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6302.0 - Average Weekly Earnings, Australia, Feb 2006  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 18/05/2006   
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INTRODUCTION

1 This publication contains estimates of average weekly earnings based on information obtained from a sample survey of employers.


CONCEPTS, SOURCES AND METHODS

2 Descriptions of the underlying concepts of Australia's average weekly earnings statistics, and the sources and methods used in compiling these estimates, are presented in Labour Statistics: Concepts, Sources and Methods (cat. no. 6102.0.55.001) which is available on the ABS web site.


SCOPE AND COVERAGE

3 All wage and salary earners who received pay for the reference period are represented in the Survey of Average Weekly Earnings (AWE), except:

  • members of the Australian permanent defence forces
  • employees of enterprises primarily engaged in agriculture, forestry and fishing
  • employees of private households
  • employees of overseas embassies, consulates, etc.
  • employees based outside Australia
  • employees on workers' compensation who are not paid through the payroll.

4 Also excluded are the following persons who are not regarded as employees for the purposes of this survey:
  • casual employees who did not receive pay during the reference period
  • employees on leave without pay who did not receive pay during the reference period
  • employees on strike, or stood down, who did not receive pay during the reference period
  • directors who are not paid a salary
  • proprietors/partners of unincorporated businesses
  • self-employed persons such as subcontractors, owner/drivers, consultants
  • persons paid solely by commission without a retainer.

5 The sample for the AWE survey, like most Australian Bureau of Statistics (ABS) business surveys, is selected from the ABS Business Register which is primarily based on registrations to the Australian Taxation Office's (ATO) Pay As You Go Withholding (PAYGW) scheme (and prior to 1 June 2000 the Group Employer scheme). The population is updated quarterly to take account of:
  • new businesses
  • businesses which have ceased employing
  • changes in employment levels
  • changes in industry
  • other general business changes.

6 The estimates include an allowance for the time it takes newly registered businesses to be added to the survey population.

7 Businesses which have ceased employing are identified when the ATO cancels their PAYGW registration. In addition businesses which do not remit under the PAYGW scheme for the previous five quarters are removed from the frame.


SURVEY DESIGN

8 A sample of approximately 5,500 employer units is selected from the ABS Business Register to ensure adequate state and industry representation. The sample is updated each quarter to reflect changes in the ABS Business Register. These changes arise from the emergence of new businesses, takeovers and mergers, changes to industry classification, changes in the number of employees, and businesses which have ceased operations. Such updating of the register can contribute to changes in the estimates of average weekly earnings.

9 The statistical unit for the survey comprises all the activities of an employer in a particular state or territory based on the Australian Business Number (ABN) unit or Type of Activity Unit (TAU) (see paragraphs 13 and 17). Each statistical unit is classified to an industry which reflects the predominant activity of the business. The statistical units are stratified by state, sector, industry and employment size, and within each stratum, statistical units are selected with equal probability.


CHANGES TO THE ABS BUSINESS REGISTER

10 The introduction of The New Tax System in July 2000 had a number of significant implications for ABS business statistics, including changes to the populations for most business surveys. Refer to paragraphs 5 and 12. These implications are discussed in general terms in the information papers: ABS Statistics and The New Tax System (cat. no. 1358.0) and Improvements in ABS Economic Statistics [arising from The New Tax System] (cat. no. 1372.0). In relation to the AWE survey, these changes caused a greater than normal rotation of businesses included in the sample for the May 2001 and August 2002 surveys.


STATISTICAL UNITS DEFINED ON THE ABS BUSINESS REGISTER

11 The ABS uses an economic statistics units model on the ABS Business Register to describe the characteristics of businesses, and the structural relationships between related businesses. The units model is also used to break groups of related businesses into relatively homogeneous components that can provide data to the ABS.

12 In mid-2002, to better use the information available as a result of The New Tax System, the ABS changed its economic statistics units model. The new units model allocates businesses to one of two sub-populations. The vast majority of businesses are in what is called the ATO Maintained Population, while the remaining businesses are in the ABS Maintained Population. Together, these two sub-populations make up the ABS Business Register population.


ATO Maintained Population

13 Most businesses and organisations in Australia need to obtain an Australian Business Number, and are then included on the ATO Australian Business Register. Most of these businesses have simple structures; therefore the unit registered for an ABN will satisfy ABS statistical requirements. For these businesses, the ABS has aligned its statistical units structure with the ABN unit. The businesses with simple structures constitute the ATO Maintained Population, and the ABN unit is used as the economic statistics unit for all economic collections.


ABS Maintained Population

14 For the population of businesses where the ABN unit is not suitable for ABS statistical requirements, the ABS maintains its own units structure through direct contact with businesses. These businesses constitute the ABS Maintained Population. This population consists typically of large, complex and diverse businesses. The new statistical units model described below has been introduced to cover such businesses.

15 Enterprise Group: This is a unit covering all the operations in Australia of one or more legal entities under common ownership and/or control. It covers all the operations in Australia of legal entities which are related in terms of the current Corporations Law (as amended by the Corporations Legislation Amendment Act 1991), including legal entities such as companies, trusts, and partnerships. Majority ownership is not required for control to be exercised.

16 Enterprise: The enterprise is an institutional unit comprising (i) a single legal entity or business entity, or (ii) more than one legal entity or business entity within the same Enterprise Group and in the same institutional subsector (i.e. they are all classified to a single Standard Institutional Sector Classification of Australia subsector).

17 Type of Activity Unit (TAU): The TAU comprises one or more business entities, sub-entities or branches of a business entity within an Enterprise Group that can report production and employment data for similar economic activities. When a minimum set of data items is available, a TAU is created which covers all the operations within an industry subdivision (and the TAU is classified to the relevant subdivision of the Australian and New Zealand Standard Industrial Classification [ANZSIC]). Where a business cannot supply adequate data for each industry, a TAU is formed which contains activity in more than one industry subdivision.


NOTES ON ESTIMATES

18 Average weekly earnings statistics represent average gross (before tax) earnings of employees and do not relate to average award rates nor to the earnings of the 'average person'. Estimates of average weekly earnings are derived by dividing estimates of weekly total earnings by estimates of number of employees. Changes in the averages may be affected not only by changes in the level of earnings of employees but also by changes in the overall composition of the wage and salary earner segment of the labour force.

19 There are several aspects which can contribute to compositional changes, including variations over time in the proportions of full-time, part-time, casual and junior employees; variations in the occupational distribution within and across industries; variations in the distribution of employment between industries; and variations in the proportion of male and female employees. Such effects may apply differently within different states and territories, and over time.


COMPARABILITY WITH WAGE PRICE INDEX

20 Period-to-period movements for the Average Weekly Earnings (AWE) series are not comparable with those for the Wage Price Index (WPI) (previously known as the Wage Cost Index). It is important to recognise that the two series have different purposes and concepts and use different sample selection and estimation methodologies.

21 The AWE survey is designed to measure the level of average earnings in Australia at a point in time. It does this by collecting information from businesses on their number of employees and their total gross weekly earnings for a specific pay period each quarter. The WPI is a price index designed to measure the change over time in the price of labour. It does this by pricing specific jobs, in terms of wage and salary payments to employees occupying the jobs, and collecting information from businesses each quarter on price changes in those jobs. It is unaffected by changes in the quality and quantity of labour purchased by employers.

22 In addition to changes in the price of labour, AWE estimates are affected by changes in hours worked and by compositional changes in the employee workforce (see paragraphs 18 and 19). The WPI prices a fixed quantum of labour services for each job, and hence changes to base earnings resulting from increases in hours worked or from changes in the composition of the employee workforce will not be reflected in the index.

23 For further information on the WPI, please refer to the Explanatory Notes of Labour Price Index, Australia (cat. no. 6345.0) and the Information Paper: Labour Price Index, Australia, 2004 (cat. no. 6363.0) which are available on the ABS web site.


EFFECTS OF ROUNDING

24 Estimates of average weekly earnings are rounded to the nearest 10 cents.

25 Percentage changes are calculated on the actual values and may differ from calculations based on rounded estimates.


HISTORICAL SERIES

26 The current AWE series, based on information obtained from a sample survey of employers, was introduced in August 1981. Prior to August 1981 the AWE series was based principally on information from payroll tax returns. Revised estimates of average weekly earnings for the period August 1981 to November 1983 were included in Average Weekly Earnings, States and Australia, March Quarter 1984 (cat. no. 6302.0) published on 12 July 1984. Users who need a measure of the movement in earnings for a period which spans both the payroll tax based and employer survey series should refer to table 3 in that publication which presents both series linked to a common index base (August 1981 = 100.0).


SEASONAL ADJUSTMENT

27 Seasonal adjustment is a means of removing the estimated effects of normal seasonal variation from the series so that the effects of other influences can be more clearly recognised. Seasonal adjustment does not aim to remove the irregular or non-seasonal influences which may be present in any particular series. Influences that are volatile or unsystematic can still make it difficult to interpret the movement of the series even after adjustment for seasonal variation. This means that quarter-to-quarter movements of seasonally adjusted estimates may not be reliable indicators of trend behaviour.

28 The Survey of Average Weekly Earnings uses the concurrent seasonal adjustment method to derive seasonal factors. Concurrent seasonal adjustment uses data up to and including the current quarter to estimate seasonal factors for the current and all previous quarters. This process can result in revisions each quarter to estimates for earlier periods. However, in most instances, the only noticeable revisions will be to the seasonally adjusted estimates for the previous quarter and one year prior to the current quarter.

29 While seasonal factors for the complete time series are estimated each quarter, they will continue to be reviewed annually at a more detailed level to take into account each additional year's original data. This annual review will not normally result in significant changes to published estimates. The review will be conducted in November each year with the results reflected in the February issue of this publication.

30 Details about the method of seasonal adjustment of these series are available on request.


TREND ESTIMATES

31 Seasonally adjusted estimates can be smoothed to reduce the impact of irregular or non-seasonal influences. Smoothed seasonally adjusted series are called trend estimates.

32 The ABS considers that trend estimates provide a more reliable guide to the underlying direction of the original estimates and are more suitable than either the seasonally adjusted or original estimates for most business decisions and policy advice.

33 The trend estimates in this publication, obtained by dampening out the irregular component from the seasonally adjusted series, are calculated using a centred 7-term Henderson moving average of the seasonally adjusted series. Estimates for the three most recent quarters cannot be calculated using this centred average method; instead an asymmetric average is used. This can lead to revisions in the trend estimates for the last three quarters when data become available for later quarters. Revisions of trend estimates will also occur with revisions to the original data and re-estimation of seasonal adjustment factors.

34 If a series is highly volatile then the trend estimates will be subject to greater revision for the latest few quarters as new data become available. However, it is important to note that this does not make the trend series inferior to the seasonally adjusted or original series.

35 For more information, refer to Information Paper: A Guide to Interpreting Time Series - Monitoring Trends (cat. no. 1349.0) which is available on the ABS web site.

36 Three feature articles which have appeared in the ABS monthly publication Australian Economic Indicators (cat. no. 1350.0) may also be of interest:
  • Picking Turning Points in the Economy (April 1991)
  • Smarter Data Use (March 1992)
  • Direct Movement Estimator for the Survey of Average Weekly Earnings (August 1998).


RELATED PUBLICATIONS

37 The following publications contain related information:
  • Australian Labour Market Statistics (cat. no. 6105.0) - issued quarterly
  • Average Weekly Earnings, Australia 1941-1990 (cat. no. 6350.0)
  • Employee Earnings, Benefits and Trade Union Membership, Australia (cat. no. 6310.0) - issued annually
  • Employee Earnings and Hours, Australia (cat. no. 6306.0) - issued biennially
  • Information Paper: Improvements in ABS Economic Statistics [Arising from The New Tax System] (cat. no. 1372.0) - issued 6 May 2002
  • Labour Force, Australia (cat. no. 6202.0) - issued monthly
  • Labour Force Projections, Australia 1999-2016 (cat. no. 6260.0)
  • Labour Price Index, Australia (cat. no. 6345.0) - issued quarterly
  • Labour Statistics: Concepts, Sources and Methods (cat. no. 6102.0.55.001)
  • Wage and Salary Earners, Public Sector, Australia (cat. no. 6248.0.55.001) - issued quarterly.


38 Current publications and other products released by the ABS are listed in the Catalogue of Publications and Products (cat. no. 1101.0). The Catalogue is available from any ABS office or the ABS web site. The ABS also issues a daily Release Advice on the web site which details products to be released in the week ahead.


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