Labour Cost Index (Salary and Wage Rates): June 2009 quarter

Overview

The labour cost index (LCI) showed an increase of 2.8 percent from the June 2008 quarter to the June 2009 quarter (ie the year to the June 2009 quarter). This is the lowest annual increase recorded in the series since a 2.7 percent increase in the year to the June 2005 quarter and is down from a 3.3 percent increase in the year to the March 2009 quarter. In comparison, the Quarterly Employment Survey (QES) average hourly earnings increased 4.5 percent in the year to the June 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 0.3 percent in the June 2009 quarter, the lowest rise recorded in the series since an identical increase in the June 1999 quarter. The latest quarterly rise follows rises of 0.6 percent in the March 2009 quarter and 0.7 percent in the December 2008 quarter. The increase this quarter was influenced by the 4.2 percent increase in the minimum wage, which took effect on 1 April 2009. There were also a small number of respondents who reported drops in pay rates as a result of the economic downturn, specifically in the construction, wholesale trade, and manufacturing industries.

Salary and ordinary time wage rates increased 2.9 percent in the year to the June 2009 quarter, the lowest annual increase recorded in the series since a 2.6 percent rise in the year to the June 2005 quarter. The latest annual increase follows rises of 3.4 percent and 3.6 percent in the years to the March 2009 and December 2008 quarters, respectively. In the June 2009 quarter, salary and ordinary time wage rates increased 0.3 percent, down from the 0.6 percent and 0.7 percent increases recorded in the March 2009 and December 2008 quarters, respectively. The latest quarterly rise is the lowest recorded in the series since an identical increase in the September 2000 quarter.

Overtime wage rates increased 3.5 percent in the year to the June 2009 quarter, following a 3.8 percent increase in the year to the March 2009 quarter. In the June 2009 quarter, overtime wage rates increased 0.5 percent, following rises of 0.8 percent in the March 2009 quarter and 1.0 percent in the December 2008 quarter. The latest quarterly rise is the lowest recorded for the series since a 0.4 percent rise in the March 2006 quarter.

In the year to the June 2009 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 5.2 percent, down from 5.7 percent in the year to the March 2009 quarter. In the June 2009 quarter, the mean increase for all surveyed salary and ordinary time wage rates that rose was 3.9 percent, down from 4.5 percent in the March 2009 quarter.

Sector movements

Salary and wage rates (including overtime) for the public sector increased 3.6 percent in the year to the June 2009 quarter. This followed increases of 4.3 percent in the year to the March 2009 quarter, 4.7 percent in the year to the December 2008 quarter, and 4.8 percent in the year to the September 2008 quarter. The increase in the year to the June 2009 quarter was a result of a 3.8 percent increase in the central government sector and a 2.5 percent increase in the local government sector.

Salary and wage rates (including overtime) increased 0.4 percent in the June 2009 quarter for the public sector. This followed increases of 0.6 percent in the March 2009 quarter, 0.8 percent in the December 2008 quarter, and 1.8 percent in the September 2008 quarter.

Salary and wage rates (including overtime) for the private sector increased 2.7 percent in the year to the June 2009 quarter, following increases of 3.1 percent, 3.2 percent, and 3.7 percent in the years to the March 2009 quarter, December 2008 quarter, and September 2008 quarter, respectively. The latest annual increase is the lowest since a 2.6 percent increase in the year to the June 2005 quarter.

Salary and wage rates (including overtime) increased 0.3 percent in the June 2009 quarter for the private sector, the lowest quarterly increase since a 0.3 percent increase in the June 2000 quarter. The latest quarterly increase followed increases of 0.6 percent, 0.7 percent, and 1.1 percent in the March 2009 quarter, December 2008 quarter, and September 2008 quarter, respectively.

Industry movements

In the year to the June 2009 quarter, the industry groups with the largest annual increases in salary and wage rates (including overtime) were:

• Health and community services – 4.4 percent
• Education – 4.0 percent.

Other industry groups with notable movements in the year to the June 2009 quarter were:

• Communication services – 3.2 percent
• Furniture and other manufacturing – 1.0 percent.

Salary and wage rates (including overtime) increased 4.4 percent in the year to the June 2009 quarter for the health and community services industry. This matched the identical rise of 4.4 percent recorded in the year to the March 2009 quarter and was up from the 4.3 percent increase in the year to the December 2008 quarter. In the June 2009 quarter, salary and wage rates (including overtime) increased 1.1 percent for this industry. This followed an identical 1.1 percent rise in the March 2009 quarter and a 0.5 percent increase in the December 2008 quarter. Collective employment agreements coming into effect was the main reason provided by respondents for the latest quarterly rise.

In the year to the June 2009 quarter, salary and wage rates (including overtime) for the education industry rose 4.0 percent. This is down from the previous three annual increases of 5.7 percent, 6.3 percent, and 6.1 percent recorded in the years to the March 2009 quarter, December 2008 quarter, and September 2008 quarter, respectively. In the June 2009 quarter, salary and wage rates (including overtime) rose 0.2 percent for this industry, following rises of 0.7 percent in the March 2009 quarter, 0.4 percent in the December 2008 quarter, and 2.7 percent in the September 2008 quarter. The latest quarterly rise is the equal lowest recorded for this industry since the series began in the June 2001 quarter (matching the 0.2 percent rise recorded in the December 2007 quarter). The main reason provided by respondents for the latest quarterly increase was collective employment agreements coming into effect.

Communication services salary and wage rates (including overtime) increased 3.2 percent in the year to the June 2009 quarter. This is the largest annual increase recorded for this industry since a 3.3 percent rise in the year to the March 2004 quarter, and follows rises of 3.1 percent in both the year to the March 2009 quarter and the year to the December 2008 quarter. Additionally, the communication services industry was the only industry in the LCI to record a higher annual increase in salary and wage rates (including overtime) in the year to the June 2009 quarter than in the year to the March 2009 quarter. In the June 2009 quarter, salary and wage rates (including overtime) rose 0.5 percent, up from the previous two increases of 0.1 percent and 0.3 percent in the March 2009 and December 2008 quarters, respectively, but down from the 2.2 percent rise in the September 2008 quarter. Matching market rates was the main reason provided by respondents for the latest quarterly rise, while collective employment agreements coming into effect also had some impact.

Salary and wage rates (including overtime) for furniture and other manufacturing increased 1.0 percent in the year to the June 2009 quarter. This is the lowest annual increase recorded for the industry since the series began in the June 2001 quarter and is also the lowest annual increase recorded across all industries in the LCI in the year to the June 2009 quarter. The latest annual rise follows increases of 2.5 percent in the year to the March 2009 quarter, and 2.6 percent in the year to the December 2008 quarter. In the March 2009 quarter, salary and wage rates (including overtime) for this industry rose 0.3 percent, up from consecutive quarterly increases of 0.2 percent in both the March 2009 quarter and the December 2008 quarter. The main reason provided by respondents to explain the latest quarterly increase was to reflect the increased cost of living.

Occupation movements

In the year to the June 2009 quarter, overall annual increases in salary and wage rates (including overtime) for the three broad occupation groups were:

• Managers, professionals and technicians – 2.9 percent
• Clerks, service and sales workers – 2.5 percent
• Other occupations – 3.2 percent.

Across all occupation groups, annual increases ranged from 1.9 percent (for salespersons, demonstrators and models) to 5.1 percent for health professionals.

Health professionals' salary and wage rates (including overtime) increased 5.1 percent in the year to the June 2009 quarter, following an identical increase in the year to the March 2009 quarter. In the June 2009 quarter, salary and wage rates increased 1.6 percent, following a 1.3 percent increase in the March 2009 quarter and a 0.5 percent increase in the December 2008 quarter. The latest quarterly increase is the fifth above 1.0 percent from the past six quarters. The main reason respondents provided for the latest quarterly increase was a result of collective employment agreements coming into effect.

Salary and wage rates (including overtime) increased 4.2 percent for teaching professionals in the year to the June 2009 quarter. The latest annual increase follows increases of 5.9 percent in the year to the March 2009 quarter, 6.8 percent in the year to the December 2008 quarter, and 6.6 percent in the year to the September 2008 quarter. In the June 2009 quarter, salary and wage rates (including overtime) increased 0.2 percent, following a 0.5 percent increase in the March 2009 quarter and a 0.2 percent increase in the December 2008 quarter. The main reason respondents provided for the latest quarterly increase was a result of collective employment agreements coming into effect.

Salary and wage rates (including overtime) for professionals (the major occupation group that includes both health professionals and teaching professionals) increased 3.8 percent in the year to the June 2009 quarter. This followed increases of 4.4 percent in the year to the March 2009 quarter, 4.7 percent in the year to the December 2008 quarter, and 4.6 percent in the year to the September 2008 quarter. In the June 2009 quarter, salary and wage rates (including overtime) increased 0.5 percent, following increases of 0.7 percent in both the March 2009 quarter and December 2008 quarter. The main reason respondents provided for the latest quarterly increase was a result of collective employments agreements coming into effect.

Salary and wage rates (including overtime) for drivers and mobile machinery operators increased 4.3 percent in the year to the June 2009 quarter. This followed increases of 4.4 percent in the year to the March 2009 quarter, 4.1 percent in the year to the December 2008 quarter, and 4.2 percent in the year to the September 2008 quarter. In the June 2009 quarter salary and wage rates (including overtime) increased 0.3 percent, following increases of 1.3 percent in the March 2009 quarter, 0.8 percent in the December 2008 quarter, and 1.9 percent in the September 2008 quarter. The main reasons respondents provided for the latest quarterly increase were to reflect the cost of living and collective employment agreements coming into effect.

Distribution of pay rates

In the year to the June 2009 quarter, 55 percent of salary and ordinary time wage rates in the surveyed sample increased, down from 60 percent that increased in the year to the March 2009 quarter. In the June 2009 quarter, 10 percent of salary and ordinary time wage rates in the surveyed sample rose, down from 13 percent in the March 2009 quarter, and the lowest proportion that increased in a quarter since at least the June 1995 quarter.

Annually, 10 percent of salary and ordinary time wage rates increased by no more than 3 percent, 28 percent by more than 3 percent but no more than 5 percent, and 17 percent increased by more than 5 percent in the year to the June 2009 quarter.

Sixty percent of overtime wage rates increased in the year to the June 2009 quarter, while 40 percent were unchanged.

Surveyed respondents were asked to give reasons for each movement in pay rates. In the year to the June 2009 quarter, 41 percent of increases in salary and ordinary time wage rates were, at least in part, to reflect the cost of living; 34 percent were due to collective employment agreements coming into effect; 26 percent were to match market rates; 11 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 June 2009 quarter was 4.0 percent, down from 4.2 percent in the year to the March 2009 quarter.

The median increase for the June 2009 quarter was 3.6 percent, down from the 4.0 percent mean increase recorded in the previous six quarters.

The mean increase for all surveyed salary and ordinary time wage rates that rose in the year to the June 2009 quarter was 5.2 percent, down from the mean increase of 5.7 percent in the year to the March 2009 quarter.

In the June 2009 quarter, the mean increase was 3.9 percent, down from the 4.5 percent mean increase in the March 2009 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 4.6 percent in the year to the June 2009 quarter. This is down from the 5.2 percent increase in the year to the March 2009 quarter. In the June 2009 quarter, unadjusted salary and ordinary time wage rates rose 0.6 percent. This is down from the 0.8 percent increase in the March 2009 quarter. The latest quarterly increase is the lowest since a 0.5 percent increase recorded in the December 1998 quarter.

Private sector unadjusted salary and ordinary time wage rates increased 4.4 percent in the year to the June 2009 quarter, following a 5.0 percent increase in the year to the March 2009 quarter. Unadjusted salary and ordinary time wage rates in the private sector rose 0.6 percent in the June 2009 quarter, down from a 0.8 percent rise in the March 2009 quarter. The latest quarterly increase is the lowest since a 0.5 percent increase in the December 1999 quarter.

Implementation of new classifications

The next LCI (salary and wage rates), for the September 2009 quarter, will be released using the updated 2006 version of the Australian and New Zealand Standard Industrial Classification (ANZSIC06) and the Australian and New Zealand Standard Classification of Occupations (ANZSCO). The ANZSIC06-based industry series and the ANZSCO-based occupation series will start from the June 2009 quarter. The LCI will be re-expressed on a base of the June 2009 quarter (=1000). 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.

The following table shows the industries that will be published under ANZSIC06 for each sector of ownership. These are marked with a Y.

The following list shows the categories at the major group level that will be released under ANZSCO:

• managers
• professionals
• technicians and trade workers
• community and personal service workers
• clerical and administrative workers
• sales workers
• machinery operators and drivers
• labourers.

In the LCI, occupation groups will be published for the above categories. Selected occupation groups will be published at a sub-group level.

ANZSIC06 and ANZSCO have been jointly developed by Statistics NZ and the Australian Bureau of Statistics to ensure that the classifications remain current and relevant, reflecting the changes that have occurred in the structure and composition of industry. See the Introducing ANZSIC 2006 and Classification of occupation webpages for more information, including links to the structures and details of the new classifications.

For technical information contact:
Nicola Argyle or Carrone Conroy
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...

Labour Cost Index (Salary and Wage Rates): September 2009 quarter will be released on
3 November 2009.