Overall labour costs
Labour costs increased 2.8 percent from the June 2008 quarter to the June 2009 quarter. The salary and wage rates (including overtime) component of the labour cost index (LCI) rose 2.8 percent, while the non-wage labour costs component rose 2.6 percent.
The costs of other business inputs (excluding capital costs), as measured by the producers price index, fell 1.2 percent from the June 2008 quarter to the June 2009 quarter, while capital goods prices increased 4.1 percent. Over the same period, the prices charged by businesses for their outputs rose 2.1 percent, while consumer prices increased 1.9 percent.
Overall non-wage labour costs
Non-wage labour costs rose 2.6 percent between the June 2008 quarter and the June 2009 quarter.
The rise in non-wage labour costs was due to rises in the cost of annual leave and statutory holidays, superannuation, and medical insurance. These rises were partly offset by an overall fall in workplace accident insurance and employer-related low interest loans, while motor vehicles available for private use was steady.
Annual leave and statutory holidays
From the June 2008 quarter to the June 2009 quarter, the cost of annual leave and statutory holidays to employers increased 0.3 percent. In the same period, salary and wage rates (including overtime) increased 2.8 percent. There were 10 paid statutory holidays in 2009, down from 11 in 2008. ANZAC Day did not fall on a weekday in 2009, and so was not a paid holiday for most employees. The fall in the number of paid statutory holidays had a downward impact on the cost of annual leave and statutory holidays to employers. Partly offsetting this fall were reported instances of increases in annual leave entitlements for employees with longer length of service. These entitlements were above the four-week or 8 percent minimum entitlement and caused a rise in the cost of providing annual leave for these employers.
Annual leave and statutory holiday costs fell 0.2 percent for private sector employers and increased 1.5 percent for the public sector.
Superannuation
Employer superannuation costs increased 30.8 percent from the June 2008 quarter to the June 2009 quarter. This follows a revised increase of 2.8 percent in the June 2008 year.
The main reason for the large increase in employer superannuation costs was the changes to employer contributions to employees' KiwiSaver schemes which took effect on 1 April 2009. Part of these changes involved an increase from 1 percent to 2 percent in employer compulsory minimum contributions to their employees' KiwiSaver schemes. Employers were previously able to receive a tax credit of up to $20 per week per employee, to assist in offsetting the cost of making compulsory employer contributions. This tax credit was removed from 1 April 2009, so employers no longer receive rebates on their contributions. On average, employers were previously able to reclaim about 70 percent of their contributions to KiwiSaver schemes. With the tax credit being removed, employers are now covering the entire cost of contributing to their employees' KiwiSaver schemes. This, along with the increase in minimum contribution, has caused a large increase in employer superannuation costs.
The latest increase in superannuation costs was also influenced by a 2.9 percent increase in salary and ordinary time wage rates.
In the public sector, superannuation costs rose by 14.2 percent. Superannuation costs for the private sector increased 40.0 percent from the June 2008 quarter to the June 2009 quarter.
Workplace accident insurance costs
Employers' workplace accident insurance costs fell 2.5 percent from the June 2008 quarter to the June 2009 quarter. This follows a revised increase of 4.8 percent in the year to the June 2008 quarter.
Employers pay residual claims levies (to fund historical injuries) and they also pay base Accident Compensation Corporation (ACC) WorkPlace Cover levies to cover the costs of ongoing injuries. There are two optional programmes offered by ACC: a workplace safety management practices programme, and a partnership programme. Under the partnership programme, employers are able to share risk in return for reductions in base premium rates. Under both programmes, employers passing safety audits at one of three levels are eligible for safety management practice discounts of 10, 15, or 20 percent off the standard base premium rates.
For the June 2009 quarter index, residual claims levy rates (applicable to earnings for the year to March 2009 and collected in arrears), at the disaggregated industry level, were added to ACC WorkPlace Cover levy rates (applicable to earnings for the year to March 2009 and collected during the period), which were discounted to reflect actual eligibility for safety management discounts for the period to 31 March 2009.
The 2009 decrease in the ACC employer premiums index reflects decreases in ACC levy rates and a 2.8 percent rise in pay rates.
Other non-wage labour costs
Other non-wage labour costs rose 1.7 percent from the June 2008 quarter to the June 2009 quarter. This compares with a rise of 0.3 percent from the June 2007 quarter to the June 2008 quarter. The other non-wage labour costs component of the labour cost index includes medical insurance, motor vehicles available for private use, and employment-related low interest loans.
The cost of providing motor vehicles for private use was flat from the June 2008 quarter to the June 2009 quarter, while the cost of providing employer-related low interest loans fell. The prescribed interest rate that is used to calculate the fringe benefit value of low interest loans decreased from 10.57 percent to 8.05 percent, which had a downward influence on the costs. The cost of providing medical insurance cover rose from the June 2008 quarter to the June 2009 quarter.
Fringe benefit tax (FBT) rates derived from FBT data for the year to March 2009 were used to calculate the June 2009 quarter indexes for medical insurance, motor vehicles available for private use, and low interest loans. Employers have the choice of either using a flat FBT rate or using multi-level FBT rules, by which rates are based on the actual remuneration levels of employees receiving the benefits.
Sectors and industries
Increases for individual industry groups' labour costs ranged from 1.1 percent (for printing, publishing, and recorded media) to 4.4 percent (for health and community services) in the year to the June 2009 quarter. The rise for health and community services was driven by increases in salary and wage rates (including overtime), annual leave and statutory holidays, superannuation, and workplace accident insurance. This increase was partly offset by a decrease in other non-wage labour costs.
Education labour costs increased 4.0 percent from the June 2008 quarter to the June 2009 quarter. This was driven by increases in salary and wage rates (including overtime), annual leave and statutory holidays, superannuation, workplace accident insurance, and other non-wage labour costs.
Labour costs in the private sector rose 2.7 percent from the June 2008 quarter to the June 2009 quarter, and 3.5 percent in the public sector. Within the public sector, central government sector labour costs rose by 3.7 percent, and local government costs by 2.6 percent.
Education revisions
Improved historical information on changes to central government primary and secondary school education pay rates back to the September 2005 quarter was incorporated into the March 2009 quarter labour cost index (all salary and wage rates) release. This resulted in revisions to some previously published figures. These changes to pay rates have also impacted on the ACC, annual leave and superannuation indexes, and the all non-wage labour costs and all labour costs indexes.
The historical time series affected are those for the central government sector, public sector, and all sectors combined. The private sector series are not affected.
Revised index numbers are flagged with the symbol 'R' in the tables attached to this release.
For technical information contact:
Nicola Argyle or Carrone Conroy
Wellington 04 931 4600
Email: info@stats.govt.nz.
LCI non-wage weights updated
The LCI all labour costs indexes have been reweighted to reflect changes in the industry and occupation structures of the labour market. The data sources used for the reweight were:
- 2006 Census of Population and Dwellings information on the relative importance of occupations within each sector by industry group in terms of jobs, and, in some cases, wages
- Quarterly Employment Survey (QES) figures for the year to June 2008 on the relationship between full- and part-time paid employees, and figures for the June 2008 quarter on average earnings per job
- Business Frame (BF) 2008 information on the relative importance of industry groups within each sector of ownership
- pay rates surveyed for the June 2008 quarter, converted to weekly pay rates, gave the price information needed for wage and non-wage calculations
- surveyed non-wage information for the June 2008 quarter was used to derive costs per employee per week, and administrative information (fringe benefit tax data and ACC levy rates) gave the price information needed for the non-wage weight calculations.
The industry breakdown of the reweighted index is based on the Australian and New Zealand Standard Industrial Classification 1996 (ANZSIC96). The occupation breakdown is based on the New Zealand Standard Classification of Occupations 1999 (NZSCO99). The LCI has not been re-expressed and is still based on the June 2001 quarter (=1000). The LCI was last reweighted using information from the 2001 Census of Population and Dwellings.
The changes in the LCI non-wage expenditure weights reflect real changes in the labour market, and to some extent, changes to the data sources and methods used to calculate the weights. Real changes are the result of relative changes in quantity and price levels. For example, if an industry has experienced higher growth in paid employees and higher increases in pay rates and non-wage labour costs than average over the seven years between the reweights, then that industry will experience an increase in its percentage weight. Industries with decreases or below average increases will have lower 2008 percentage weights compared with those for 2001.
From 2001 to 2008, the BF and other information showed a 35 percent increase in full-time equivalent (FTE) jobs for all sectors and industries (and occupations) combined. Salary and wage rates (including overtime) also increased 20.9 percent over the same period. The overall level of expenditure on wages and salaries (which the wage weights are based on) increased 65 percent over the seven-year period. The non-wage labour cost index increased 24.7 percent overall from 2001 to 2008, and the overall level of expenditure (which the non-wage weights are based on) increased 66 percent.
The overall weight for non-wage costs increased slightly from 16.31 percent in 2001 to 16.36 percent in 2008. To improve the accuracy of the new LCI weights, they were compared with a number of other sources. Wage index weights were compared at a sector of ownership by industry group level with QES gross ordinary time and gross overtime earnings figures for the year to June 2008. Similar adjustments were made for pay rates feeding into the weight calculations for annual leave and statutory holidays, ACC employer premiums, and superannuation. Superannuation tax data and other sources were used to compare the new superannuation weights calculated from Labour Cost Survey data.
Fringe benefits are represented in the index by motor vehicles available for private use, low interest loans, and medical insurance. FBT data for the year to March 2008 was used to benchmark the weights at a sector of ownership by industry group level. The weights for the three surveyed fringe benefits were then rated up so that their combined weight represents all fringe benefits, not just those surveyed. FBT data broken down into categories including private use of motor vehicles and low interest loans was available for the 2001 reweight. No such breakdown was available for the 2008 reweight, resulting in less certainty about the true importance of the three surveyed fringe benefits relative to each other.
Annual leave and statutory holiday costs have a higher weight in the reweighted index (up from 11.49 percent in 2001 to 12.33 percent in 2008), largely due to an increase in the minimum leave entitlement from three weeks to four weeks per year.
The weight of superannuation rose from 1.37 percent to 1.41 percent. The introduction of KiwiSaver and the compulsory employer contribution from 1 April 2008 had an impact on the weight for superannuation (based on prices in the June 2008 quarter), but the effect was relatively small due to the employer tax credit available at the time. The LCI for the June 2009 quarter showed the impact of the removal of the employer tax credit and the increase from 1 percent to 2 percent in the minimum employer contribution from 1 April 2009. These changes mean that the relative importance of superannuation costs in the LCI for the June 2009 quarter was above the level suggested by the June 2008 quarter weights.
The combined weight of fringe benefits decreased from 1.83 percent to 1.34 percent, mainly due to a reduction in the relative importance of motor vehicles for private use. Low interest loans decreased, and medical insurance increased.
In calculating the weight for ACC employer premiums (1.28 percent), residual claims levy rates and ACC WorkPlace Cover levy rates (discounted to reflect eligibility for safety management discounts) were used. For employers in the ACC Partnership Programme, standard WorkPlace Cover levy rates less safety management discounts were used in the weights calculations to represent workplace accident insurance costs.
The new expenditure weights for the June 2008 quarter appear in table 6.
For technical information on the updated expenditure weights contact:
Claudia Schroeder or Chris Pike
Wellington 04 931 4600
Email: info@stats.govt.nz.
Next release ...
Labour Cost Index (Salary and Wage Rates): September 2009 quarter will be released on 3 November 2009.