Labour Market Reports
WAGE GROWTH - MARCH 2008 QUARTER
Published: 5 May 2008
This note examines the wage growth measures for the March 2008 quarter from the Labour Cost Index (LCI) and the Quarterly Employment Survey (QES) which were released by Statistics New Zealand on 5 May 2008.
Wage growth at a record high
Annual wage growth in the adjusted LCI (which measures changes in pay rates for a fixed set of jobs and excludes performance related pay increases) remained steady at 3.4% in the March 2008 quarter. This is the equal highest rate recorded since the LCI began in 1992 matching the annual increase for the December 2007 year.
The unadjusted LCI (which includes performance related pay increases) shows annual wage growth of 5.4% in the March 2008 quarter, up from 5.0% at December 2007.
Annual wage growth in the QES (which includes performance related pay increases and is affected by the composition of employment) increased to 4.6% for the year to March 2008, up from 4.1% in the previous quarter.
| Last year | Last quarter | This quarter | |
|---|---|---|---|
| Wage Growth (annual % change) | March 2007 | December 2007 | March 2008 |
| Adjusted LCI | 3.1 | 3.4 | 3.4 |
| Unadjusted LCI | 4.5 | 5.0 | 5.4 |
| QES | 4.6 | 4.1 | 4.6 |
Other indicators from the LCI and QES also showed continued pressure on wages. In the year to March 2008, 46% of all salary and ordinary-time wage rates rose by more than 3%, up slightly from 45% in the December 2007 quarter. The median increase of all wage rates that increased remained at 4.0% in the March 2008 quarter which is only marginally lower than the historical high of 4.2% recorded in the December 2006 quarter.
Wage growth in real terms was relatively high at 2.0% in the year to March 2008, with 5.4% wage growth (unadjusted LCI) offset by consumer price inflation of 3.4%. Real wage growth during the last five years has averaged about 2.2% per annum which has been higher than growth in labour productivity.
Annual wage growth in the private sector was 3.5% in the year to March 2008, the largest annual increase recorded by the LCI. Annual public sector wage growth increased slightly to 3.3% in March 2008 from 3.1% in December 2007.
Wage growth set to remain strong
Wage growth is likely to remain high over the coming year. This outlook is based on the rise in skill and labour shortages in late 2006 and early 2007 and the 1 to 2 year lag between skill shortages and wage growth (wages change infrequently and take time to be negotiated). Furthermore, unemployment has remained very low, and workers will seek higher wages to make up for the recent rises in consumer price inflation.
Author or contact details
For further information please contact the Labour Market Analysis team