INCOME AND EARNINGS
Information about personal income and the wages and salaries paid to employees is used for many purposes including economic analysis, social research, policy formation and evaluation, and research by employer and employee associations. The ABS publishes a variety of information on these topics, drawing on administrative and survey data sources.
Estimates from a given source may differ from estimates from other sources as a result of differences in scope, coverage and methodology. This article explores some of the earnings statistics produced by the ABS.
DEFINING INCOME AND EARNINGS
Figure 1 below summarises the conceptual framework for statistical measures of employee remuneration in Australia (in the context of the broader concept of labour costs). Concepts of 'Wages and salaries', 'Employee income', 'Compensation of Employees' and 'Labour costs' all include and extend upon the concept of 'Earnings'.
Earnings are the pre-tax amount paid to employees for work done or time worked (including paid leave). In concept, earnings include 'payments-in-kind'; the value of 'non-cash' goods or services provided to employees. However, in practice they are not included in ABS collections, with the exception of goods and services obtained through salary sacrifice arrangements.
The exclusion of payments-in-kind (non-salary-sacrifice) from earnings is largely due to practical considerations, as data about payments-in-kind is not always readily available from employer payrolls, and because the contribution of wages and salaries in-kind to total employee earnings are relatively insignificant.
The concept ‘employee income’ is broadly comparable with the ‘compensation of employees’ component of the framework (Figure 1). It refers to an employee's total remuneration, whether in cash or in kind, received as a return to labour from an employer or from a person's own incorporated business. In addition to earnings, it includes non-cash benefits- free or subsidised goods and services from an employer such as the use of motor vehicles and subsidised housing; payments-in-kind; employers' social (e.g. superannuation); and severance and termination pay.
‘Labour costs’ are the cost to the employer in the employment of labour, including all cash and in-kind payments of wage and salaries to employees; all social contributions by employers in respect of their employees; and all other costs borne by employers in the employment of labour that are not related to employee compensation.
Total personal income
The broader concept of ‘total personal income’ includes other monetary receipts, such as government pensions and benefits; investment income; profit or loss from an unincorporated business; and private transfers (such as superannuation, child support etc.).
Graph 1: Mean Earnings, Employee income and Total personal income, Persons, 2015-16
Source: Survey of Income and Housing, 2015-16
Figure 1: Australian Conceptual Framework for Measures of Employee Remuneration
ABS INCOME AND EARNINGS DATA SOURCES
The ABS produces earnings statistics, as well as earnings related measures, from a range of sources (see Table 2). Household and employer surveys which are used by the ABS to collect earnings statistics have different strengths and limitations.
It is important to be aware of these differences when analysing the data.
Household surveys provide:
- earnings by socio-demographic characteristics;
- earnings by a range of employment characteristics, such as paid leave entitlements; and
- greater geographic information about place of usual residence including Statistical Area level 4 under the Australian Statistical Geography Standard.
However, limitations of household surveys data include:
- earnings are less robust, with reliance on respondents' accurate recall of (pre-tax) earnings;
- some respondents report on behalf of others in the household which can affect the quality of data reported;
- fewer and less robust information about business characteristics; and
- components of earnings estimates not available.
Employer surveys provide:
- more accurately reported earnings as data are obtained from employers' payrolls;
- components of earnings collected separately (i.e. ordinary time and overtime earnings); and
- consistent business characteristics (such as industry and business size), as this information is maintained on the ABS Business Register.
However limitations of employer surveys data include:
- limited socio-demographic characteristics of employees;
- limited information about characteristics of employment; and
- only state/territory geographic information about place of work available.
While large administrative datasets allow for rich analysis of income for small areas, consideration needs to be given to the scope and collection method of the data source. For example the Australian Tax Office (ATO) Personal Income Tax dataset covers all individuals who submit an individual income tax return, and therefore may exclude people with incomes below the tax threshold. The ABS is working to explore administrative data through the Linked Employer – Employee Database (LEED).
Table 2: ABS data sources for earnings, employment income and total personal income
For more information
see Labour Statistics: Concepts, Sources and Methods, Feb 2018
(cat. no. 6102.0.55.001).
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