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Foreign Policy Analysis
Summary of wage growth in the December 2019 quarter

Summary of wage growth in the December 2019 quarter

Wages rose 2.6 percent in 2019, the highest
rate of wage inflation in more than a decade. Around 6 out of every 10 jobs we surveyed
in the December 2019 quarter had pay rises in the year, which is the highest proportion
getting pay rises since the September 2008 quarter. For the second quarter in a row, the public
sector has been driving wage increases in the Labour Cost Index or LCI, our key measure
of wage inflation. In the year to December 2019, public sector
wages rose 3.3 percent. The strong growth in the public sector comes
off the back of several high profile pay settlements, including those for nurses, teachers, and
police officers. As a result, the industries which have seen
the strongest wage growth are healthcare and social assistance; education and training;
and public administration and safety. The private sector has also seen wage growth
over the year – at 2.4 percent. The $1.20 increase to the minimum wage in
April 2019 contributed to growth in this sector. This brought the minimum wage in New Zealand
up to $17.70 per hour. The minimum wage will continue to rise in
annual increments, reaching $20.00 per hour by 2021. We expect this to keep boosting salaries and
wages, particularly in lower paying industries such as retail trade and accommodation and
food services. Wages as measured by the Quarterly Employment
Survey or QES also rose in 2019.Average ordinary time hourly earnings increasing by 3.6 percent,
to reach $32.76 an hour. As in the LCI, QES hourly wage growth was
also driven by the public sector. For full time workers, average weekly earnings,
including overtime, rose 3.6 percent in the year to reach about $1,272. Weekly wages from the QES are one of the measures
that help set increases to a number of government payments, including NZ Superannuation, Veterans’
Pensions and Paid Parental Leave, worth about $20 billion a year. These payments affect the incomes of thousands
of people in New Zealand every fortnight.

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