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Release of the new 'wage cost index, Australia'



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Australian Bureau of Statistics

March 24 1998 32/98

.S'

RELEASE OF THE NEW "WAGE COST INDEX, AUSTRALIA"

The Australian Bureau of Statistics will release a new publication Wage Cost Index, Australia (ABS Catalogue No. 6345.0) next Thursday 26 March 1998. The first issue will show wage rate movements between September quarter and December quarter 1997.

The Wage Cost Index (WCI) has been developed as a tool for the analysis of monetary, fiscal and wage policies. It also will provide appropriate measures of change in wage rates for contract adjustment purposes, superior to the Award Rates of Pay Indexes (ARPI) which was discontinued after the release of the June 1997 ARPI publication.

There will be four sets of quarterly fixed-weighted indexes in the WCI publication:

• Ordinary-time hourly rates of pay - excluding bonuses • Ordinary-time hourly rates of pay - including bonuses • Total hourly rates of pay - excluding bonuses • Total hourly rates of pay - including bonuses

The four component sets of indexes together will comprise the WCI. The component indexes of the WCI will be 'pure' price indexes: i.e. they will aim to measure changes in the wage and salary cost of a representative 'basket' of jobs over time, unaffected by changes in the quality or quantity of work performed.

The ordinary-time hourly rates of pay indexes will measure quarterly changes in ordinary-time hourly wage and salary rates. These indexes will exclude the effects of changes in penalty payments (which fluctuate depending on the number of hours paid at penalty rates) and allowances (which fluctuate according to how much work is performed under special work conditions eg. height, dirt, heat allowances).

The total hourly rates of pay indexes will combine ordinary-time and overtime hourly rates. They will be similar to the ordinary-time indexes, but include the effect of any changes in overtime penalty rates.

Indexes will be compiled for various combinations of State/Territory, sector (private/public), broad industry group and broad occupation group.

More detailed information on the WCI will be available in Information Paper: Wage Cost Index, Australia (ABS Catalogue No. 6346.0) which is also to be released on the 26 March 1998

A copy of the layout of the new Wage Cost Index publication is attached.

Further Information: John Bright

Media & Public Affairs Unit Tel: 02 6252 7197 Mobile: 0418 633730

D E C E M B E R Q U A R T E R 1 9 9 7 6345.0

WAGE COST IN D EX AUSTRALIA

EMBARGO: 1 1 : 3 0 A M (CANBERRA TIME) THURS 26 MAR 1 9 9 8

D E C E M B E R Q U A R T E R 1 9 9 7 K E Y F I G U R E S

Total hourly rates of pay, excluding bonuses

Australia

Sector

Private sector

Public sector

States and Territories

New South Wales

Victoria

Queensland

South Australia

Western Australia

Tasmania

Northern Territory

Australian Capital Territory

% change

Sep Qtr 1997 to Dec Qtr 1997

D E C E M B E R Q U A R T E R 1 9 9 7 KEY P O I N T S

Q U A R T E R L Y C H A N G E S

I NDEXES OF TOTAL HOURLY RATES OF PAY EXCLUDI NG BONUSES

OTHER I NDEXES

■ For further information about these and related statistics, contact Bob McCombe on Canberra 02 6252 6729 or Andrew Harvey on Perth 08 9360 5170, or any ABS office shown on the back of this

publication.

FI RST I SSUE

FORTHCOMI NG I SSUES

FORTHCOMI NG CHANGES

DATA AVAI L ABI L I TY

UNP UB L I S H E D STATI STI CS

REVI SI ONS

FURTHER I NFORMATI ON

This publication contains the first quarterly movements o f a new statistical

series, the Wage Cost Index (WCI)· The WCI measures changes in wage

and salary costs for employee jobs, unaffected by changes in the quality and

quantity o f work performed.

This issue shows movements in indexes o f hourly rates o f pay between

September quarter 1997 and December quarter 1997 (w ith a base o f

September quarter 1997 = 100.0). Quarterly movements prior to

December quarter 1997 have not been compiled.

For more information on the WCI, see the Explanatory Notes at the back o f

the publication.

ISSUE (Q uarter) EXPECTED RELEASE DATE

March 1998 18 June 1998

June 1998 17 September 1998

The present content and table formats o f this publication w ill continue fo r

the next three issues, although the tables w ill expand as each new quarter's

data become available. Following a review o f users' publication

requirements, the content and table formats may change. Any changes w ill

tie implemented in the December quarter 1998 issue o f the publication.

Statistics published in this issue are available on PC Ausstats, the ABS's

on-line data service.

Indexes are compiled for various combinations o f State/Territory, sector

(private/public), broad industry group and broad occupation group.

Indexes not included in this publication may be made available on request

by telephoning Perth 08 9360 5170.

Index numbers will be released as final figures at the time they are first

published. Revisions w ill only occur in exceptional circumstances.

More detailed information on the WCI is available in Information Paper:

Wage Cost Index, Australia (Cat. no. 6346.0).

W. M c L e n n a n

A u s t r a l i a n S t a t i s t i c i a n

2 A B S · WAGE COST I NDEX · Θ 3 4 5 . 0 · DECEMBER QUARTER 1 9 9 7

CONTENTS

TABLES

Notes

page

2

Indexes of total hourly rates of pay, excluding bonuses

1 Sector, States and T errito rie s............................................................. 5

2 Sector, in d u stry.................................................................................... 6

3 Sector, o c c u p a tio n ............................................................................. 7

Indexes of total hourly rates of pay, including bonuses

4 Sector, States and T e rrito rie s ............................................................ 8

Indexes of ordinary time hourly rates of pay, excluding bonuses

5 Sector, States and T e rrito rie s............................................................. 9

Indexes of ordinary time hourly rates of pay, including bonuses

6 Sector, States and Territories

ADDITIONAL INFORMATION

Explanatory notes 11

Glossary 15

ABS ■ WAGE COST I NDEX · 8 3 4 5 . 0 · D E CE MB E R QUARTER 1 9 9 7 3

E X P L A N A T O R Y N O T E S

INTRODUCTION

PUBLISHED INDEXES

1 This publication contains indexes measuring quarterly changes in wage and salary

costs for employee jobs. These indexes were compiled for the first tim e for the

December quarter 1997 (w ith a base o f September quarter 1997 = 100.0).

2 The methodology used to construct the component indexes o f the Wage Cost Index (WCI) is similar to that used for other price indexes such as the Consumer

Price Index. In the WCI, index numbers are compiled from hourly wage and salary

costs for a representative sample o f employee jobs w ithin a sample o f employing

organisations. Individual indexes are compiled for various combinations o f

State/Territory, sector (private/public), broad industry group and broad occupation

group. For more detailed inform ation on the methodology used in the

construction o f the WCI, refer to Information Paper: Wage Cost Index, Australia

(Cat. no. 6346.0).

3 There are four sets o f quarterly fixed weighted indexes published in this bulletin:

■ ordinary time hourly rates o f pay— excluding bonuses;

■ ordinary time hourly rates o f pay— including bonuses;

• total hourly rates o f pay— excluding bonuses; and

■ total hourly rates o f pay— including bonuses.

The four component sets o f indexes together comprise the WCI.

4 The ordinary time indexes that exclude bonuses measure quarterly changes in ordinary time hourly wage and salary rates. These indexes are not affected by

changes in penalty payments (which fluctuate depending on the number o f hours

paid at penalty rates) and allowances (which fluctuate according to how much w ork

is performed under special w ork conditions e.g. height, dirt, heat allowances).

Specifically, the following effects are excluded:

■ changes in penalty rates for overtime, shifts, weekends and public holidays;

■ changes in the amount o f w ork undertaken at penalty rates (e.g. less night

shift, more overtime);

* changes in allowances paid; and

■ rolling o f penalty payments (other than overtime) and allowances into the

ordinary time hourly rate.

5 The total hourly indexes that exclude bonuses combine ordinary tim e and overtime hourly rates. They are similar to the ordinary time indexes, but include

the effect o f any changes in overtime penalty rates. Effects o f changes in the

am ount o f overtime are excluded. When overtime penalty payments are rolled into ordinary tim e hourly rates, the effect on the total hours indexes will be minimal,

since the increase in the ordinary time hourly rate w ill tend to be offset by the

elimination o f overtime penalty payments.

6 The indexes that include bonuses w ill tend to be more volatile than those that exclude bonuses owing to quarterly changes in performance-based payments that

are a feature o f many collective and individual wage agreements. Bonus payments

are converted to an hourly rate based on the relevant period o f work. This hourly

rate is then added to the respective hourly wage and salary rates (ordinary time and

total hours) to construct the indexes that include bonuses.

A 8 S · WAGE COST I NDEX · 6 3 4 5 . 0 · D ECEMBER QUARTER 1 9 9 7 11

E X P L A N A T O R Y N O T E S continued

DESIGN OF THE INDEXES

BROAD DESCRIPTION

SCOPE AND COVERAGE

7 The component indexes o f the WCI are ‘pure’ price indexes: i.e. they aim to measure changes in the wage and salary cost o f a representative ‘basket’ o f jobs

over time, unaffected by changes in the quality or quantity o f work performed. This

is referred to as ‘pricing to constant quality’. By following a ‘basket’ o f jobs over

time, and by maintaining a fixed weighting pattern at the level o f elementary

aggregates (see Glossary), these indexes w ill be unaffected by, for example, shifts in

the distribution o f employees by occupation and industry, and between full-tim e

and part-time jobs. Thus, unlike other ABS earnings measures such as the quarterly

average weekly earnings series, the WCI w ill not measure changes in average (per

employee) wage payments.

8 Genuine changes in rates o f pay (i.e. price changes) arise from a range o f sources including award variations, enterprise and workplace agreements, centralised wage

fixation, individual contracts and informal agreements. Agreements often provide

for bonus payments, with the size o f the bonuses depending on certain

performance-related outcomes. Changes in these payments w ill be reflected in the

tw o sets o f indexes that include bonuses (see paragraph 6).

9 Every effort is made to price to constant quality in the WCI, in spite o f difficulties in defining the quality o f job performance in a measurable sense. Characteristics o f

the jobs being priced (e.g. tide, grade, location, tasks) are specified in detail, and a

range o f quality adjustment procedures have been put in place which are designed

to prevent any significant long-term bias in the indexes. For example, pay changes

due to age increments, change in qualification level, change in apprenticeship year,

successful completion i ·{ training, and com pletion o f probationary periods do not

affect the indexes. Likewise, the effects o f salary increments, paid for length o f

service and work performance o f individual employees, are removed from the

indexes provided there is no change in the underlying salary range. A change in the

salary range for a selected employee job is treated as a genuine price change,

whereas incremental pay movements within fixed salary ranges, and pay changes

related to training and qualifications, are treated as proxies for measurable quality

change and are, therefore, precluded from measures o f price change.

10 Wage and salary payments to employees are computed on an hourly basis, whether or not this is the actual basis o f payment. For workers paid by the hour,

the reported wage for the reference pay period is divided by the number o f paid

hours. For salaried workers w ho are paid to perform a job regardless o f the num ber

o f hours worked, the reported salary is converted to an equivalent hourly basis

using information provided by the employer.

11 The target population o f employers for the WCI is all employing organisations in Australia (private and public sectors) except:

• enterprises primarily engaged in agriculture, forestry or fishing;

• private households employing staff; and

• overseas embassies, consulates etc.

12 A 8 S · WAGE COST I NDEX · 8 3 4 5 . 0 · DECEMBER QUARTER 1 9 9 7

E X P L A N A T O R Y N O T E S continued

SCOPE a n d c o v e r a g e 12 All employee jobs in the target population o f employers are in scope o f the

continued WCI, except the following:

* Australian permanent defence force jobs;

■ ‘non-maintainable’ jobs (i.e. jobs that are expected to be occupied for less

than six months o f a year); and

■ jobs for which wages and salaries are not determined by the Australian labour

market: e.g. working proprietors o f small incorporated enterprises; most

employees o f Community Development Employment Programs; jobs where

the remuneration is set in a foreign country.

13 As such, full-time and part-time, permanent and casual, and managerial and non-managerial jobs are in scope o f the WCI. Costs incurred by employers fo r w ork

undertaken by self-employed persons such as consultants and subcontractors are

out o f scope o f the WCI, as they do not relate to employee jobs.

data c o l l e c t io n 1 4 Inform ation for the WCI is collected each quarter by mail questionnaires from a

sample survey o f approximately 3,500 private and public sector employers selected

from the ABS Business Register. In the first quarter they participate in the survey,

each employer selects a small sample o f jobs from their workplace(s) using

sampling instructions provided by the ABS, and provides information fo r these jobs,

including job descriptions. In subsequent quarters they are asked to provide

updated information about the same jobs, using tailored forms containing the

preprinted job descriptions previously provided. It is essential that the same jobs

are compared in successive quarters, w hether the individual employees occupying

the designated jobs are the same o r not. Approximately 19,000 matched jobs are

surveyed each quarter from the selected employers.

15 The sampling scheme retains the highest possible common sample o f employers over time, and retains the same sampled jobs w ithin those selected

employers in the sample, where possible. However, it is also necessary to maintain

representativeness o f the index over time, as well as to lim it the length o f tim e that

small businesses are included in the sample. For these reasons, the em ployer

sample is reselected_annually (for the September quarter) in a way that ensures a

high proportion o f common selections while allowing new employers to be

represented in the index sample.

16 Between annual reselections o f the employer sample, a small number o f employee jobs w ill be lost from the index sample because o f the closure o f some

(m ainly small) organisations. In addition, some jobs in continuing organisations w ill

be replaced in the sample because o f restructuring and other job changes.

w e ig h t in g 1 7 In the WCI, as with other price indexes, base period ‘expenditure’ weights are

used to combine elementary aggregate indexes into publication indexes. The fixed

expenditure weights are derived from independent estimates o f total weekly wages

and salaries relating to the base quarter (September 1997).

18 The WCI w ill be reweighted approximately every five years to take account o f changing wage and salary expenditure patterns among the elementary aggregates.

These changes result from changes in the distribution o f the number o f employee

jobs among occupation groups, industries, States and sectors, as well as changes in

wage rate relativities.

ABS ■ WAGE COST I NDEX · 6 3 4 5 . 0 · DECEMBER QUARTER 1 9 9 7 13

E X P L A N A T O R Y N O T E S continued

PERCENTAGE CHANGE AND

ROUNDING

1 9 The published index numbers have been rounded to one decimal place, and

the percentage changes (also rounded to one decimal place) are calculated from

the rounded index numbers.

INTERPRETATION OF INDEX

NUMBERS

2 0 Index numbers measure changes in hourly rates o f pay between the base

quarter (September 1997) and a later quarter. Differences in index numbers across

States do not provide comparative information on hourly rates o f pay for the States.

Similarly, index numbers cannot be compared across sectors, across industries, o r

across occupations.

REVISIONS TO INDEXES 2 1 Index numbers will be released as final figures at the time they are first

published. Revisions w ill only occur in exceptional circumstances.

RELIABILITY OF THE INDEXES 22 Since the index numbers are based on inform ation relating to a sample o f

employee jobs, they are subject to sampling error. That is, they may differ from

figures that would have been produced if all employee jobs had been included.

Estimates o f the magnitude o f sampling error o f index numbers will not be available

u n til the WCI has been operating for a num ber o f quarters.

23 Inaccuracies may also occur because o f imperfections in reporting by

respondents o r in processing by the ABS. Inaccuracies o f this kind are referred to as

non-sampling errors. Every effort has been made to reduce non-sampling error, for example:

■ by careful design and testing o f questionnaires and processing systems;

■ by providing instructions to employers on how to select a sample o f employee

jobs;

■ by detailed checking o f completed survey forms; and

■ by instituting a range o f procedures for ensuring constant quality pricing o f

employee jobs.

RELATED PUBLICATIONS 2 4 Users may also wish to refer to the following publications which are available

on request:

Inform ation Paper: Wage Cost Index, Australia (Cat. no. 6346.0)

Average Weekly Earnings, Australia, Preliminary (Cat. no. 6301.0)— issued

quarterly

Average Weekly Earnings, States a n d Australia (Cat. no. 6302.0)— issued quarterly

2 5 Current publications produced by the ABS are listed in the Catalogue o f

Publications a n d Products (Cat. no. 1101.0). The ABS also issues, on Tuesdays and Fridays, a Release Advice (Cat. no. 1105-0) which lists publications to be released in

the next few days. The Catalogue and Release Advice are available from any ABS

office.

UNPUBLISHED STATISTICS 2 6 As well as the statistics included in this publication, the ABS may have other

relevant unpublished data available. This inform ation may be made available in one

o r more forms: photocopy, data tape, floppy disk, computer printout o r clerically

extracted tabulation. Generally, a charge is made for providing unpublished

inform ation. Inquiries should be made to Andrew Harvey on Perth 08 9360 5170 o r

Inform ation Services in the nearest ABS office.

14 A 8 S · WAGE COST I NDEX · 6 3 4 5 . 0 · DECEMBER QUARTER 1 9 9 7