6 November 2019
Labour cost index (LCI) salary and wage rates (including overtime) increased 2.4 percent in the year to September 2019
quarter, its largest annual increase since the June 2009 quarter, Stats NZ said today.
“Annual wage growth is at its highest level since the 2008 global financial crisis, after which wage growth remained
largely flat,” business prices delivery manager Bryan Downes said.
“The percentage of wages that increased is at its highest level since March 2015, at 59 percent. This shows there has
been more broad-based wage growth across the LCI.”
Salary and wage rates for the public sector increased 3.0 percent annually, the highest rate since June 2009. This
compares to a 2.2 percent increase in the year to the June 2019 quarter.
Public sector wage rates have been driven by collective agreements for teachers, nurses, and police over the past year.
With these three largest occupations excluded, public sector wages would have increased 1.8 percent annually.
Private sector wage rates rose 2.3 percent in the year to September 2019, compared with a 2.2 percent increase in the
year to the June 2019 quarter.
“The minimum wage increase last quarter was the largest in percentage terms since 2007 and will continue to boost
overall salary and wages,” Mr Downes said.
“The minimum wage will continue to rise in annual increments, reaching $20.00 per hour by 2021.”
The unadjusted LCI for the private sector increased 3.8 percent over the year, while the unadjusted LCI for all salaries
and wages increased 3.9 percent annually.
The LCI salary and wage rates measures movements in wages for a fixed quantity and quality of labour. This means that
changes in pay rates due to the performance of employees or promotions are not shown in the index.
The unadjusted LCI, on the other hand, takes into account those factors which make it more comparable with the earnings
measures in the quarterly employment survey (QES).
In the year to the September 2019 quarter, QES average ordinary time hourly earnings increased by 4.2 percent. The key
influences for higher average ordinary time hourly earnings were the professional, scientific, technical,
administrative, and support services; health care and social assistance; and public administration industries.
Primary, and secondary teachers’ pay settlements were confirmed in late June. The effect of these pay increases has come
through in the LCI, with the education and training industry seeing a 1.7 percent increase in salary and wage rates
(including overtime) over the quarter.
Conversely, in the QES, average total hourly earnings in education and training has remained flat this quarter.
This difference between the LCI and the QES, can be explained by the fact that, although teachers’ new salaries had been
agreed upon, they had not actually started to be paid out before the mid-August reference dates of the QES and LCI.
While the LCI reports the new agreed-upon salaries, the QES reports on the actual amount of money that has been paid
out, which did not yet reflect the new salaries. We can expect to see teachers’ pay increases coming through in the QES
in the December 2019 quarter.
Text alternative for diagram, Labour cost index – all salary and wage rates for the September 2019 quarter
Diagram shows the published labour cost index figures for the September 2019 quarter. For all sectors combined, the
published quarterly rate was 0.8%, annual rate was 2.4%. For the private sector, the quarterly rate was 0.6%, annual
rate was 2.3%. For the public sector, the quarterly rate was 1.3%, annual rate was 3.0%. Excluding minimum wage impact,
for all sectors combined, the quarterly rate was 0.8%, annual rate was 2.2%. Private sector quarterly rate was 0.6%,
annual was 1.9%. Public sector quarterly rate was 1.3%, annual was 3.0%. Excluding major pay settlements (teachers,
nurses & police), for all sectors combined, the quarterly rate was 0.6%, annual was 2.1%. Private sector quarterly rate was
0.6%, annual was 2.2%. Public sector quarterly rate was 0.7%, annual was 1.8%. Excluding minimum wage and major pay
settlements, for all sectors combined, the quarterly rate was 0.6%, annual was 1.8%. Private sector quarterly rate was
0.6%, annual was 1.9%. Public sector quarterly rate was 0.6%, annual was 1.7%.
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