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

Overview

The Labour Cost Index (LCI) showed a rise of 3.3 percent in salary and wage rates (including overtime) from the December 2007 quarter to the December 2008 quarter (ie, the year to the December 2008 quarter). In comparison, the Quarterly Employment Survey (QES) average hourly earnings increased 5.5 percent in the year to the December 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 0.7 percent in the December 2008 quarter. This is down from both the 1.1 percent increase in the September 2008 quarter (the equal-largest increase recorded since the series began in the December 1992 quarter) and the 0.8 percent increase in the June 2008 quarter.

Salary and ordinary time wage rates rose 3.3 percent in the year to the December 2008 quarter, following a record rise of 3.6 percent in the year to the September 2008 quarter. In the latest quarter, salary and ordinary time wage rates increased 0.7 percent, down from the record 1.2 percent increase in the September 2008 quarter.

Overtime wage rates increased 3.6 percent in the year to the December 2008 quarter, matching the 3.6 percent increase in the year to the September 2008 quarter. In the latest quarter, overtime wage rates increased 1.0 percent. This followed increases of 1.2 percent in the September 2008 quarter and 0.7 percent in the June 2008 quarter.

In the year to the December 2008 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 5.8 percent. In the December 2008 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 4.8 percent.

Sector movements

In the year to the December 2008 quarter, salary and wage rates (including overtime) increased 3.2 percent in the private sector. This is down from the record 3.7 percent increase in the year to the September 2008 quarter, and the 3.4 percent increase in the year to the June 2008 quarter.

In the December 2008 quarter, salary and wage rates (including overtime) increased 0.7 percent in the private sector. This followed the equal-largest increase of 1.1 percent in the September 2008 quarter.

Salary and wage rates (including overtime) in the public sector increased 3.5 percent in the year to the December 2008 quarter. This followed annual increases of 3.6 percent and 3.7 percent in the years to the September 2008 and June 2008 quarters, respectively. The latest annual increase is a result of a 2.7 percent increase in the local government sector and a 3.7 percent increase in the central government sector.

Public sector salary and wage rates (including overtime) increased 0.9 percent in the December 2008 quarter, down from the 1.1 percent increase in the September 2008 quarter. The latest quarterly increase is larger than the 0.7 percent and 0.8 percent increases in the June 2008 and March 2008 quarters, respectively.

Industry movements

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

• Mining – 4.8 percent
• Central government administration and defence – 4.3 percent
• Health and community services – 4.3 percent.

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

• Construction – 3.9 percent
• Metal product manufacturing – 3.9 percent. 

In the year to the December 2008 quarter, salary and wage rates (including overtime) in the metal product manufacturing industry increased 3.9 percent, the largest annual increase for the industry since the series began. The latest annual rise followed increases of 3.6 percent in the year to the September 2008 quarter and 3.5 percent in the year to the June 2008 quarter. Salary and wage rates (including overtime) for the metal product manufacturing industry rose 1.1 percent in the December 2008 quarter, following a 1.2 percent rise in the September 2008 quarter. The main reason respondents gave for the latest quarterly increase was to reflect the cost of living.

Occupation movements

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

• Managers, professionals and technicians – 3.0 percent
• Clerks, service and sales workers – 3.4 percent
• Other occupations – 3.7 percent.

Across all occupation groups, annual increases ranged from 2.5 percent (legislators, administrators and managers) to 5.0 percent (for health professionals).

Health professionals' salary and wage rates (including overtime) increased 5.0 percent in the year to the December 2008 quarter. This followed increases of 5.1 percent and 4.2 percent in the years to the September 2008 quarter and June 2008 quarter, respectively. In the December 2008 quarter, salary and wage rates (including overtime) rose 0.5 percent, following rises of 1.6 percent in the September 2008 quarter, and 1.7 percent in the June 2008 quarter. The main reason respondents provided for the latest quarterly increase was collective employment agreements coming into effect.

Agriculture and fishery workers' salary and wage rates (including overtime) increased 3.5 percent in the year to the December 2008 quarter. This is the largest annual increase since the series began in the December 1992 quarter. The latest annual increase followed increases of 3.4 percent and 2.5 percent in the years to the September 2008 and June 2008 quarters, respectively. In the December 2008 quarter, salary and wage rates (including overtime) for agriculture and fishery workers rose 0.9 percent. The latest quarterly rise followed the record 1.5 percent rise in the September 2008 quarter, and a 0.5 percent rise in the June 2008 quarter. 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 4.1 percent in the year to the December 2008 quarter, down from the record increase of 4.2 percent in the year to the September 2008 quarter. In the December 2008 quarter, salary and wage rates (including overtime) for drivers and mobile machinery operators rose 0.8 percent. This is down from the record 1.9 percent rise in the September 2008 quarter. The latest quarterly rise is larger than the 0.4 percent rise in the June 2008 quarter but down on the 1.0 percent rise in the March 2008 quarter. The main reason respondents provided for the latest quarterly increase was to reflect the cost of living.

Distribution of pay rates

In the year to the December 2008 quarter, 58 percent of salary and ordinary time wage rates in the survey sample increased, compared with 61 percent increasing in the year to the September 2008 quarter. In the December 2008 quarter, 15 percent of salary and ordinary time wage rates in the survey sample rose, down from 22 percent in the September 2008 quarter.

Annually, 10 percent of salary and ordinary time wage rates increased by no more than 3 percent, 26 percent by more than 3 percent but no more than 5 percent, and 23 percent increased by more than 5 percent in the year to the December 2008 quarter.

Sixty-two percent of overtime wage rates increased in the year to the December 2008 quarter, while 38 percent were unchanged.

Survey respondents were asked to give reasons for each movement in pay rates. In the year to the December 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; 14 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 December 2008 quarter was 4.3 percent. This was identical to the 4.3 percent median increase in the year to the September 2008 quarter.

The median increase for the December 2008 quarter was 4.0 percent, identical to the 4.0 percent median increases recorded in both the September 2008 and June 2008 quarters.

The mean increase for all surveyed salary and ordinary time wage rates that rose in the year to the December 2008 quarter was 5.8 percent. This is down from the 6.1 percent mean increase in the year to the September 2008 quarter, but equals the 5.8 percent increase in the year to the June 2008 quarter.

In the December 2008 quarter, the mean increase was 4.8 percent, down from the 5.0 percent mean increase in the year to the September 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 5.4 percent in the year to the December 2008 quarter. This is up from an increase of 5.3 percent in the year to the September 2008 quarter, but down from a 5.5 percent increase in the year to the June 2008 quarter. In the December 2008 quarter, unadjusted salary and ordinary time wage rates rose 1.5 percent. This is identical to the 1.5 percent rise in the September 2008 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 5.4 percent in the year to the December 2008 quarter, following an identical increase in the year to the September 2008 quarter. Unadjusted salary and ordinary time wage rates in the private sector rose 1.3 percent in the December 2008 quarter, down from a 1.5 percent rise in the September 2008 quarter.

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

LCI expenditure weights corrected

The LCI wage and salary rate indexes were reweighted, effective from the September 2008 quarter, to reflect changes in the industry and occupation structures of the labour market. The data sources used included the 2006 Census of Population and Dwellings, the Quarterly Employment Survey, the Business Frame (Statistics NZ's register of businesses), and pay rates surveyed in the Labour Cost Survey for the June 2008 quarter.

It has been found that some jobs recorded on the Business Frame in the finance and insurance industry were inadvertently omitted from the LCI expenditure weight calculations. The expenditure weights have, therefore, been recalculated with the additional jobs included. The main impact of the recalculation is to increase the relative importance of the finance and insurance industry, and to marginally decrease the relative importance of other industries. The relative importance of the private sector of ownership is also slightly higher than originally calculated.

The updated expenditure weights appear in tables 9.1 and 9.2 of this release. Revised figures are flagged with an 'R'. Differences between the originally published 2008 expenditure weights and the updated set of weights are also shown in the following table. 

No index numbers have been revised. There was no impact on the published aggregate index numbers for the September 2008 quarter, and an insignificant effect on a small number of disaggregated series. However, the expenditure weights have been updated to ensure that index numbers for subsequent periods are appropriately weighted.

Next release...

Labour Cost Index (Salary and Wage Rates): March 2009 quarter will be released on 4 May 2009.