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

Annual wage rates grow 2.0 percent

The labour cost index (LCI) increased 2.0 percent in the year to the June 2012 quarter, after increasing 2.0 percent in the years to the March 2012, December 2011, and September 2011 quarters. Before that, annual growth in wage rates was below 2.0 percent since the December 2009 quarter.

All salary and wage rates (including overtime) rose 0.4 percent in the June 2012 quarter, after a rise of 0.5 percent in the March 2012 quarter.

The latest quarterly increase was affected by the rounding of index numbers. If percentage changes were calculated on unrounded index numbers, then the LCI salary and wage rates (including overtime) would have risen 0.5 percent in the June 2012 quarter (please see Data quality for more information) and 0.4 percent in the March 2012 quarter.

Graph, Salary and ordinary time wage rates, all sectors combined, percentage change from same quarter previous year, June 2007 quarter to June 2012 quarter.

Salary and ordinary time wage rates increased 2.0 percent in the year to the June 2012 quarter, after increases of 2.0 percent in the years to the March 2012, December 2011, and September 2011 quarters.

In the June 2012 quarter, salary and ordinary time wage rates rose 0.5 percent, after a rise of 0.4 percent in the March 2012 quarter.

Overtime wage rates increased 2.3 percent in the year to the June 2012 quarter. This follows a 2.5 percent increase in the year to the March 2012 quarter.

In the June 2012 quarter, overtime wage rates rose 0.7 percent, after a rise of 0.6 percent in the March 2012 quarter.

Private sector pay rates increase 2.1 percent for the year

Private sector salary and wage rates (including overtime) increased 2.1 percent in the year to the June 2012 quarter. The latest annual increase follows an increase of 2.1 percent in the year to the March 2012 quarter.

In the June 2012 quarter, private sector salary and wage rates (including overtime) rose 0.5 percent, after a 0.5 percent rise in the March 2012 quarter.

In the June 2012 quarter, salary and ordinary time wage rates for the private sector rose 0.5 percent and overtime rates rose 0.7 percent.

Graph, All salary and wage rates by sector, percentage change same quarter of previous year, June 2007 quarter to June 2012 quarter.

Public sector pay rates increase 1.6 percent

Salary and wage rates (including overtime) for the public sector increased 1.6 percent in the year to the June 2012 quarter, after increasing 1.6 percent in the year to the March 2012 quarter. The increase in the latest year resulted from a 1.6 percent increase in central government and a 2.4 percent increase in local government salary and wage rates.

In the June 2012 quarter, all salary and wage rates (including overtime) for the public sector rose 0.3 percent, after a 0.4 percent rise in the March 2012 quarter.

Pay rates for health professionals up 1.0 percent in the June quarter

In the June 2012 quarter, a collective employment agreement increase for nurses contributed to a 1.0 percent rise in pay rates for health professionals.

Salary and wage rates (including overtime) for health professionals increased 1.8 percent in the year to the June 2012 quarter.

Minimum wage increase affects pay rates in skill level 5

The adult minimum wage increased from $13.00 per hour to $13.50 per hour on 1 April 2012. This had the most impact on occupations in skill level 5. Skill level 5 includes occupations that require a New Zealand Register level 1 qualification, no qualification, or a short period of on-the-job training (eg clerical and administrative workers, labourers, sales workers). Surveyed respondents were asked to give reasons for each movement in pay rates, and 'minimum wage' was the reason given for 18 percent of the June 2012 quarter increases in skill level 5 occupations. This compares with 7 percent for all skill levels combined.

If the increases that respondents indicated were because of the minimum wage had been processed as no change, skill level 5 occupations would have had a 0.7 percent rise in salary and ordinary time wage rates in the June 2012 quarter instead of 0.8 percent.

Mean increase of 3.9 percent is highest in over two years

The mean increase for all surveyed salary and ordinary time wage rates that increased in the year to the June 2012 quarter was 3.9 percent. This is the highest increase since a 3.9 percent mean increase in the year to the March 2010 quarter.

 Graph, Annual proportion increasing and mean increase, all sectors combined, surveyed salary and wage rates, June 2007 quarter to June 2012 quarter.

The median (or middle) increase for all surveyed salary and ordinary time wage rates that rose in the year to the June 2012 quarter was 3.0 percent. This is the fourth consecutive quarter that the median annual increase has been 3.0 percent. 

In the year to the June 2012 quarter, the mean increase for the private sector was 4.1 percent, which is the largest mean increase since 4.4 percent in the year to the December 2009 quarter.

In the year to the June 2012 quarter, 56 percent of salary and ordinary time wage rates in the survey sample increased. After the 2008/09 recession, the proportion of salary and ordinary time wage rates that increased fell to a low of 43 percent, in the year to the March 2010 quarter. By the year to the June 2011 quarter, 58 percent of salary and ordinary time wage rates increased.

Fourteen percent of salary and ordinary time wage rates in the sample rose in the June 2012 quarter, after 13 percent rising in the March 2012 quarter and 14 percent rising in the June 2011 quarter. 

In the year to the June 2012 quarter:

  • 27 percent were up no more than 3 percent
  • 30 percent were up more than 3 percent.

In contrast, in the year to the September 2008 quarter:

  • 12 percent were up no more than 3 percent
  • 51 percent were up more than 3 percent.

Graph, Distribution of annual movements, all sectors combined, surveyed salary and wage rates, June 2007 quarter to June 2012 quarter.

Analytical unadjusted LCI grows 3.4 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 3.4 percent in the year to the June 2012 quarter, after increasing 3.3 percent in the year to the March 2012 quarter.

In the June 2012 quarter, unadjusted salary and ordinary time wage rates rose 0.8 percent – after rising 0.6 percent in the March 2012 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 3.6 percent in the year to the June 2012 quarter. This follows a 3.5 percent increase in the year to the March 2012 quarter.

Unadjusted salary and ordinary time wage rates in the private sector rose 0.8 percent in the June 2012 quarter, after rising 0.7 percent in the March 2012 quarter.

Analytical unadjusted and adjusted salary and ordinary time wage rates
Private sector and all sectors combined
June 2012 quarter 
Sector Percentage change from previous quarter  Percentage change from same quarter of previous year 
Adjusted  Unadjusted  Adjusted  Unadjusted 
Private sector 0.5 0.8 2.1 3.6
All sectors 0.5 0.8 2.0 3.4

QES and LCI ordinary time rises

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 the Quarterly Employment Survey: June 2012 quarter information release.

Annual percentage changes in salary and ordinary time wage rates vary between the QES and LCI measures. For the year to the June 2012 quarter, QES average ordinary time hourly earnings increased 2.9 percent, the LCI analytical unadjusted series was up 3.4 percent, and LCI salary and ordinary time wage rates were up 2.0 percent.

Graph, Annual percentage change in salary and ordinary time wage rates, June 2007 quarter to June 2012 quarter.

Related measures

The prices of goods and services bought by households, as measured by the consumers price index (CPI) (see Consumers Price Index: June 2012 quarter), increased 1.0 percent in the year to the June 2012 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 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. The latest CPI annual increase of 1.0 percent does not include most of the effects of the GST increase.

Graph, Annual percentage change in CPI and LCI, June 2007 quarter to June 2012 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.

Canterbury construction industry

After the September 2010 and February 2011 Canterbury earthquakes, there is interest in the changes to salary and wage rates in the Canterbury construction industry. In response, we created six new regional analytical series from the existing LCI sample. These six regional analytical series are now available on Infoshare. They 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.

After the September 2010 and February 2011 earthquakes, the Labour Cost Survey first reflected changes in salary and wage rates in the December 2010 and June 2011 quarters, respectively.  

The graph below shows that in the year to the June 2012 quarter, salary and wage rates (including overtime) in the Canterbury construction industry increased 3.1 percent, down from a peak of 4.3 percent in the year to the September 2011 quarter. For further information, refer to the supplementary tables with this information release.

Graph, Regional analytical index for the construction industry, all salary and wage rates, percentage change from same quarter previous year, June 2010 quarter to June 2012 quarter.

The table below shows that by the year to the June 2011 quarter, the mean increase for all surveyed salary and ordinary time wage rates for the Canterbury construction industry had grown to 2.0 percentage points higher than the rest of New Zealand. Since this period, the annual mean increase has remained over 2 percentage points higher in the Canterbury construction industry.

Annual mean ordinary time increase, construction industry for selected regions(1)
 Quarter

Canterbury 

 Rest of New Zealand

 Dec 2010

 3.9

 3.5

 Jun 2011

 5.5

 3.5

 Dec 2011

 6.9

 4.1

 Jun 2012

 6.9

 3.9

 1. Does not include decreases or rates that remained unchanged.

 

These six new regional analytical series are now 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

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

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