This document was added or updated on 23/07/2020.
Measuring the Wage Price Index during the COVID-19 pandemic
This article explains the changes being made to the measurement of the Wage Price Index (WPI) following the response of Commonwealth and state/territory governments to the COVID-19 pandemic. These changes will be made in the June quarter 2020 WPI, scheduled for release on 12 August. In summary:
1. Wage subsidies (JobKeeper) and payroll tax changes will have no direct impact on the WPI as they fall outside of the conceptual framework defining wages and salaries.
2. New analytical indexes will be released alongside the WPI providing insights around the combined impacts of government measures on the Australian labour market.
Australian conceptual framework for measures of employee remuneration
The principle purpose of the WPI is to measure changes in the price of wages and salaries (in hourly terms) for employers in the Australian labour market.
Figure 1 shows the conceptual framework for Labour Costs. Here you can see that wage subsidies and payroll tax are outside the conceptual boundary for WPI.
Figure 1: Labour costs conceptual framework
New analytical indexes
To assist businesses responding to the WPI survey, respondents have been asked to include JobKeeper payments in their wage and salary data. This is consistent with the survey of Average Weekly Earnings (AWE) approach. JobKeeper payments will then be identified in the WPI data and their effect removed during validation.
The WPI is often used as a proxy measure of price changes of the total labour cost for employers, as well a measure of an employees’ hourly income growth. In this exceptional COVID-19 period, the ABS will therefore provide two alternative analytical indexes alongside the WPI:
1. A Labour Price Index (LPI), including the JobKeeper wage subsidy and payroll tax changes.
2. An index of hourly income growth including the JobKeeper subsidy where applicable.
The additional analytical indexes will be created using collected WPI data, including JobKeeper payment information, supplemented with administrative data and other ABS labour survey data.
The analytical LPI will, where possible, be created using the same methods as the previously published Labour Price Index, which was last released in 2011.
Coherence with Average Weekly Earnings
As a measure of average income, the Average Weekly Earnings survey (AWE) will include JobKeeper payments. The WPI will remove the effect of the JobKeeper payments from the headline WPI.