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Workers’ wages are not keeping up with costs

CTU Media Release

3 May 2011

Workers’ wages are not keeping up with costs while executive salaries gallop

“Wages fell well behind price increases in the last three months for most people. Meanwhile top executives are getting percentage pay rises in the double digits”, says Bill Rosenberg, CTU Economist.

“Wages fell behind prices in the last three months – and this is on top of the effects of the increase in GST and other government charges which largely showed through in the previous quarter. For the full year, wages rose much less than the cost of living increased. The same people who received little in the way of tax cuts in October are now feeling the effects of rises in the cost of essentials like food and fuel.”

The Labour Cost Index shows wage increases for people doing the same work in the same job averaged 0.4 percent in the three months to the end of March while CPI increased by 0.8 percent. For the full year the increase was 1.8 percent compared to the CPI increase of 4.5 percent. Public sector rates rose even slower for the year at 1.4 percent, and 0.5 percent for the quarter.

The average wage, which includes changes in peoples’ jobs and changes in the makeup of the workforce rose only 0.4 percent in the quarter and 2.6 percent in the year, both behind the increase in costs measured by CPI. The average ordinary time wage now stands at $25.93. The Quarterly Employment survey also showed the number of jobs remained unchanged over the year.

Meanwhile a recent New Zealand Herald survey showed that “The bosses of New Zealand's biggest listed firms and state-owned enterprises received an average pay rise of 14 per cent in the 2010 financial year”. (“Pay rises for bosses surge ahead of ordinary Kiwis”, 30 April 2011).

“This was at a time when corporate profits were low, they were laying off staff and giving workers lower increases than either productivity increases or inflation,” said Rosenberg. “The contrast is stark, and with the tax cuts demonstrates growing income inequality for New Zealanders both before and after tax.”

The pay increase that some executives got per week was more than many workers get paid in a year. Westpac New Zealand’s George Frazis for example received an increase of $2.3 million for the 2010 financial year – or an extra $45,000 a week.

However, more people are beginning to get pay rises: in the year to March 2011, 56 percent of wage rates increased, an increase from 53 percent in the year to December 2010. For those who got an increase, the average increase was 3.5 percent and the median (middle value) was 3.0 percent.


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