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Labour Cost Index (Salary and Wage Rates): December 2009 quarter
Embargoed until 10:45am  –  02 February 2010
Commentary

Overview

The labour cost index (LCI) showed an increase of 1.8 percent from the December 2008 quarter to the December 2009 quarter (ie the year to the December 2009 quarter). This is a continuation of the steady decline in salary and wage rates (including overtime) increases from a peak of 4.0 percent in the year to the September 2008 quarter (the largest annual increase recorded since the series began in the December 1992 quarter). The latest annual increase of 1.8 percent is the lowest since a 1.8 percent increase in the year to the June 2001 quarter. In comparison, the Quarterly Employment Survey (QES) average hourly earnings increased 3.7 percent in the year to the December 2009 quarter.

The QES average earnings statistics reflect not only changes in pay rates, but also compositional and other changes across and within the paid workforce. In comparison, the LCI measures changes in salary and wage rates for a fixed quantity and quality of labour input. Service increments, merit promotions, and increases (or decreases) relating to the performance of individual employees are not shown in the index.

In the LCI, salary and wage rates (including overtime) increased 0.4 percent in the December 2009 quarter, following increases of 0.5 percent in the September 2009 quarter and 0.3 percent in the June 2009 quarter.

Salary and ordinary time wage rates increased 1.8 percent in the year to the December 2009 quarter, the lowest annual increase recorded in the series since a 1.8 percent rise in the year to the June 2001 quarter. The latest annual increase follows rises of 2.1 percent and 2.9 percent in the years to the September 2009 and June 2009 quarters, respectively. In the December 2009 quarter, salary and ordinary time wage rates increased 0.4 percent, down from an increase of 0.5 percent recorded in the September 2009 quarter, but up from the 0.3 percent increase in the June 2009 quarter.

Overtime wage rates increased 2.2 percent in the year to the December 2009 quarter, following a 2.8 percent increase in the year to the September 2009 quarter. This is the lowest annual increase in overtime wage rates since the year to December 2002 quarter when a 2.2 percent increase was also recorded. In the December 2009 quarter, overtime wage rates increased 0.4 percent. This follows rises of 0.5 percent in both the September 2009 and June 2009 quarters.

Salary and ordinary time and overtime wage rates annual percentage change 

In the year to the December 2009 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 4.4 percent, down from 4.8 percent in the year to the September 2009 quarter. In the December 2009 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 3.3 percent, down from 3.8 percent in the September 2009 quarter. Fifty-six percent of surveyed salary and ordinary time wage rates had no change in the year to the December 2009 quarter.   

Sector movements

Salary and wage rates (including overtime) for the public sector increased 2.4 percent in the year to the December 2009 quarter. This is the lowest annual increase recorded for the public sector since an identical increase of 2.4 percent in the year to the September 2004 quarter. The latest increase is down from a 2.9 percent increase in the year to the September 2009 quarter and a 3.6 percent increase in the year to the June 2009 quarter. The increase in the year to the December 2009 quarter was as a result of a 2.5 percent increase in the local government sector and a 2.4 percent increase in the central government sector.

In the December 2009 quarter, salary and wage rates (including overtime) for the public sector increased 0.3 percent, the lowest quarterly increase for the public sector since the June 2007 quarter when salary and wage rates (including overtime) also rose 0.3 percent. The latest quarterly increase follows a 1.1 percent increase in the September 2009 quarter.

Private sector salary and wage rates (including overtime) rose 1.6 percent in the year to the December 2009 quarter, following a 2.0 percent increase in the year to the September 2009 quarter and a 2.7 percent rise in the year to the June 2009 quarter. The latest annual increase is the lowest recorded in the series since a 1.6 percent rise in the year to the March 2001 quarter.

In the December 2009 quarter, private sector salary and wage rates (including overtime) increased 0.3 percent, down from the 0.4 percent increase in the September 2009 quarter, and identical to the 0.3 percent rise in the June 2009 quarter.  In comparison, salary and wage rates (including overtime) for the private sector, recorded increases of 0.7 percent in the December 2008 quarter, 1.1 percent in the September 2008 quarter, and 0.8 percent in the June 2008 quarter, which were all higher than the latest quarterly increase of 0.3 percent.

In the December 2009 quarter, salary and wage rates (including overtime) recorded increases of 0.3 percent for both the public and private sector, while the increase for all sectors combined was 0.4 percent. These movements were all calculated using index numbers rounded to the nearest index point which can result in a larger movement for all sectors combined, than for the individual sectors. See the technical notes for further details.

 All salary and wage rates by sector annual percentage change

Industry movements

In the December 2009 quarter, the highest Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06)-based industry increases in salary and wage rates (including overtime) were:

  • food, beverage, and tobacco product manufacturing – up 0.8 percent
  • financial and insurance services – up 0.6 percent
  • arts and recreation services – up 0.6 percent.

As the ANZSIC06-based series began in the June 2009 quarter, annual movements are not available.

In the year to the December 2009 quarter, the highest ANZSIC96-based industry group increases in salary and wage rates (including overtime) were:

  • education – up 3.4 percent
  • health and community services – up 3.3 percent.

Salary and wage rates (including overtime) for the education industry increased 3.4 percent in the year to the December 2009 quarter. This followed rises of 3.7 percent, 4.0 percent, and 5.7 percent in the years to the September 2009, June 2009, and March 2009 quarters, respectively. The latest annual increase is the lowest for the education industry since a 3.2 percent increase in the year to the June 2008 quarter. In the December 2009 quarter, salary and wage rates (including overtime) for the education industry increased 0.1 percent, following quarterly increases of 2.4 percent in the September 2009 quarter, 0.2 percent in the June 2009 quarter, and 0.7 percent in the March 2009 quarter. The latest quarterly increase is the lowest since the series began in the June 2001 quarter. 

In the year to the December 2009 quarter, salary and wage rates (including overtime) for the health and community services industry increased 3.3 percent, following increases of 3.4 percent in the year to September 2009 quarter, and 4.4 percent in the years to both the June 2009 and March 2009 quarters. The latest annual increase is the lowest for the health and community services industry since a 2.8 percent increase in the year to the March 2005 quarter. In the December 2009 quarter, salary and wage rates (including overtime) for the health and community services industry rose 0.4 percent. This followed increases of 0.7 percent in the September 2009 quarter, and 1.1 percent in both the June 2009 and March 2009 quarters. The latest quarterly increase is the lowest since a 0.4 percent increase in the June 2002 quarter. Collective employment agreements coming into effect was the main reason provided by respondents for the latest quarterly increase.

 All salary and wage rates for health & communty services and all industries annual percentage change

Occupation movements

In the December 2009 quarter, the highest Australian and New Zealand Standard Classification of Occupations (ANZSCO)-based occupation series increases in salary and wage rates (including overtime) were:

  • factory process workers – up 1.0 percent 
  • mobile plant operators – up 0.6 percent 
  • automotive and engineering trades workers – up 0.6 percent.


As the ANZSCO-based series began in the June 2009 quarter, annual movements are not available.

In the year to the December 2009 quarter, overall annual increases in salary and wage rates (including overtime) for the three broad New Zealand Standard Classification of Occupations 1999 (NZSCO99)-based occupation groups were:

  • managers, professionals, and technicians – up 2.0 percent
  • clerks, service, and sales workers – up 1.5 percent 
  • other occupations – up 2.1 percent.

Across all NZSCO99-based occupation groups, annual increases ranged from 1.0 percent (for legislators, administrators, and managers) to 4.1 percent (for health professionals) in the year to the December 2009 quarter. Teaching professionals showed an increase of 3.6 percent in the year to the December 2009 quarter.

Salary and wage rates (including overtime) increased 4.1 percent in the year to the December 2009 quarter for the health professionals occupation group. This followed an increase of 4.3 percent in the year to the September 2009 quarter, and 5.1 percent increases in both the year to the June 2009 quarter and the year to the March 2009 quarter. In the December 2009 quarter, salary and wage rates (including overtime) increased 0.4 percent for health professionals, a lower quarterly movement than the 0.9 percent increase recorded 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.

Teaching professionals' salary and wage rates (including overtime) increased 3.6 percent in the year to the December 2009 quarter. This is down from a 3.9 percent increase in the year to the September 2009 quarter. In the December 2009 quarter, salary and wage rates (including overtime) for teaching professionals recorded a flat movement. This follows an increase of 2.9 percent in the September 2009 quarter, and increases of 0.2 percent and 0.5 percent in the June 2009 and March 2009 quarters, respectively. The latest quarter is the first time that teaching professionals have recorded no increase in salary and wage rates (including overtime) since the June 2001 quarter, when no change was also recorded.

Professionals' (which is the broad occupation group that includes both teaching professionals and health professionals) salary and wage rates (including overtime) increased 2.7 percent in the year to the December 2009 quarter. This followed increases of 3.2 percent and 3.8 percent in the years to the September 2009 quarter and the June 2009 quarter, respectively. In the December 2009 quarter, professionals' salary and wage rates (including overtime) increased 0.2 percent. This is the lowest quarterly movement for this occupation group since an identical increase of 0.2 percent was recorded in the December 1994 quarter. The latest quarterly increase is down from a 1.2 percent increase in the September 2009 quarter and a 0.5 percent increase in the June 2009 quarter. The main reason respondents gave for the latest quarterly increase was as a result of collective employment agreements coming into effect.

All salary and wage rates for health professionals and professionals annual percentage change 

Distribution of pay rates

In the year to the December 2009 quarter, 44 percent of salary and ordinary time wage rates in the surveyed sample increased, down from 47 percent in the year to the September 2009 quarter. The latest annual proportion that increased is the lowest since an identical proportion in the year to the June 2000 quarter. In the December 2009 quarter, 12 percent of salary and ordinary time wage rates in the surveyed sample rose, down from 15 percent in the September 2009 quarter, and down from 15 percent in the December 2008 quarter.

Annually, 15 percent of salary and ordinary time wage rates increased by no more than 3 percent, 19 percent by more than 3 percent but not more than 5 percent, and 10 percent increased by more than 5 percent in the year to the December 2009 quarter.

One percent of salary and ordinary time wage rates in the surveyed sample decreased in the year to the December 2009 quarter, following the same proportion of 1 percent that decreased in the year to the September 2009 quarter. There were some instances where respondents recorded drops in pay rates as a result of the economic downturn, specifically in the ANZSIC06-based manufacturing; agriculture, forestry, and fishing; and construction industries.

Fifty-one percent of overtime wage rates increased in the year to the December 2009 quarter, while 49 percent were unchanged.

Surveyed respondents were asked to give reasons for each movement in pay rates. In the year to the December 2009 quarter, 41 percent of increases in salary and ordinary time wage rates were, at least in part, due to collective employment agreements coming into effect; 39 percent were to reflect the cost of living; 22 percent were to match market rates; 8 percent were to retain staff; and 1 percent were to attract staff.

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 2009 quarter was 3.7 percent, down from the 4.0 percent median increase in both the years to the September 2009 and June 2009 quarters. The median increase in the year to the December 2009 quarter is the lowest since a 3.2 percent median increase in the year to the June 2005 quarter.

The median increase for the December 2009 quarter was 2.9 percent, down from the 3.7 percent median increase in the September 2009 quarter. This is the lowest median increase since a 2.8 percent median increase in the March 2001 quarter.

The mean increase for all surveyed salary and ordinary time wage rates that rose in the year to the December 2009 quarter was 4.4 percent, down from 4.8 percent in the year to the September 2009 quarter. The mean increase in the year to the December 2009 quarter is the lowest since an identical mean increase in the year to the March 2005 quarter.

In the December 2009 quarter, the mean increase was 3.3 percent, the lowest since the September 2000 quarter, when the mean increase was 3.0.

Median and mean increases for salary and ordinary time wage rates by sector
December 2009 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 3.0 3.4 3.7 4.6
Central government 3.2 3.6

4.0

4.6
Public sector 3.2 3.5 4.0 4.6
Private sector 2.9 3.3 3.5 4.4
All sectors 2.9 3.3 3.7 4.4
* 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 December 2009 quarter. This is down from the 3.8 percent increase in the year to the September 2009 quarter. The latest annual increase is the lowest increase since the June 1999 quarter, when the annual increase was also 2.9 percent. In the December 2009 quarter, unadjusted salary and ordinary time wage rates rose 0.5 percent, down from the 0.9 percent increase in the September 2009 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 2.7 percent in the year to the December 2009 quarter, following a 3.7 percent increase in the year to the September 2009 quarter. The latest annual increase is the lowest for the private sector since the series began in the September 1998 quarter. Unadjusted salary and ordinary time wage rates in the private sector rose 0.4 percent in the December 2009 quarter, down from a 0.8 percent rise in the September 2009 quarter.

In the December 2009 quarter, both the private sector and all sectors combined unadjusted salary and ordinary time wage rates recorded quarterly increases that are only 0.1 of a percentage point higher than the movements recorded for the adjusted salary and ordinary time wage rates. The analytical unadjusted series shows any change in pay rates when new employees replace incumbents in surveyed positions. In the December 2009 quarter, the impact of new employees replacing incumbents on the all sectors combined unadjusted series was negative, due to pay rates for new employees being lower on average than the pay rates of the incumbents they replaced. This resulted in a lower quarterly movement for unadjusted salary and ordinary time wage rates, and therefore a smaller gap between the adjusted and unadjusted movements. In both the September 2009 and June 2009 quarters, the net impact of new employees replacing incumbents was positive (ie pay rates for new employees were higher on average), which contributed to a larger gap between quarterly movements for the adjusted and unadjusted series in both quarters.

Analytical unadjusted and adjusted salary and ordinary time wage rates
Private sector and all sectors combined
December 2009 quarter
Sector Percentage change from previous quarter Percentage change from same quarter of previous year
Adjusted salary and ordinary time wage rates Unadjusted salary and ordinary time wage rates Adjusted salary and ordinary time wage rates Unadjusted salary and ordinary time wage rates
Private sector 0.3 0.4 1.5 2.7
All sectors 0.4 0.5 1.8 2.9


For technical information contact:
Nicola Argyle or Ludeth Mariposa
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 were 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 continue to 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 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): March 2010 quarter will be released on
4 May 2010.

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