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Labour Cost Index (Salary and Wage Rates): June 2013 quarter
Embargoed until 10:45am  –  07 August 2013
Commentary

Annual wage rates grow 1.7 percent

The labour cost index (LCI) increased 1.7 percent in the year to the June 2013 quarter, after a 1.7 percent increase in the year to the March 2013 quarter.

In contrast, in the year to the June 2012 quarter, the LCI increased 2.0 percent.

Graph, Salary and ordinary time and overtime wage rates, all sectors combined, percentage change from same quarter of previous year, June 2008 quarter to June 2013 quarter.

Salary and ordinary time wage rates increased 1.7 percent in the year to the June 2013 quarter, after a 1.8 percent increase in the year to the March 2013 quarter.

Overtime wage rates increased 2.2 percent in the year to the June 2013 quarter, after a 2.5 percent increase in the year to the March 2013 quarter.

Annual wage rate growth higher for private sector

Private sector salary and wage rates (including overtime) increased 1.8 percent in the year to the June 2013 quarter. This follows an increase of 1.8 percent in the year to the March 2013 quarter.

Public sector salary and wage rates (including overtime) increased 1.5 percent in the year to the June 2013 quarter, the same increase as in the year to the March 2013 quarter. The latest annual wage rate growth in the public sector resulted from increases in central government (up 1.4 percent) and local government (up 1.9 percent).

Over the last three years, wage rate growth has been stronger in the private sector than in the public sector. The gap peaked at 0.7 percent in the year to the September 2012 quarter, when private sector growth was 2.1 percent and public was 1.4 percent.

Prior to this, public sector wage rate growth had exceeded private sector wage growth for just over two years. That gap peaked in the year to the December 2008 quarter.

 Graph, All salary and wage rates by sector, percentage change from same quarter of previous year, June 2008 quarter to June 2013 quarter.

Annual mean increase of 3.4 percent, lowest in over 12 years

Of all salary and ordinary time wage rates in the LCI sample, 55 percent rose in the year to the June 2013 quarter. This compares with 56 percent in the year the March 2013 quarter and 55 percent in the year to the December 2012 quarter. Of the 55 percent that increased in the year to the June 2013 quarter, there was:

  • a median (middle) annual increase of 2.7 percent (the lowest since the March 2001 quarter)
  • a mean annual increase of 3.4 percent (the lowest since the December 2000 quarter).

Graph, Annual proportion increasing and mean increase, all sectors combined, surveyed salary and wage rates, June 2008 quarter to June 2013 quarter.

In the year to the June 2013 quarter, the mean increases by sector were:

  • private sector, 3.5 percent
  • public sector, 3.0 percent.

Graph, Distribution of annual movements, all sectors combined, surveyed salary and wage rates, June 2008 quarter to June 2013 quarter.

In the year to the June 2013 quarter:

  • 34 percent of salary and wage rates rose no more than 3 percent
  • 22 percent of salary and wage rates rose more than 3 percent.

In contrast, in the year to the June 2012 quarter:

  • 27 percent of salary and wage rates rose no more than 3 percent
  • 30 percent of salary and wage rates rose more than 3 percent.

Minimum wage increase affects pay rates in skill level 5

The adult minimum wage increased from $13.50 per hour to $13.75 per hour on 1 April 2013. 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 24 percent of the June 2013 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, wage rates for skill level 5 occupations would have risen 0.4 percent this quarter. Instead, they rose 0.5 percent.

Analytical unadjusted LCI shows annual growth of 2.8 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 2.8 percent in the year to the June 2013 quarter, after increasing 3.0 percent in the year to the March 2013 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 3.0 percent in the year to the June 2013 quarter, after increasing 3.3 percent in the year to the March 2013 quarter.

Analytical unadjusted and adjusted salary and ordinary time wage rates
Private sector and all sectors combined
June 2013 quarter 
Sector Percentage change from previous quarter  Percentage change from same quarter of previous year 
Adjusted  Unadjusted  Adjusted  Unadjusted 
Private sector 0.4 0.5 1.7 3.0
All sectors 0.4 0.6 1.7

2.8

QES and LCI ordinary time rises

Annual percentage changes in salary and ordinary time wage rates vary between the QES and LCI measures. For the year to the June 2013 quarter:

  • LCI salary and ordinary time wage rates were up 1.7 percent
  • QES average ordinary time hourly earnings increased 2.1 percent
  • LCI analytical unadjusted series was up 2.8 percent.

Graph, Annual percentage change in salary and ordinary wage rates, June 2008 quarter to June 2013 quarter.

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  Quarterly Employment Survey: June 2013 quarter.

Comparison with consumer prices

The prices of goods and services bought by households, as measured by the consumers price index (CPI), increased 0.7 percent in the year to the June 2013 quarter (see Consumers Price Index: June 2013 quarter). The LCI salary and wage rates (including overtime) increased 1.7 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.

Graph, Annual percentage change in CPI and LCI, June 2008 quarter to June 2013 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 wage growth slows

In the year to the June 2013 quarter, salary and wage rate growth (including overtime) in the Canterbury construction industry increased 3.6 percent, down from 4.3 percent in the year to the March 2013 quarter. For the rest of New Zealand, wage growth in the construction industry rose 2.1 percent in the year to the June 2013 quarter.

Graph, Regional analytical index for the construction industry, all salary and wage rates, percentage change from same quarter of previous year, June 2010 quarter to June 2013 quarter.

In the year to the June 2013 quarter, the mean increase for surveyed salary and ordinary time wage rates that rose for the Canterbury construction industry continued to be higher than for the rest of New Zealand. 

The mean increases of the rates that rose for the year to the June 2013 quarter were:

  • 5.5 percent for the Canterbury region
  • 3.3 percent for the rest of New Zealand.

For further information, refer to the supplementary tables with this information release.

In response to the Canterbury earthquakes, we created six new regional analytical series from the existing LCI sample. 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. See data quality for more information. 

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

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