Tightening labour market puts pressure on wages

Wage inflation was 2.1 percent in the year to the June 2021 quarter, while average ordinary time hourly earnings rose 4.0 percent, Stats NZ said today.

The labour cost index (LCI) all salary and wages (including overtime) increased 2.1 percent in the year to the June 2021 quarter, up from 1.6 percent in the year to the March 2021 quarter.

“The LCI captures reasons why employers change their pay. This quarter, a lot of firms reported trying to match market rates and retain staff in a tight labour market. This, combined with the rise in minimum wage in April, helped drive wage inflation this quarter,” business prices delivery manager Bryan Downes said.

“Over half the roles surveyed in the LCI saw an increase to wage rates in the year to the June 2021 quarter – the first time this has happened since the June 2020 quarter.”

QuarterProportion of increases
Jun-0861
Sep-0862
Dec-0860
Mar-0960
Jun-0955
Sep-0947
Dec-0944
Mar-1043
Jun-1046
Sep-1049
Dec-1053
Mar-1156
Jun-1158
Sep-1156
Dec-1157
Mar-1257
Jun-1256
Sep-1256
Dec-1255
Mar-1356
Jun-1355
Sep-1354
Dec-1354
Mar-1454
Jun-1457
Sep-1457
Dec-1459
Mar-1559
Jun-1557
Sep-1555
Dec-1554
Mar-1657
Jun-1656
Sep-1655
Dec-1655
Mar-1756
Jun-1757
Sep-1753
Dec-1751
Mar-1851
Jun-1852
Sep-1853
Dec-1856
Mar-1957
Jun-1958
Sep-1959
Dec-1961
Mar-2061
Jun-2056
Sep-2049
Dec-2045
Mar-2146
Jun-2153

However, for the first time since the December 2018 quarter, annual wage inflation (up 2.1 percent) did not outpace annual household living-costs inflation (up 2.5 percent).

See Household living-costs price indexes: June 2021 quarter for more information.

The LCI measures movements in wages employers pay to have the same work done to a set standard. The index controls for any changes in the type or amount of work, person doing the job or even change in qualification or experience. The Quarterly Employment Survey (QES), on the other hand, is a sample survey which calculates average earnings of employees captured by the survey and reflects changes in the composition of the paid workforce (such as changes in earnings paid within and between industries).

QES average ordinary time hourly earnings increased 4.0 percent over the year, to reach $34.76.

QuarterLCI adjustedQES ordinary time hourly
Jun-083.65.3
Sep-0845.6
Dec-083.55.5
Mar-093.35.4
Jun-092.84.7
Sep-092.13.5
Dec-091.82.9
Mar-101.51
Jun-101.61.4
Sep-101.62
Dec-101.71.9
Mar-111.93.1
Jun-111.92.8
Sep-1123
Dec-1123.1
Mar-1223.2
Jun-1222.6
Sep-121.92.9
Dec-121.82.4
Mar-131.72.4
Jun-131.72.8
Sep-131.72.6
Dec-131.62.9
Mar-141.62.6
Jun-141.72.2
Sep-141.62.7
Dec-141.83
Mar-151.72.4
Jun-151.62.5
Sep-151.62.2
Dec-151.52
Mar-161.62.4
Jun-161.52.4
Sep-161.62.1
Dec-161.61.8
Mar-171.62.5
Jun-171.72.5
Sep-171.92.4
Dec-171.83.1
Mar-181.82.7
Jun-181.92.9
Sep-181.83.2
Dec-181.93.2
Mar-1923
Jun-192.14
Sep-192.43.4
Dec-192.63.3
Mar-202.53.7
Jun-202.13
Sep-201.94.2
Dec-201.64.3
Mar-211.64
Jun-212.14

Construction industry sees wages rise over the year

Wages in the construction industry, as measured by the LCI, increased 3.0 percent in the year to the June 2021 quarter, reflecting continued quarterly increases.

“This is the largest annual increase for the construction industry since the series began in 2009,” Mr Downes said.

Average total hourly earnings (including overtime) in the construction industry, as measured by the QES, also increased – up 4.2 percent over the year to $32.09.

“We’re seeing wages begin to rise as a result of the high demand for labour in the construction industry after a period of slow wage growth last year,” Mr Downes said.

QuarterAnnual percentage change
Jun-101.6
Sep-101.4
Dec-101.6
Mar-111.9
Jun-112.1
Sep-112.3
Dec-112.4
Mar-122.3
Jun-122.2
Sep-122.3
Dec-122.5
Mar-132.5
Jun-132.4
Sep-132.0
Dec-131.8
Mar-141.9
Jun-142.1
Sep-142.4
Dec-142.4
Mar-152.1
Jun-152.2
Sep-152.1
Dec-151.8
Mar-162.3
Jun-162.0
Sep-162.1
Dec-162.1
Mar-171.8
Jun-171.9
Sep-172.0
Dec-171.8
Mar-181.9
Jun-182.0
Sep-181.9
Dec-182.2
Mar-192.0
Jun-192.0
Sep-191.9
Dec-192.1
Mar-202.1
Jun-201.1
Sep-201.5
Dec-201.4
Mar-211.8
Jun-213.0

Retail trade and accommodation wage rates lift over the quarter

The industries that contributed the most to high wage inflation over the quarter were those impacted by the minimum wage increase, such as retail trade and accommodation.

In April 2021, the Government raised the minimum wage from $18.90 to $20.00 per hour.

Wage rates in retail trade and accommodation rose 1.7 percent in the June 2021 quarter.

Across all industries, the LCI rose 0.7 percent in the quarter. Private sector wages rose 0.9 percent, while public sector wages rose 0.3 percent.

/Stats NZ Public Release. This material comes from the originating organization and may be of a point-in-time nature, edited for clarity, style and length. View in full here.