1504.0 - Methodological News, Dec 2000  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 05/02/2001   
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A reliable estimate of wages growth is an important economic indicator. One of the most popular series used by commentators is the Average Weekly Earnings (AWE) survey which produces the movement in full-time adult average weekly ordinary time earnings (AWOTE).

The quality of the published estimates has been questioned recently following the release of the August 2000 preliminary annual movement AWOTE figure of 5.9%. This movement was subsequently revised upwards in the final publication. Paul Sutcliffe and Bob McCombe were asked to review the survey, and report back to senior management on the quality of the published data. While the review had a wide ranging terms of reference this article concentrates on techniques for investigation of some of the methodological aspects.

The Frame Creation

The frame creation process has undergone a large number of changes in the past year and was therefore targeted for further investigation. Similarly the ABS's new business provisions (NBP's) were selected for review. NBP's represent the counts of businesses which did not make it on to our business register in time for selection. In order to manage these investigations, they were broken down into the following sections:

  • A review of the population counts and NBP counts used by AWE;
  • A detailed investigation into the creation of the Management Unit State (MUS) which is the statistical unit for AWE;
  • A review of the process of handing over the frame creation and validation process to a central group within the ABS;
  • Investigation into the effect of frame updates, especially benchmark employment and industry codes; and,
  • A review of the calculation and application of the business provisions.

The review worked closely with the survey team to identify if there was anything unusual, or that had changed, which might have impacted on the published estimates.

The Decomposition of the Movement Estimates.

In order to better interpret the effects on the movement estimates of the changes in the survey frame and survey sample over time, the decomposition components of the movement estimates can be collapsed into the following five key components:
  • Common Sample Unit Effect;
  • Net Birth-Death Effect = Frame Growth Effect + Sample Death Effect + Sample Birth Effect;
  • Net Stratum Flip Effect = Frame Stratum Flip Net Effect + Sample Stratum Flip Out Effect + Sample Stratum Flip In Effect;
  • Net Rotations Effect = Sample Rotation Out Effect + Sample Rotation In Effect Stratification Change Effect; and,
  • Classification Change Effect.

Stratum flipping occur when information from a sample unit suggest that the unit should be in a different stratum. It is also possible to breakdown the common sample unit effect into different categories. Each unit's contribution to the categories can be ranked. In this way any unusual impacts can be readily identified.

A macro to evaluate these impacts is now available. This tool proved valuable in completing the AWE review as it allowed us to evaluate the impact of frame changes on the estimates. It also provided lists of units having high impacts on the movements which could then be identified and interrogated.

The Direct Movement Estimator.

The ABS currently designs the AWE survey to produce optimal level estimates of AWOTE. Due to the existence of highly correlated quarterly samples (in general) and the strong correlation between the data items collected from the same business, the quarterly differences of the level estimates are a good measure of the quarterly movements in AWOTE. The annual differences in the level estimates are not as robust as the quarterly as there is not as much common sample and changes in the composition of the population may affect the results. A direct movement estimator is a more robust measure for both quarterly and annual movement, as it is based on the common sample between the two time periods and allows for population changes between them.

The ABS has always been active in reviewing methodologies for keeping the frame as up to date as possible and has presented papers to conferences on this topic. The use of decomposition techniques to understand the contribution to estimates of different components allows the survey teams to fully understand their data. The direct movement estimator is used by a number of survey teams to review the published data and understand the main drivers behind the estimates.
For more information, please contact Paul Sutcliffe on (02) 6252 6759.

E-mail: p.sutcliffe@abs.gov.au