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1301.0 - Year Book Australia, 2006  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 20/01/2006   
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EARNINGS

Statistics on earnings are used to help evaluate the standard of living of employees and to make policy decisions regarding income redistribution, social welfare, taxation and wage setting.

The ABS concept of earnings is based on the definition adopted by the twelfth International Conference of Labour Statisticians in 1973. Earnings are considered to be remuneration to employees for time worked or work done, as well as remuneration for time not worked (e.g. paid annual leave).

The ABS produces a range of statistics on earnings paid to workers. The quarterly Survey of Average Weekly Earnings (AWE) and the two-yearly Survey of Employee Earnings and Hours (EEH) both provide a statistical measure of the remuneration paid to employees. The EEH survey also provides estimates of earnings for each of the pay setting methods (i.e. awards, collective agreements and individual arrangements). The Survey of Employee Earnings, Benefits and Trade Union Membership, which is run annually as a Labour Force Supplementary Survey, also provides information about the earnings of employees.

The quarterly Labour Price Index (LPI) measures the quarterly changes in wages and salaries, and other 'non-wage' components which contribute to the cost to employers of employing labour (i.e. annual leave, superannuation, payroll tax and workers' compensation). Unlike the AWE and EEH surveys, the LPI is unaffected by changes in the quantity or quality of work performed.

LEVEL OF EARNINGS

Data on the level of earnings reflect the variations within different population groups, and across industries and occupations. Differences in earnings are also of interest in reflecting the strength of labour demand and supply.

The AWE survey provides an estimate of the gross weekly earnings paid to employees by measuring earnings during a one-week reference period in the middle month of a quarter (excluding irregular earnings not related to the reference period). Data are collected from the payrolls of a sample of employers.

The AWE survey provides three types of earnings measures. The first is average weekly ordinary time earnings (commonly referred to as AWOTE) for full-time adult employees, which relates to that part of total earnings attributable to award, standard or agreed hours of work. A second measure is full-time adult total earnings, which includes both ordinary time and overtime pay. A third measure is total earnings for all employees (including full-time and part-time, adult and junior).

Graph 6.50 shows AWOTE from May 1995 to May 2005. Over the 10-year period, AWOTE for full-time adult male employees increased by 55%, from $688 to $1,064, while AWOTE for full-time adult female employees increased by 57%, from $576 to $904.

Graph 6.50: AVERAGE WEEKLY ORDINARY TIME EARNINGS(a)


Table 6.51 shows that in May 2005 the difference between male and female average weekly earnings was lowest for full-time adult AWOTE (women earned 85% of the male figure of $1,064) and highest for all employees total earnings (women earned 66% of the male figure of $943). The latter difference reflects the inclusion of part-time employees (a higher proportion of female employees work part time) and the inclusion of overtime pay (of which men earn more than women). In May 2005, 45% of female employees worked part time compared with 14% of male employees.

6.51 AVERAGE WEEKLY EARNINGS - May 2005

Males
Females
Persons
$
$
$

Full-time adult ordinary time earnings
1,064.00
903.50
1,006.70
Full-time adult total earnings
1,136.90
917.50
1,058.50
All employees total earnings
942.70
620.20
789.70

Source: Average Weekly Earnings, Australia, May 2005 (6302.0).


Table 6.52 presents AWOTE for full-time adult men and women by states and territories in May 2005. The highest weekly earnings for men and women were in the Australian Capital Territory. The lowest weekly earnings for men and women were in Tasmania.

6.52 AVERAGE WEEKLY EARNINGS, By state and territory - May 2005

Full-time adult ordinary time earnings

Males
Females
Persons
$
$
$

New South Wales
1,108.90
950.60
1,051.50
Victoria
1,044.20
893.80
992.10
Queensland
1,009.50
861.80
954.50
South Australia
965.40
864.00
930.70
Western Australia
1,120.80
848.90
1,032.20
Tasmania
926.50
810.40
888.10
Northern Territory
1,112.70
906.90
1,023.30
Australian Capital Territory
1,250.20
1,052.70
1,160.70
Australia
1,064.00
903.50
1,006.70

Source: Average Weekly Earnings, Australia, May 2005 (6302.0).


Graph 6.53 shows that in May 2005, the mining industry recorded the highest AWOTE for full-time adults ($1,628 for men and $1,189 for women). The industries with the lowest AWOTE for full-time adults were Accommodation, cafes and restaurants ($723 for men and $674 for women) and Retail trade ($757 and $697 respectively).

AWOTE for full-time adult women was less than for men in all industries. Full-time adult women earned approximately two-thirds (64%) of male full-time adult ordinary time earnings in the finance and insurance industry, rising to 93% in the Accommodation, cafes and restaurants industry.

Graph 6.53: AVERAGE WEEKLY ORDINARY TIME EARNINGS(a), By industry(b) - May 2005


Data on average weekly earnings are also available from the EEH survey. This survey provides additional information, such as occupation. Average weekly ordinary time earnings for full-time adult employees by occupation for May 2004 are shown in graph 6.54. For both men and women, labourers and related workers earned the lowest average weekly ordinary time earnings of all the occupation groups ($699 for men and $612 for women), whereas the highest earnings were for managers and administrators ($1,607 for men and $1,391 for women).


Men had higher average earnings than women in each major occupation group. For full-time adult employees, the proportional difference between male and female average weekly ordinary time earnings was smallest for labourers and related workers (average earnings of women were 88% of those of men) and greatest for tradespersons and related workers (78%).

Graph 6.54: AVERAGE WEEKLY ORDINARY TIME EARNINGS(a), By occupation(b) - May 2004


HOW PAY IS SET

Information on the methods of setting the main part of employees' pay is collected in the EEH survey. Three different methods of setting pay are identified: awards; collective agreements; and individual arrangements.

Awards are legally enforceable determinations made by federal or state industrial tribunals that set the terms of employment (pay and conditions). Awards usually cover a particular industry or occupation. Employees whose pay is set by 'award only' are those who have their pay set by an award, and who are not paid more than the award rate of pay.

Collective agreements, which include enterprise and workplace agreements, are agreements between an employer (or group of employers) and a group of employees (or one or more unions or employee associations representing employees). Collective agreements set the terms of employment, and are usually registered with an industrial tribunal or authority.

Individual arrangements are arrangements between an employer and an individual employee on the terms of employment for the employee. Employees whose pay is set by an individual arrangement include those whose pay is set by an individual contract, registered individual agreement (e.g. an Australian Workplace Agreement), or common law contract, as well as employees receiving over-award payments by individual agreement, and working proprietors of incorporated businesses.

The proportion of employees who had their pay set by award only decreased from 23% in 2000 to 20% in 2004 (graph 6.55). Over the same period the proportion of employees who had their pay set by a collective agreement increased from 37% to 41%.

Graph 6.55: METHODS OF SETTING PAY - May


Table 6.56 shows that in May 2004, 38% of all private sector employees had their pay set through an unregistered individual arrangement, compared with only 4% of public sector employees. Most public sector employees had their pay set by a registered collective agreement (92%). Men were more likely than women to have their pay set by an unregistered individual arrangement (35% compared with 27%), and less likely than women to have their pay set by award only (16% compared with 24%). Part of the difference between male and female employees' pay setting methods can be attributed to the differing proportions of men and women in the various occupation and industry groups.


6.56 METHODS OF SETTING PAY, By sector - May 2004

Collective agreement
Individual arrangement


Award
only
Registered
Unregistered
Registered
Unregistered(a)
Working proprietor of
incorporated business(a)
All methods
of setting
pay
%
%
%
%
%
%
%

Males
Private sector
19.0
23.3
3.6
3.0
41.7
9.5
100.0
Public sector
*0.7
90.7
*0.6
3.0
5.0
-
100.0
All sectors
15.7
35.2
3.0
3.0
35.2
7.8
100.0
Females
Private sector
31.0
25.2
2.8
2.2
34.9
3.9
100.0
Public sector
*3.5
92.6
*0.2
0.9
2.8
-
100.0
All sectors
24.4
41.4
2.2
1.9
27.2
2.9
100.0
Persons
Private sector
24.7
24.2
3.2
2.6
38.5
6.9
100.0
Public sector
*2.3
91.8
0.4
1.8
3.7
-
100.0
All sectors
20.0
38.3
2.6
2.4
31.2
5.4
100.0

(a) Prior to 2004, working proprietors of incorporated businesses were classified to unregistered individual arrangements.

Source: Employee Earnings and Hours, Australia, May 2004 (6306.0).


Table 6.57 shows that the occupation groups which had the highest proportion of employees who had their pay set by a registered or unregistered individual arrangement were advanced clerical and service workers and managers and administrators (52% and 47% respectively). A further 27% of managers and administrators were working proprietors of their own incorporated business. Awards were far more prevalent in the lower skilled occupations, with 40% of elementary clerical, sales and service workers and 38% of labourers and related workers having their pay set by award only. In contrast, only 1% of managers and administrators, 7% of professionals and 8% of associate professionals had their pay set by award only. Collective agreements were most prevalent for professionals (56%) and intermediate production and transport workers (50%).

6.57 METHODS OF SETTING PAY, By occupation(a) - May 2004

Individual arrangement

Award only
Collective
agreement(b)
Registered or
unregistered(c)
Working
proprietor of incorporated
business(c)
All methods
of setting
pay
%
%
%
%
%

Managers and administrators
0.8
25.3
47.3
26.7
100.0
Professionals
6.7
55.8
32.8
4.7
100.0
Associate professionals
8.3
40.0
42.6
9.1
100.0
Tradespersons and related workers
22.5
34.6
35.2
7.7
100.0
Advanced clerical and service workers
8.2
30.2
51.8
9.8
100.0
Intermediate clerical, sales and service workers
25.8
38.3
34.6
1.2
100.0
Intermediate production and transport workers
17.3
50.0
29.9
2.9
100.0
Elementary clerical, sales and service workers
39.9
37.1
21.8
*1.2
100.0
Labourers and related workers
37.9
36.8
24.5
*0.8
100.0
All occupations
20.0
40.9
33.7
5.4
100.0

(a) Classified according to the Australian Standard Classification of Occupations.
(b) Includes registered and unregistered agreements.
(c) Prior to 2004, working proprietors of incorporated businesses were classified to unregistered individual arrangements.

Source: Employee Earnings and Hours, Australia, May 2004 (6306.0).


Table 6.58 shows that the Accommodation, cafes and restaurants and Retail trade industries had the highest proportion of employees who had their pay set by award only (60% and 31% respectively). Collective agreements were more prevalent in Government administration and defence (89%), Education (84%) and Electricity, gas and water supply (80%). The industries with the highest proportion of employees who had their pay set through a registered or unregistered individual arrangement were Wholesale trade (62%), Mining (58%) and Property and business services (57%).

6.58 METHODS OF SETTING PAY, By industry(a) - May 2004

Individual arrangement

Award
only
Collective
agreement(b)
Registered or
unregistered(c)
Working
proprietor of
incorporated
business(c)
All methods
of setting
pay
%
%
%
%
%

Mining
*1.9
38.8
57.6
*1.7
100.0
Manufacturing
14.9
35.8
44.5
4.8
100.0
Electricity, gas and water supply
*1.7
79.9
17.7
*0.7
100.0
Construction
15.2
24.1
40.8
20.0
100.0
Wholesale trade
14.9
16.0
61.8
7.3
100.0
Retail trade
31.3
33.4
30.3
5.0
100.0
Accommodation, cafes and restaurants
60.1
11.7
25.9
2.4
100.0
Transport and storage
14.4
41.9
36.2
7.5
100.0
Communication services
*2.1
62.6
32.8
*2.5
100.0
Finance and insurance
4.5
43.7
46.9
4.9
100.0
Property and business services
19.7
12.8
56.8
10.8
100.0
Government administration and defence
*0.8
89.3
9.9
. .
100.0
Education
8.9
83.5
7.2
*0.4
100.0
Health and community services
26.6
54.8
15.9
2.7
100.0
Cultural and recreational services
17.7
38.7
40.4
*3.2
100.0
Personal and other services
23.5
45.7
27.8
*2.9
100.0
All industries
20.0
40.9
33.7
5.4
100.0

(a) Classified according to the Australian and New Zealand Standard Industrial Classification.
(b) Includes registered and unregistered agreements.
(c) Prior to 2004, working proprietors of incorporated businesses were classified to unregistered individual arrangements.

Source: Employee Earnings and Hours, Australia, May 2004 (6306.0).


CHANGES IN THE PRICE OF LABOUR

The LPI measures change in the price of labour services resulting from market pressures. The LPI is unaffected by changes in the quality or quantity of work performed, that is, it is unaffected by changes in the composition of the labour force, hours worked, or changes in characteristics of employees (e.g. work performance). The LPI is produced annually on a financial year basis and consists of two components: a wage price index (WPI), published quarterly; and a non-wage price index, which is available for each financial year.

Indexes are compiled using information collected from a representative sample of employee jobs within a sample of employing organisations. The ABS constructs four WPIs on a quarterly basis: ordinary time hourly rates of pay excluding bonuses; ordinary time hourly rates of pay including bonuses; total hourly rates of pay excluding bonuses; and total hourly rates of pay including bonuses. Four non-wage indexes are constructed on a financial year basis: annual and public holiday leave; superannuation; payroll tax; and workers' compensation. From these wage and non-wage components, two LPIs are constructed, also on a financial year basis, one including bonuses and one excluding bonuses. Only those indexes which exclude bonuses are pure price indexes because bonuses tend to reflect changes in the quality of work performed.

Graph 6.59 shows percentage changes from the previous financial year for several LPI series. The WPI (total hourly rates of pay excluding bonuses) and the LPI (excluding bonuses), show similar rates of change from the previous financial year for 2003-04. This was not the case for 2002-03 when the LPI showed a larger rate of increase than the WPI. The main reason for the difference in 2002-03 was the impact of the changed Superannuation Guarantee Levy (SGL) upon the LPI. The SGL rose from 8% to 9% in July 2002 and this accounts for most of the increase (of 11.8%) for 2002-03 in the superannuation index.

Graph 6.59: WAGE, NON-WAGE AND LABOUR PRICE INDEXES


As shown in table 6.60, increases in the indexes for total hourly rates of pay excluding bonuses varied across sectors, and across states and territories. For Australia, the growth in the year to June quarter 2005 (i.e. from the June quarter 2004 to the June quarter 2005) was 4.1%. In the year to June quarter 2005 the increase for the public sector was 4.7% compared with 4.0% for the private sector.


For the states and territories, the highest increase in the year to the June quarter 2005 was recorded by Western Australia (5.0%) and the lowest by South Australia (3.8%). Western Australia recorded the highest increase in the year to the June quarter 2005 in the private sector (4.7%), and South Australia the lowest (3.5%). In the public sector, Tasmania recorded the highest increase (5.8%) and Queensland the lowest increase (4.0%) for the same period.

6.60 TOTAL HOURLY RATES OF PAY EXCLUDING BONUSES, By sector

Index numbers(a)

June qtr 2004
September qtr 2004
December qtr 2004
March qtr 2005
June qtr 2005
Percentage change
from June qtr 2004
to June qtr 2005

PRIVATE

New South Wales
101.0
102.1
102.8
103.8
104.7
3.7
Victoria
101.1
102.4
103.2
104.4
105.2
4.1
Queensland
101.1
102.1
103.4
104.2
104.9
3.8
South Australia
100.8
102.1
103.0
103.7
104.3
3.5
Western Australia
100.9
102.5
104.0
104.9
105.6
4.7
Tasmania
100.9
102.5
103.2
104.2
105.1
4.2
Northern Territory
101.2
102.2
103.1
104.6
105.3
4.1
Australian Capital Territory
100.8
102.4
103.1
103.7
104.4
3.6
Australia
101.0
102.3
103.2
104.1
105.0
4.0

PUBLIC

New South Wales
101.1
102.5
103.1
105.7
105.8
4.6
Victoria
100.7
102.3
104.0
105.1
105.6
4.9
Queensland
101.2
103.4
104.0
104.8
105.2
4.0
South Australia
100.8
101.6
104.2
105.4
105.5
4.7
Western Australia
100.8
102.4
103.6
104.4
106.2
5.4
Tasmania
100.8
103.2
103.6
105.6
106.6
5.8
Northern Territory
101.2
101.8
102.2
104.5
105.4
4.2
Australian Capital Territory
101.0
102.4
104.8
105.8
106.4
5.3
Australia
101.0
102.6
103.7
105.2
105.7
4.7

ALL SECTORS

New South Wales
101.1
102.2
102.8
104.2
105.0
3.9
Victoria
101.0
102.4
103.4
104.5
105.3
4.3
Queensland
101.1
102.4
103.5
104.3
105.0
3.9
South Australia
100.8
102.0
103.3
104.1
104.6
3.8
Western Australia
100.8
102.5
103.9
104.8
105.8
5.0
Tasmania
100.8
102.7
103.3
104.7
105.6
4.8
Northern Territory
101.2
102.0
102.7
104.6
105.4
4.2
Australian Capital Territory
100.8
102.4
104.2
105.0
105.7
4.9
Australia
101.0
102.3
103.3
104.4
105.1
4.1

(a) Reference base of each index 2003-04 = 100.0.

Source: Labour Price Index, Australia, June Quarter 2005 (6345.0).


Graph 6.61 compares the rate of increase in the total hourly rate of pay excluding bonuses across all major occupation groups for the year to June quarter 2004 and the year to June quarter 2005. Tradespersons and related workers (4.5%) and professionals (4.4%) recorded the highest growth in the year to June quarter 2005, while elementary clerical, sales and service workers recorded the lowest annual growth rate (3.5%). The only occupation group to record a lower rate of growth in the year to June quarter 2005 than in the year to June quarter 2004 was advanced clerical and service workers.

Graph 6.61: TOTAL HOURLY RATES OF PAY EXCLUDING BONUSES, By occupation(a) - June quarter


Annual movements in the total hourly rates of pay excluding bonuses, by industry, are shown in graph 6.62. For the year to June quarter 2005, the increases ranged from 3.1% for transport and storage to 5.7% for education.

Graph 6.62: TOTAL HOURLY RATES OF PAY EXCLUDING BONUSES, By industry(a) - June quarter

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