Labour Cost Index (Salary and Wage Rates): September 2008 quarter

Revision

'LCI expeniture weights updated' section revised 2 February 2009. See Labour Cost Index (Salary and Wage Rates): December 2008 quarter for further details.

Overview

The Labour Cost Index (LCI) showed a rise of 3.6 percent in salary and wage rates (including overtime) from the September 2007 quarter to the September 2008 quarter (in the year to the September 2008 quarter). This annual increase is the largest since the series began in the December 1992 quarter, surpassing the previous record increase of 3.5 percent in the year to the June 2008 quarter. In comparison, the Quarterly Employment Survey (QES) average hourly earnings increased 5.5 percent in the year to the September 2008 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 1.1 percent in the September 2008 quarter. This is the equal-largest quarterly increase since the series began, matching the 1.1 percent increase in the December 2007 quarter. This follows increases of 0.8 percent and 0.7 percent in the June 2008 and March 2008 quarters, respectively.

Salary and ordinary time wage rates increased 3.6 percent in the year to the September 2008 quarter, the largest annual increase recorded since the series began. In the September 2008 quarter, salary and ordinary time wage rates increased 1.2 percent. This is the largest quarterly increase since the series began.

Overtime wage rates increased 3.6 percent in the year to the September 2008 quarter, following rises of 3.4 percent and 3.5 percent in the years to the June 2008 and March 2008 quarters, respectively. In the September 2008 quarter, overtime wage rates increased 1.2 percent. This is the largest quarterly increase since a 1.3 percent rise recorded in the September 2006 quarter.

 

In the year to the September 2008 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 6.1 percent. The mean increase for all surveyed salary and ordinary time wage rates that rose in the September 2008 quarter was 5.0 percent.

Sector movements

In the year to the September 2008 quarter, private sector salary and wage rates (including overtime) increased 3.7 percent. This is the largest annual increase recorded for the private sector since the series began, surpassing the previous largest annual increase of 3.5 percent recorded in the year to the March 2008 quarter.

In the September 2008 quarter, salary and wage rates (including overtime) for the private sector increased 1.1 percent, following increases of 0.8 percent and 0.7 percent in the June 2008 and March 2008 quarters, respectively. The latest quarterly increase is the equal-largest recorded since the series began, matching the 1.1 percent increase recorded in the December 2007 quarter.

Public sector salary and wage rates (including overtime) increased 3.6 percent in the year to the September 2008 quarter, down from the 3.7 percent increase recorded in the year to the June 2008 quarter. The increase in the year to the September 2008 quarter was a result of a 5.0 percent rise in the local government sector and a 3.4 percent increase in the central government sector.

Salary and wage rates (including overtime) in the public sector rose 1.1 percent in the September 2008 quarter, following rises of 0.7 percent and 0.8 percent in the June 2008 and March 2008 quarters, respectively. The latest quarterly increase is the largest recorded for the public sector since a 1.3 percent increase in the September 2007 quarter.

 

Industry movements

In the year to the September 2008 quarter, the industry groups with the largest annual increases in salary and wage rates (including overtime) were:

• Health and community services – 5.7 percent
• Local government administration – 5.4 percent.

Other industry groups with notable movements in the year to the September 2008 quarter included:

• Petrol, coal, chemical and associated manufacturing – 4.3 percent
• Agriculture – 3.3 percent
• Communication services – 3.0 percent.

Salary and wage rates (including overtime) for the health and community services industry increased 5.7 percent in the year to the September 2008 quarter. This is the largest annual increase recorded for the industry since the series began in the June 2001 quarter, and follows a 5.1 percent rise recorded in the year to the June 2008 quarter. In the September 2008 quarter, salary and wage rates (including overtime) for the health and community services industry rose 1.6 percent, up from the two previous quarterly increases of 1.1 percent in the June 2008 quarter and 1.0 percent in the March 2008 quarter. The main reason respondents provided for the latest quarterly increase was collective employment agreements coming in to effect.

In the year to the September 2008 quarter, salary and wage rates (including overtime) for the petrol, coal, chemical and associated manufacturing industry increased 4.3 percent. This is the largest annual increase recorded in the industry since the series began in the June 2001 quarter, and followed a rise of 2.9 percent in the year to the June 2008 quarter. In the September 2008 quarter, salary and wage rates for the petrol, coal, chemical and associated manufacturing industry rose 1.8 percent, following quarterly rises of 0.9 percent in the June 2008 quarter and 0.7 percent in the March 2008 quarter. The latest quarterly increase is the largest recorded for the industry since the series began. Reflecting the cost of living was the main reason respondents gave for the latest quarterly increase.

Agriculture industry salary and wage rates (including overtime) increased 3.3 percent in the year to the September 2008 quarter, the largest annual increase in the index since the series began in the June 2001 quarter. The latest annual rise followed increases of 2.8 percent and 2.6 percent in the years to the June 2008 and March 2008 quarters, respectively. In the September 2008 quarter, salary and wage rates (including overtime) for the agriculture industry increased 1.4 percent, following rises of 0.6 percent in the June 2008 quarter and 0.4 percent in the March 2008 quarter. The latest quarterly increase is the largest recorded for the industry since the series began. The main reason provided by respondents to explain the most recent quarterly increase was to reflect the cost of living.

Salary and wage rates (including overtime) in the communication services industry rose 3.0 percent in the year to the September 2008 quarter, following rises of 1.0 percent in the year to the June 2008 quarter and 0.6 percent in each of the years to the March 2008, December 2007 and September 2007 quarters. The latest annual increase is the largest recorded for the communication services industry since a 3.3 percent rise in the year to the March 2004 quarter. In the September 2008 quarter, salary and wage rates (including overtime) increased 2.2 percent, the largest quarterly increase recorded since the series began in the June 2001 quarter. Matching market rates was the main reason respondents provided for the latest quarterly increase, while collective employment agreements coming into effect also had some impact.

Occupation movements

In the year to the September 2008 quarter, overall annual increases in salary and wage rates (including overtime) for the three broad occupation groups were:

• Managers, professionals and technicians – 3.4 percent
• Clerks, service and sales workers – 3.8 percent
• Other occupations – 3.9 percent.

Across all occupation groups, annual increases ranged from 2.6 percent (for teaching professionals) to 5.4 percent (for personal and protective services workers).

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Personal and protective services workers' salary and wage rates (including overtime) increased 5.4 percent in the year to the September 2008 quarter. This followed increases of 5.9 percent recorded in the year to the June 2008 quarter and 5.7 percent recorded in the year to the March 2008 quarter. This is the fifth consecutive quarter in which personal and protective service workers have recorded the largest annual increase in salary and wage rates (including overtime) across all occupation groups. In the September 2008 quarter salary and wage rates (including overtime) increased 1.0 percent for this occupation. This follows a 1.1 percent increase recorded in both the June 2008 and March 2008 quarters. The main reasons respondents provided for the latest quarterly increase were to reflect the cost of living and as a result of collective employment agreements coming into effect.

Salary and wage rates (including overtime) for agriculture and fisheries workers increased 3.4 percent in the year to the September 2008 quarter. This is the equal-largest annual increase since the series began in the December 1992 quarter, matching the 3.4 percent increase recorded in the year to the June 2006 quarter. The latest annual increase follows a 2.5 percent increase in the year to the June 2008 quarter and a 2.7 percent increase in the year to the March 2008 quarter. In the September 2008 quarter salary and wage rates (including overtime) increased 1.5 percent. This is the largest quarterly increase recorded since the series began and surpasses the pervious record increase of 1.3 percent recorded in the September 2005 quarter. The latest quarterly rise follows increases of 0.5 percent recorded in both the June 2008 and March 2008 quarters. The main reason provided by respondents for the latest quarterly increase was to reflect the cost of living.

Drivers and mobile machinery operators' salary and wage rates (including overtime) increased 4.2 percent in the year to the September 2008 quarter. This is the second time the annual increase has been at least 4.0 percent for this occupation group. The latest annual increase is the largest recorded since the series began in the December 1992 quarter, and follows a 3.7 percent increase and a 4.0 percent increase in the year to the June 2008 quarter and the year to the March 2008 quarter, respectively. In the September 2008 quarter salary and wage rates (including overtime) increased 1.9 percent for this occupation. This is the largest quarterly increase since the series began, and follows a 0.4 percent increase in the June 2008 quarter and a 1.0 percent increase in the March 2008 quarter. The reason provided by respondents for the latest quarterly increase was to reflect the cost of living.

Plant and machine operators and assemblers, the major occupation group that contains drivers and mobile machinery operators, recorded a 3.7 percent increase in salary and wage rates (including overtime) in the year to the September 2008 quarter. This is the largest annual increase since the index rose 3.8 percent in the year to the September 2007 quarter. The latest annual increase followed a 3.6 percent rise in the year to the June 2008 quarter and a 3.5 percent increase in the year to the March 2008 quarter. In the September 2008 quarter salary and wage rates (including overtime) increased 1.2 percent, the largest quarterly increase recorded for the occupation since an identical 1.2 percent increase in the December 2006 quarter. The latest quarterly increase followed a 0.7 percent increase in both the June 2008 quarter and the March 2008 quarter. The main reasons respondents provided for the latest quarterly increase were collective employment agreements coming in to effect and to reflect the cost of living.

Distribution of pay rates

In the year to the September 2008 quarter, 61 percent of salary and ordinary time wage rates in the survey sample increased. This matches the 61 percent increasing in the year to the June 2008 quarter. In the September 2008 quarter 22 percent of salary and ordinary time wage rates in the survey sample increased, up from 16 percent in the June 2008 quarter.

Twelve percent of salary and ordinary time wage rates increased by no more than 3 percent, 25 percent increased by more than 3 percent but no more than 5 percent, and 25 percent increased by more than 5 percent in the year to the September 2008 quarter.

Sixty-five percent of overtime wage rates increased in the year to the September 2008 quarter, while 35 percent were unchanged.

Survey respondents were asked to give reasons for each movement in pay rates. In the year to the September 2008 quarter, 43 percent of increases in salary and wage rates were, at least in part, to reflect the cost of living; 32 percent were to match market rates; 28 percent were due to collective employment agreements coming into effect; 15 percent were to retain staff; and 2 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 September 2008 quarter was 4.3 percent, up from 4.1 percent in the year to the June 2008 quarter.

The median increase for the September 2008 quarter was 4.0 percent, matching the median increase for the June 2008 quarter.

The mean increase for all surveyed salary and ordinary time wage rates that rose in the year to the September 2008 quarter was 6.1 percent, up from 5.8 percent in the year to the June 2008 quarter. The mean increase recorded in the year to the September 2008 quarter is the largest since the series began in the December 1992 quarter.

In the September 2008 quarter, the mean increase was 5.0 percent, down from the 5.6 percent mean increase recorded in the June 2008 quarter.

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 5.3 percent in the year to the September 2008 quarter, down from the increase of 5.5 percent recorded in the year to the June 2008 quarter, and the 5.4 percent increase recorded in the year to the March 2008 quarter. In the September 2008 quarter, unadjusted salary and ordinary time wage rates rose 1.5 percent. This is up from the three previous quarterly increases – 1.1 percent in the June 2008 quarter, 1.2 percent in the March 2008 quarter, and 1.4 percent in the December 2007 quarter.

Private sector unadjusted salary and ordinary time wage rates rose 5.4 percent in the year to the September 2008 quarter, following consecutive increases of 5.5 percent in the years to the June 2008 and March 2008 quarters. Unadjusted salary and ordinary time wage rates for the private sector increased 1.5 percent in the September 2008 quarter, up from consecutive quarterly increases of 1.2 percent in both the June 2008 and March 2008 quarters.

Unadjusted salary and ordinary time wage rates recorded larger increases than adjusted salary and ordinary time wage rates, both for the year to the September 2008 quarter and in the September 2008 quarter.

LCI expenditure weights corrected

This section was revised 2 February 2009. See Labour Cost Index (Salary and Wage Rates): December 2008 quarter for more details. The LCI wage and salary rate indexes have been reweighted to reflect the changes in industry and occupation structures of the labour market. The data sources used were:

• 2006 Census of Population and Dwellings information on the relative importance of occupations within each sector by industry group in terms of jobs, and, in some cases, wages
• Quarterly Employment Survey figures for the year to June 2008 on the relationship between full- and part-time paid employees, and figures for the June 2008 quarter on average earnings per job
• Business Frame (BF) 2008 information on the relative importance of industry groups within each sector of ownership
  pay rates surveyed in the Labour Cost Survey for the June 2008 quarter.

The industry breakdown of the reweighted index is based on the Australian and New Zealand Standard Industrial Classification (ANZSIC96) and the occupation breakdown on the New Zealand Standard Classification of Occupations (NZSCO99).

The LCI has not been re-expressed and is still based on the June 2001 quarter (=1000). The LCI was last reweighted using 2001 Census of Population and Dwellings information.

The changes in the LCI expenditure weights reflect real changes in the labour market, and to some extent changes to the data sources and methods used to calculate the weights. Real changes are the result of relative changes in quantity and price levels. For example, if an industry has experienced higher growth in paid employees and higher wage increases than average over the seven years between reweights, then that industry will experience an increase in its expenditure weight percentage. Industries with decreases or below average increases will have a percentage weight in 2008 that is lower than the 2001 percentage weight.

For all sectors, and industries (and occupations) combined, the BF and other information showed a 35 percent increase from 2001 to 2008 in full-time equivalent (FTE) jobs. The salary and wage rates (including overtime) LCI for all sectors, industries and occupations combined increased 21 percent over the same period. The overall level of expenditure on wages and salaries (which the weights are based on) increased 65 percent over the seven-year period.

Sector of ownership

Table 9.1 shows that the public sector has increased its relative expenditure share by 1.8 percentage points to 23.3 percent, and the private sector has decreased its share to 76.7 percent. This is partly due to greater-than-average LCI pay rate movements in the public sector of 23.4 percent, compared with 20.2 percent in the private sector. Changes in the sector of ownership of individual businesses between 2001 and 2008 has also had an impact.

The private sector weights for salary and ordinary time wage rates, and overtime wage rates change slightly to 96.9 and 3.1 percent, respectively. The public sector has shown a decrease of 0.3 of a percentage point, to 98.4 percent for salary and ordinary time wage rates. The weight for overtime wage rates for the public sector increased from 1.3 percent to 1.6 percent. For all sectors combined, the weights for salary and ordinary time wage rates, and overtime wage rates are unchanged at 97.2 and 2.8 percent, respectively.

Industry

The following graph shows there has been some movement in the industry weights since the 2001 reweight.

The following industries have shown the largest relative increases:

• agriculture (from 3.3 percent to 4.3 percent)
• mining (from 0.3 percent to 0.5 percent)
• electricity, gas and water supply (from 0.6 percent to 0.8 percent)
• construction (from 6.0 percent to 7.7 percent)
• property and business services (from 11.5 percent to 13.4 percent).

Property and business services recorded the highest percentage points increase of 1.9, followed by construction and by agriculture, with 1.7 and 1.0 percentage point increases, respectively.

These upward movements can be partly explained by the increase each industry has experienced in BF-based FTE counts over the seven-year period. Construction had the highest increase in FTEs with 81 percent, followed by agriculture and mining, both up 63 percent. Property and business services increased 57 percent, and electricity, gas and water supply rose 42 percent. These are five of the six largest industry increases and all are above 35 percent, which is the overall BF-based FTE increase over the same period.

Coupled with above-average increases in the number of jobs, most of these industries also experienced strong growth for salary and wage rates, according to the LCI. The LCI shows that mining increased 24.6 percent, construction 24.0 percent, and electricity, gas and water supply 22.8 percent. This compares with the overall LCI increase of 20.9 percent.

Forestry and logging, and textile and apparel manufacturing had the largest relative downward movements. Forestry and logging had the largest relative fall, with a percentage weight of 0.8 in 2001 declining to 0.3 percent in 2008. Textile and apparel manufacturing went from 1.1 percent to 0.7 percent. It is interesting to note that the relative importance of all manufacturing industries decreased over the seven-year period (except for non-metallic mineral product manufacturing, which stayed constant). Manufacturing had a weight of 19.3 percent at the last reweight in 2001, and now has a weight of 15.8 percent.

Forestry and logging saw a 25 percent fall in BF-based FTE figures, and textile and apparel manufacturing decreased 22 percent. While FTE jobs in total manufacturing increased by 12 percent, this was below the overall BF-based FTE increase.

Forestry and logging, and textile and apparel manufacturing showed salary and wage rate increases in the LCI of 13.4 and 20.1 percent, respectively, over the seven years, which is below the 20.9 percent overall increase. Manufacturing had a 20.0 percent increase, and five of the manufacturing sub-industries had increases in the LCI lower than the increase for all industries combined.

Occupation

All occupation major groups had significant absolute growth in expenditure, due to both increased job numbers ranging from 1 percent to 37 percent (according to census) and to higher salaries and wage rates.

 

The managers, professionals and technicians broad occupation group has had higher-than-average growth in expenditure, resulting in a 0.6 percentage point increase in weight, despite technicians and associate professionals dropping in relative importance. This is due to professionals' overall share climbing 1.1 percentage points to 20.9 percent overall. Interestingly, managers showed strong growth in job numbers. However, its weight has remained relatively stable at 20.1 percent, partly due to managers recording the lowest LCI increase of 16.4 percent over the period from 2001 to 2008.

The weight for clerks fell most in relative terms, losing 1.7 percentage points to 10.5 percent. This is over 5 percentage points lower than in 1992. Service and sales workers, however, have increased slightly to 9.7 percent, returning to just under the weight in 1992 of 9.8 percent. The clerks, service and sales workers broad occupation group has had below average growth in job numbers. Clerks recorded the lowest increase of 0.9 percent (since 2001), and service and sales workers were also below average, up 13 percent. Service and sales workers' higher weighting is partly explained by its above average LCI pay rate increase of 22.1 percent since 2001.

The other occupations broad occupation group had the largest combined weight increase of 0.7 of a percentage point, with increases for agriculture and fishery workers, trades workers, and elementary occupations. Plant and machine operators have fallen from 9.2 percent to 8.6 percent, but still hold the highest weight in this bracket. Plant and machine operators are typically employed in manufacturing, which showed a decrease in relative importance. Trades workers, and elementary occupations each had an increase in relative importance. These occupation groups include carpenters, electricians and builders' labourers. These are occupations typically employed in the construction industry, which has shown an increase in relative importance. All four occupation groups have moved some way back towards their 1992 weights.

Further details about the methods used to compile the new expenditure weights are available on request and can be found in the January 2009 issue of Price Index News.

For technical information on the updated expenditure weights contact:
Adam Dustin or Chris Pike
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release...

Labour Cost Index (Salary and Wage Rates): December 2008 quarter will be released on 2 February 2009.