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Minimum wage rise boosts private sector pay rates

6 August 2019

The rise in the minimum wage helped lift labour cost index (LCI) salary and wage rates (including overtime) 0.7 percent in the June 2019 quarter, Stats NZ said today.

"This is the largest quarterly increase since the December 2008 quarter," business prices delivery manager Sarah Johnson said.

“If wages affected by the minimum wage had remained constant, the LCI would have only increased by 0.5 percent this quarter."

On 1 April 2019, the Government raised the minimum wage from $16.50 per hour to $17.70 per hour. The minimum wage will continue to rise in annual increments, reaching $20.00 per hour by 2021. Minimum wage increases have a larger impact on private sector industries. Private sector salary and wage rates rose 0.8 percent for the June 2019 quarter, following a rise of 0.3 percent in the March 2019 quarter.

The impact of the minimum wage change on industry groups was most significant in retail trade (up 1.4 percent), and accommodation and food services (up 2.3 percent) for the June 2019 quarter.


“Accommodation, food, and retail industries are generally lower-paying industries, and are most affected by a minimum wage increase,” Ms Johnson said.

The increase in minimum wage also affected occupations such as service, clerical, and sales workers, and machinery operators, drivers, and labourers.

Average ordinary time hourly earnings in the quarterly employment survey (QES) were $32.37, up 1.2 percent in the June 2019 quarter. The key contributing industries in the QES were accommodation and food, public administration, and retail trade.

Labour cost index annual change

Annually, salary and wage rates (including overtime) increased 2.1 percent, while the unadjusted LCI series increased 3.6 percent to its highest level since the March 2011 quarter.

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 makes it more comparable with the earnings measures in the QES.

The LCI is often compared with the consumers price index (CPI) to see how wage inflation compares with consumer inflation (which is the change in prices of goods and services bought by households). Annual CPI inflation increased 1.7 percent in the year to the June 2019 quarter (see Consumers price index: June 2019 quarter).

Along with the rise in minimum wage this quarter, collective agreements in healthcare occupations, including nurses, contributed to higher annual wage rates. Collective pay agreements for primary and secondary teachers were also finalised in late June.

“We expect to start seeing the effects of the teacher pay settlement in the September quarter,” Ms Johnson said.

"Teachers are the largest occupation group in the LCI public sector."

For more information about these statistics:

• Visit Labour market statistics: June 2019 quarter

• See Unemployment falls to 11-year low

• See CSV files for download


ends

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