This publication contains indexes measuring changes in the price of wages and salaries in the Australian labour market.
The methodology used to construct the WPIs is similar to that used for other price indexes such as the Consumer Price Index. In the WPI, index numbers are compiled using information collected from a representative sample of employee jobs within a sample of employing organisations. Individual indexes are compiled for various combinations of state/territory, sector (private/public) and industry division. Industry is classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006 (cat. no. 1292.0). For more detailed information on the methodology used in the construction of the WPI, refer to Wage Price Index: Concepts, Sources and Methods (cat. no. 6351.0.55.001).
Current published indexes
Four WPIs are constructed and published quarterly. These indexes were first compiled for the September quarter 1997, and cover:
- ordinary time hourly rates of pay excluding bonuses index
- ordinary time hourly rates of pay including bonuses index
- total hourly rates of pay excluding bonuses index
- total hourly rates of pay including bonuses index.
In these indexes the term 'bonuses' refers to bonuses and commissions.
Design of the indexes
The WPIs measure changes over time in the price of wages and salaries unaffected by changes in the quality or quantity of work performed. A range of procedures have been developed to identify and measure quality and quantity changes and ensure that only pure price changes are reflected in the indexes.
Price-determining characteristics of the jobs are fixed to ensure that changes in these characteristics do not contribute toward index movements. The following are examples of changes in price-determining characteristics which are not reflected in index movements:
- changes in the nature of work performed (e.g. different tasks or responsibilities)
- changes in the quantity of work performed (e.g. the number of hours worked)
- changes in the characteristics of the job occupant (e.g. age, apprenticeship year, successful completion of training or a qualification, grade or level, experience, length of service, etc.)
- changes in the location where the work is performed.
Changes in the price of wages and salaries resulting from changes in the composition of the labour market are also excluded from index movements. To achieve this, a longitudinal survey methodology is used to measure a similar sample of jobs over time. Once a business is selected in the sample, it will be expected to provide data for a sample of jobs for a minimum of five years.
Wage price indexes
The ordinary time hourly rates of pay indexes that exclude bonuses measure quarterly changes in ordinary time hourly wage and salary rates. Changes in rates of pay reflected in these indexes (i.e. pure price changes) arise from a range of sources including award variations, enterprise and workplace agreements, minimum wage setting, individual contracts and informal arrangements.
These indexes are not affected by changes in:
- penalty payments for overtime, shifts, weekends and public holidays (which fluctuate depending on the number of hours paid at penalty rates)
- allowances which fluctuate (such as those paid according to how much work is performed under special work conditions e.g. height, dirt, heat allowances)
- bonus payments (which may, or may not, relate to an individual's work performance). These payments are specifically excluded when calculating ordinary time hourly wage and salary rates.
The effect of rolling ordinary time penalty payments and allowances into ordinary time hourly rates is excluded from these indexes. However, when overtime penalty payments and non-separable shift allowances are rolled into ordinary time hourly rates, the ordinary time indexes will increase accordingly.
The total hourly rates of pay indexes that exclude bonuses are based on a weighted combination of ordinary time hourly wage and salary rates and overtime hourly rates. As a result, the total hourly rates of pay indexes reflect changes in both the ordinary time and overtime hourly rates. However, the effect of changes in the amount of overtime paid at each overtime rate is not shown in these indexes.
Only those indexes that exclude bonuses and commissions are pure price indexes because bonus and commission payments can reflect changes in the quality of work performed. No attempt is made to remove this quality element from the indexes that include bonuses and commissions.