Wage Growth - March 2012 Quarter
Published: 7 May 2012
This note examines the wage growth measures from the Labour Cost Index (LCI) and the Quarterly Employment Survey (QES).
Wage growth is gradually recovering…
The March 2012 quarter data shows that wage growth continues to gradually recover (Figure 1). The adjusted LCI (which measures changes in pay rates for a fixed set of jobs and excludes performance-related pay increases) rose by 0.5% over the March 2012 quarter, contributing to annual wage growth of 2.0%. This level of annual wage growth is unchanged from the year to December 2011 and September 2011, but is up from 1.8% a year ago.
Figure 1: Wage Growth Measures
Source: Statistics New Zealand
| Wage Growth | Last year | Last quarter | This quarter |
|---|---|---|---|
| (annual % change) | Mar-11 | Dec-11 | Mar-12 |
| Adjusted LCI | 1.9 | 2.0 | 2.0 |
| Unadjusted LCI | 3.6 | 3.2 | 3.3 |
| QES | 2.6 | 2.8 | 3.9 |
Source: Statistics New Zealand.
Annual wage growth in the private sector increased to 2.1% in the year to March 2012, up from 2.0% in the year to December 2011 and a year ago. This is the highest increase since the June 2009 year (2.7%). Public sector wage growth was 1.6% in the year to March 2012, down from 1.8% in the year to December 2011.
By industry, annual wage growth was strongest in fishing, aquaculture, and support services to agriculture, forestry and fishing (3.0%), followed by professional, scientific and technical services (2.8%). Construction wage growth was 2.3% in the year to March 2012, down from 2.4% in the year to December 2011, but still higher than a year ago (1.9%). By occupation, annual wage growth was strongest for automotive and engineering trades workers, as well as mobile plant operators (up by 2.6%).
The unadjusted LCI (which includes pay increases due to such factors as changes in performance, experience and increased qualifications) was 3.3% for the year to March 2012, up slightly from 3.2% for the year to December 2011. The adjusted LCI is the best measure of the cost of living component of wage increases. However, the unadjusted LCI is a better measure of the level of pay increases that people actually received. Annual wage growth in the QES[1] was 3.9% for the year to March 2012, up from 2.8% for the year to December 2011 and 2.6% a year ago (Table 1). The strong growth in the QES reflects a fall in the number of part-time jobs, which tend to be lower paid.
… and is expected to grow modestly
The latest results confirm that wage growth has been gradually recovering, albeit from a low level. Wages typically lag changes in economic and labour market conditions by 1-2 years due to the infrequent nature of wage negotiations. With the modest economic and labour market recovery, and contained inflation pressures, wage growth is likely to be modest in the short-term.
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[1] The QES can be volatile given it is affected by compositional changes.