LABOUR PAYMENTS QUADRANT

The Labour Payments quadrant accounts for the costs incurred by enterprises in employing labour and the incomes received by people from its provision.

Figure 12: Labour Payments Quadrant, Identity Relationship Diagram



LABOUR PAYMENTS CONCEPTS

Figure 13 below summarises the conceptual framework for statistical measures of employee remuneration in Australia (in the context of the broader concept of labour costs). The narrowest concept outlined in the international guidelines is that of 'Earnings'. Concepts of 'Wages and salaries', 'Employee income', 'Compensation of Employees' and 'Labour costs' all include and extend upon the concept of 'Earnings'.

Figure 13: Australian conceptual framework for measures of employee remuneration



Source: Labour Statistics: Concepts, Sources and Methods (ABS cat. no 6102.0.55.001)

The statistical measure of labour costs is based on the concept of labour as a cost to the employer and relates to:

• all cash and in-kind payments of wage and salaries to employees;
  
• all contributions by employers in respect of their employees to social security, private pension, casualty insurance, life insurance and similar schemes; and
  
• all other costs borne by employers in the employment of labour that are not related to employee compensation (such as costs of training, welfare services to employees, payroll taxes etc.).

Measures of labour costs should be net of any subsidies, rebates or allowances from governments for wage and salary payments to employees, or for other labour costs borne by employers.

The definition of labour costs from the 1966 International Conference of Labour Statisticians, paragraph 39 is ‘...remuneration for work performed, payments in respect of time paid for but not worked, bonuses and gratuities, the cost of food, drink and other payments in kind, cost of workers' housing borne by employers, employers' social security expenditures, cost to the employer for vocational training, welfare services and miscellaneous items, such as transport of workers, work clothes and recruitment together with taxes...’.

LABOUR PAYMENTS SOURCES

Source data for quarterly estimates of Labour Payments

Labour Payments data are primarily sourced from underlying data from two ABS National Accounts publications: Australian System of National Accounts (ABS cat. no. 5204.0) and the Australian National Accounts: National Income, Expenditure and Product (ABS cat. no. 5206.0). Please refer to Chapter 11 of the Australian System of National Accounts: Concepts, Sources and Methods (ABS cat. no. 5216.0) for details on how data are compiled for National Accounts.

Data components of other labour related costs to employers are sourced from the Australian National Accounts: Input-Output Tables, Product Details (ABS cat. no. 5215.0.55.001) and underlying information from ABS compiled Supply and Use tables.

Table 7 below summarises data sources used in compiling quarterly estimates in the Labour Payments quadrant.

Table 7: Description of quarterly data sources and uses for the Labour Payments Quadrant

Source data	Use in compiling quarterly data
Australian System of National Accounts (ABS cat. no. 5204.0)	Used in compiling estimates of labour income from self-employment.
Australian National Accounts: National Income, Expenditure and Product (ABS cat. no. 5206.0)	Used in compiling estimates of: • Compensation of employees; • Payroll taxes; and • Labour income from self-employment.
Australian National Accounts: Input-Output Tables, Product Details (ABS cat. no. 5215.0.55.001)	Used in compiling estimates of: • Training costs; and • Recruitment costs.
ABS compiled Supply-Use tables	Used in compiling estimates of: • Employment subsidies; • Training costs; and • Recruitment costs.
Government Finance Statistics, Australia (ABS cat. no. 5512.0)	Used in compiling estimates of employment subsidies.

Source data for annual estimates of Labour Payments

Source data for the annual estimates of Labour Payments are the same as those described above for quarterly estimates.

Labour Payments Methods



Methods for the compilation of quarterly and industry estimates of Labour Payments

Total Labour Costs

Total Labour Costs are the sum of:

· Total Labour Income, and
· Other Employment Costs.

Total Labour Income

Total Labour Income is the sum of:

· Compensation of Employees, and
· Labour Income from self-employment.

Estimates of Compensation of Employees at a total economy and industry level are derived from underlying Australian National Accounts data.

Labour Income from self-employment is an estimate of the share of Gross Mixed Income (GMI) attributable to the provision of labour. GMI is the surplus or deficit accruing from production by unincorporated enterprises that includes both the return on labour and return on capital.

The calculation of the labour share of GMI on an annual basis for each industry follows the method described in compiling Productivity Statistics outlined in Chapter 19 (Productivity Measures) of the Australian System of National Accounts: Concepts, Sources and Methods (ABS cat. no. 5216.0). This method assumes that self-employed proprietors receive the same average compensation per hour as wage and salary earners, and can be summarised as comprising the following steps:

1. Average hourly income of wage and salary earners in each industry is calculated by dividing Compensation of Employees by the estimated number of hours worked in all jobs by employees in the industry (excluding the self-employed).
2. This hourly rate is then multiplied by the estimated number of hours worked by self-employed persons (OMUEs) whose main job is classified to the industry. This information is derived by expanding the average number of hours worked in the reference weeks recorded in the Labour Force Survey by the number of weeks in the quarter and aggregating for the year.
3. This estimate is then multiplied by a scaling factor, to constrain to total industry GMI reported in the National Accounts. The scaling factor represents the ratio of the sum of the independently calculated labour and capital shares of GMI, for each industry, to the independently calculated estimate of total industry GMI reported in the National Accounts. This difference can arise from the use of different sources and methods to derive estimates of returns to labour and capital, to the method used by national accounts in calculating total GMI.
4. As productivity statistics are not compiled for industries with significant “non-market” components, no GMI scaling factor is applied to estimated self-employed labour income for Division P (Education and Training) and Division Q (Health Care and Social Assistance).
5. No GMI is estimated for Division D (Electricity, Gas, Water and Waste Services), Division K (Financial and Insurance Services) and Division O (Public Administration and Safety), as there are no owner-managed unincorporated enterprises (OMUEs) classified to these industries.
   

The Australian Labour Account calculates quarterly labour income from self-employment by taking the scaled labour share of GMI from underlying National Accounts productivity data, as calculated using the steps described above, and applying this share to the total level of quarterly GMI for each industry. This approach ensures consistency between Australian Labour Account estimates of labour income from self-employment and National Accounts GMI data.

As productivity statistics are not compiled for Division P (Education and Training) and Division Q (Health Care and Social Assistance), the scaled labour share of GMI for Division M (Professional, Scientific and Technical Services) is applied to total quarterly GMI for these industries. In addition, the scaled labour share of GMI for Division I (Transport, Postal and Warehousing) is used to represent Division A (Agriculture, Forestry and Fishing) while the scaled labour share of GMI for Division A is further investigated.

As industry productivity statistics are only compiled annually, the same annual scaled labour share of GMI is applied to each quarterly GMI measure for the financial year.

Other Employment Costs

Other Employment Costs are the sum of

• Employers Payroll Taxes;
• Payment for Recruitment Services;
• Training costs; less
• Employment Subsidies.

Employers Payroll Taxes

Estimates for employers’ payroll taxes are taken from underlying National Accounts estimates.

Payment for Recruitment Services and Training Costs

Estimates of total expenditure on recruitment services are calculated as the sum of Intermediate Use (purchase price) and Government Final Consumption Expenditure sourced from the Australian National Accounts: Input-Output Tables, Product Details (ABS cat. no. 5215.0.55.001) for Input-Output Product Classification (IOPC) 72110010 (Employment placement and recruitment services).

Training Costs are similarly derived and sourced from the Input-Output tables, using the following IOPC codes:

• IOPC 81010010 Technical, vocational and other non-tertiary education services;
• IOPC 81020010 Tertiary higher education services (including undergraduate and postgraduate);
• IOPC 82120010 Arts education services (excluding vocational);
• IOPC 82190011 Adult, community and other education services; and
• IOPC 82200010 Education support services.

As Input-Output tables are only available infrequently for earlier periods and with a significant time lag for more recent periods, estimates of total expenditure on recruitment services and training costs for the intervening and out years are compiled using underlying data from the Supply-Use tables, based on applying movements in the following Supply and Use Product Classification (SUPC) codes:

• SUPC 72005 Employment placement and recruitment services;
• SUPC 80205 Technical, vocational and tertiary education services; and
• SUPC 80310 Arts, adult and other education services.

Supply-Use tables also provide proportions used to allocate total expenditure on recruitment services and training costs to industry, derived by aggregating total intermediate usage of these products to an ANZSIC division basis.

Employment Subsidies

Employment subsidies represent payments made by the government to employers who hire eligible job seekers including mature age, disabled, indigenous, youth, parents, and long-term unemployed job seekers etc. This information is sourced from data provided to the ABS from the Department of Finance to compile estimates for the publication Government Finance Statistics, Australia (ABS cat. no. 5512.0). If data for current year employment subsidies estimate are not available at the time of publication, the average rate of change in employment subsidies estimates across the past two years is used to derive an annual estimate for the most recent year.

As data from Government Finance Statistics, Australia (ABS cat. no. 5512.0) are annual data, quarterly estimates of employment subsidies are derived by evenly distributing the annual estimate across the four quarters.

To allocate total quarterly employment subsidies to industry, underlying data from the Supply-Use tables for subsidies on production by industry are used to derive industry proportions.

Method for the compilation of annual estimates of Labour Payments

As all data contained in the Labour Payments quadrant are flow data, which represent a measure of activity over a given period, data across time periods are additive. Therefore, annual data in the Labour Payments quadrant are derived as the sum of the four quarterly estimates.

It should be noted that the Labour Payments quadrant includes a derived annual Average Labour Income per Employed Person estimate. This is calculated using a flow as the numerator (i.e. Total Labour Income), divided by an annual average level of four quarterly stocks for the denominator (i.e. the annual average level of Employed Persons). Therefore, caution must be exercised when comparing this result with other estimates measured at the same point in time, such as estimates of Average Weekly Earnings. This data is intended for comparison across time and industries within the Australian Labour Account, and to provide a link between the Persons and Labour Payments quadrants.