Annual wage cost inflation 4.3 percent

Annual wage cost inflation measured by the labour cost index (LCI) increased to 4.3 percent in the year to the March 2023 quarter, according to figures released by Stats NZ today.

“Annual wage cost inflation is at its highest level since the series began in 1992, up from 4.1 percent in the year to the December 2022 quarter,” business prices manager Bryan Downes said.

“This aligns with other wage measures, like the unadjusted LCI and average hourly earnings, both of which also had the largest annual increases on record.”

Wage cost inflation is the percentage change in all salary and wage rates (including overtime) in the LCI, which measures changes in the cost of labour incurred by businesses, adjusting for changes in the quality, quantity, and type of work.

Quarter	LCI adjusted	LCI unadjusted
Mar-96	2	3.5
Jun-96	2	3.9
Sep-96	2	3.8
Dec-96	2	3.7
Mar-97	2.2	3.8
Jun-97	2.5	3.8
Sep-97	2.5	3.6
Dec-97	2.2	3.6
Mar-98	1.9	3.4
Jun-98	2	3.2
Sep-98	1.8	2.9
Dec-98	1.7	2.7
Mar-99	1.8	2.6
Jun-99	1.5	2.9
Sep-99	1.5	3.3
Dec-99	1.5	3.6
Mar-00	1.4	3.6
Jun-00	1.7	3.5
Sep-00	1.5	3.5
Dec-00	1.6	3.5
Mar-01	1.8	3.6
Jun-01	1.8	3.6
Sep-01	2	4.2
Dec-01	2.2	4.2
Mar-02	2.1	3.9
Jun-02	2.1	3.7
Sep-02	2.3	3.6
Dec-02	2.1	3.9
Mar-03	2.3	4.2
Jun-03	2.3	4.4
Sep-03	2.3	4.4
Dec-03	2.3	4.3
Mar-04	2.2	4.2
Jun-04	2.3	4.3
Sep-04	2.2	4.5
Dec-04	2.5	4.8
Mar-05	2.5	4.7
Jun-05	2.6	4.9
Sep-05	3.1	5.4
Dec-05	3.1	5.4
Mar-06	3.2	5.7
Jun-06	3.2	5.5
Sep-06	3.2	5.1
Dec-06	3.2	5
Mar-07	3.2	4.6
Jun-07	3.2	4.7
Sep-07	3.1	4.6
Dec-07	3.2	4.9
Mar-08	3.4	5.3
Jun-08	3.6	5.4
Sep-08	3.9	5.6
Dec-08	3.6	5.6
Mar-09	3.4	5.2
Jun-09	2.9	4.6
Sep-09	2.1	3.8
Dec-09	1.8	2.9
Mar-10	1.5	2.5
Jun-10	1.6	2.9
Sep-10	1.6	3.1
Dec-10	1.7	3.6
Mar-11	1.8	3.6
Jun-11	1.9	3.4
Sep-11	2	3.3
Dec-11	2	3.2
Mar-12	2	3.3
Jun-12	2	3.4
Sep-12	1.9	3.2
Dec-12	1.8	3
Mar-13	1.8	3
Jun-13	1.7	2.8
Sep-13	1.6	3.1
Dec-13	1.6	3
Mar-14	1.5	2.8
Jun-14	1.6	2.9
Sep-14	1.7	2.5
Dec-14	1.7	2.6
Mar-15	1.7	2.5
Jun-15	1.6	2.5
Sep-15	1.6	2.7
Dec-15	1.5	2.7
Mar-16	1.6	2.9
Jun-16	1.5	2.8
Sep-16	1.7	2.6
Dec-16	1.6	2.8
Mar-17	1.6	3
Jun-17	1.7	3
Sep-17	1.8	3.4
Dec-17	1.8	3.3
Mar-18	1.8	3.2
Jun-18	1.9	3.3
Sep-18	1.8	3.3
Dec-18	1.9	3.3
Mar-19	2	3.4
Jun-19	2.1	3.6
Sep-19	2.5	3.9
Dec-19	2.6	3.9
Mar-20	2.5	3.8
Jun-20	2.1	3.1
Sep-20	1.8	2.8
Dec-20	1.6	2.5
Mar-21	1.6	2.7
Jun-21	2.1	3.4
Sep-21	2.4	3.8
Dec-21	2.6	4.2
Mar-22	3	4.8
Jun-22	3.4	5.1
Sep-22	3.7	5.3
Dec-22	4.1	5.7
Mar-23	4.3	5.8

The unadjusted LCI increased 5.8 percent in the year to the March 2023 quarter. The unadjusted LCI tends to increase at a higher rate than wage cost inflation, since it includes market costs as well as factors like employees’ individual performance or years of service.

For example, if an employee received a pay rate increase due to rises in the cost of living, this would be reflected in both the LCI’s primary measure of wage cost inflation (adjusted LCI) and the unadjusted LCI. However, if an employee gets a pay rate increase for quality reasons, such as acknowledging good performance, this would only be reflected in the unadjusted LCI.

Average ordinary time hourly earnings, measured by the Quarterly Employment Survey (QES), in the year to the March 2023 quarter, increased 7.6 percent to reach $38.93. This figure is the mean value of wages and salaries paid per hour excluding overtime in jobs measured by the QES, so it can rise or fall as the type of work being done changes.

Quarterly industry movements

Quarterly wage cost inflation was 1.0 percent in the March 2023 quarter. The largest contribution to national wage inflation over the quarter came from the healthcare and social assistance industry. Of the 1.0 percent quarterly rise, over a fifth came from wage growth in healthcare and social assistance roles.

Industry	Percent
Health care and social assistance	21.4
Manufacturing	12.1
“Professional	11.3
scientific	9.6
technical	9.3
administrative	7.3
and support services”
Education and training
Retail trade and accommodation
“Transport
postal
and warehousing”

“Public sector collective agreements in the health industry were implemented over the course of this quarter,” Downes said.

Public sector salary and wage rates rose 1.3 percent, while private sector rates rose 0.9 percent in the March 2023 quarter.

Quarter	LCI adjusted – all salary and wage rates	CPI – all groups
Dec-93	1	1.4
Mar-94	1	1.3
Jun-94	0.9	1.1
Sep-94	1.2	1.8
Dec-94	1.2	2.8
Mar-95	1.3	4
Jun-95	1.4	4.6
Sep-95	1.5	3.5
Dec-95	1.9	2.9
Mar-96	1.9	2.2
Jun-96	1.9	2
Sep-96	1.9	2.4
Dec-96	2	2.6
Mar-97	2.2	1.8
Jun-97	2.5	1.1
Sep-97	2.4	1
Dec-97	2.2	0.8
Mar-98	1.9	1.3
Jun-98	2	1.7
Sep-98	1.9	1.7
Dec-98	1.8	0.4
Mar-99	1.7	-0.1
Jun-99	1.4	-0.4
Sep-99	1.5	-0.5
Dec-99	1.4	0.5
Mar-00	1.4	1.5
Jun-00	1.6	2
Sep-00	1.5	3
Dec-00	1.6	4
Mar-01	1.8	3.1
Jun-01	1.8	3.2
Sep-01	2	2.4
Dec-01	2.1	1.8
Mar-02	2	2.6
Jun-02	2.1	2.8
Sep-02	2.2	2.6
Dec-02	2.1	2.7
Mar-03	2.3	2.5
Jun-03	2.3	1.5
Sep-03	2.3	1.5
Dec-03	2.4	1.6
Mar-04	2.2	1.5
Jun-04	2.3	2.4
Sep-04	2.2	2.5
Dec-04	2.5	2.7
Mar-05	2.5	2.8
Jun-05	2.7	2.8
Sep-05	3.1	3.4
Dec-05	3	3.2
Mar-06	3.2	3.3
Jun-06	3.1	4
Sep-06	3.2	3.5
Dec-06	3.2	2.6
Mar-07	3.2	2.5
Jun-07	3.3	2
Sep-07	3.1	1.8
Dec-07	3.3	3.2
Mar-08	3.4	3.4
Jun-08	3.6	4
Sep-08	4	5.1
Dec-08	3.5	3.4
Mar-09	3.3	3
Jun-09	2.8	1.9
Sep-09	2.1	1.7
Dec-09	1.8	2
Mar-10	1.5	2
Jun-10	1.6	1.7
Sep-10	1.6	1.5
Dec-10	1.7	4
Mar-11	1.9	4.5
Jun-11	1.9	5.3
Sep-11	2	4.6
Dec-11	2	1.8
Mar-12	2	1.6
Jun-12	2	1
Sep-12	1.9	0.8
Dec-12	1.8	0.9
Mar-13	1.7	0.9
Jun-13	1.7	0.7
Sep-13	1.7	1.4
Dec-13	1.6	1.6
Mar-14	1.6	1.5
Jun-14	1.7	1.6
Sep-14	1.6	1
Dec-14	1.8	0.8
Mar-15	1.7	0.3
Jun-15	1.6	0.4
Sep-15	1.6	0.4
Dec-15	1.5	0.1
Mar-16	1.6	0.4
Jun-16	1.5	0.4
Sep-16	1.6	0.4
Dec-16	1.6	1.3
Mar-17	1.6	2.2
Jun-17	1.7	1.7
Sep-17	1.9	1.9
Dec-17	1.8	1.6
Mar-18	1.8	1.1
Jun-18	1.9	1.5
Sep-18	1.8	1.9
Dec-18	1.9	1.9
Mar-19	2	1.5
Jun-19	2.1	1.7
Sep-19	2.4	1.5
Dec-19	2.6	1.9
Mar-20	2.5	2.5
Jun-20	2.1	1.5
Sep-20	1.9	1.4
Dec-20	1.6	1.4
Mar-21	1.6	1.5
Jun-21	2.1	3.3
Sep-21	2.4	4.9
Dec-21	2.6	5.9
Mar-22	3	6.9
Jun-22	3.4	7.3
Sep-22	3.7	7.2
Dec-22	4.1	7.2
Mar-23	4.3	6.7

The LCI is often compared with the consumers price index (CPI). This comparison shows how wage cost inflation for businesses compares with consumer inflation (that is, the change in prices of goods and services bought by households). These indexes are not a direct comparison between household income and cost of living.

“Labour market measures, such as wage cost inflation for businesses, tend to lag behind broader economic indicators,” Downes said.

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