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Tuesday, 27 January 2015

Wages: Labour Cost Index vs Quarterly Employment Survey

Once again the opposition is claiming that half of all New Zealanders haven't had a pay rise in the past year, citing the Labour Cost Index. Statistics NZ are clear on this: the Labour Cost Index is one of the measurements of inflation (like the Consumer Price Index), it's an index of the increase in labour cost for a fixed input. This is the critical point. Statistics add:
By comparison, the average earnings measures from the Quarterly Employment Survey (QES) reflect not only changes in pay rates, but also compositional change (ie changes in the mix of labour from period to period).

What the LCI figures most likely show is that productivity increases are keeping pace with wage increases. That is a good thing because it means we're not just working harder, but making use of new technologies and work practices to get better outcomes. Which is exactly why when Labour were in office last, they used the QES, not the LCI, when it came to setting both paid parental leave rates and superannuation payment rates.