, up from a 0.5 percent rise in the March 2010 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 2.9 percent in the year to the June 2010 quarter, following a 2.5 percent increase in the year to the March 2010 quarter. Unadjusted salary and ordinary time wage rates in the private sector rose 1.0 percent in the June 2010 quarter, up from a 0.7 percent rise in the March 2010 quarter.

Analytical unadjusted and adjusted salary and ordinary time wage rates
Private sector and all sectors combined
June 2010 quarter
Sector Percentage change from previous quarter Percentage change from same quarter of previous year
Adjusted Unadjusted Adjusted Unadjusted
Private sector 0.4 1.0 1.4 2.9
All sectors 0.4 1.0 1.6 2.9

 

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

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 into 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 June 2009 quarter. However, the LCI (salary and wage rates) series on the old classifications will be published until the June 2010 quarter, providing a year-long overlap. These results appear in tables 10.1,10.2, 10.3, 11.1, 11.2, 11.3, 12.1, 12.2, 12.3, 13.1, 13.2, 13.3, 14.1, and 14.2 (previously numbered 2.1, 2.2, 2.3, 3.1, 3.2, 3.3, 4.1, 4.2, 4.3, 5.1, 5.2, 5.3, 9.1, and 9.2, respectively).

The new base expenditure weights by sector, cost, and occupation appear in table 9.1, and those by industry appear in table 9.2.

The next LCI (all labour costs) release, for the June 2010 quarter, will be published on 22 October 2010 under both industry classifications, ANZSIC06 and ANZSIC96. From the June 2011 quarter onwards, only the new ANZSIC06 classification will be released.

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

Next release ...

Labour Cost Index (Salary and Wage Rates): September 2010 quarter will be released on

2 November 2010.

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