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22 Aug 2019

Wages & Employment Up

Unlike their cousins across the Tasman, New Zealand workers have seen strong wage growth, with the biggest pay rise in a decade recently recorded. According to Statistics New Zealand, average hourly earnings have increased 4% over the past year to $32.37 an hour, which is the biggest annual percentage increase since June 2009. The seasonally adjusted unemployment rate also fell in the June quarter from 4.2% to 3.9%, with the under-utilisation rate also dropping from 11.3% to 11%.

Despite reasonably strong wage and employment figures, only 60% of people experienced an increase according to The Labour Cost Index. Low-income earners are more likely to see a jump in wages, with the minimum wage recently increased to $17.70 an hour. The minimum wage will keep rising in small increments until 2021, until it reaches the magic politically beneficial number of $20 an hour. The minimum wage increase was not felt across the board, with retail and accommodation and food services feeling the most impact at 1.4% and 2.3% respectively. 

According to ASB chief economist Nick Tuffley, low-income earners are more likely to benefit from wage growth over recent months: "The chances are likely to be better for lower-income earners who are paid near the minimum wage... The 7.3 per cent lift in the minimum wage in April was a prominent feature of the wages data, as had been expected. This was on display in the disaggregated data, with the retail trade and accommodation industry outperforming with a 1.8 per cent increase lift in wages over the quarter."

Despite a significant jump in the minimum hourly rate, wage growth was more subdued for higher-income earners. According to Mr Tuffley, "Solid quarterly increases outside of this sector were relatively broad-based, indicating there was some broader spillover from the minimum wage hike... However, we are still in an environment of low wage increases, so increases are likely to be modest outside of the impact of minimum wage increases."

The unemployment rate was also down, with the number of people looking for work at its lowest level since June 2008 when it was at 3.8%. According to Sean Broughton, labour market and household statistics senior manager, "Since late 2012, the seasonally adjusted unemployment rate has largely been tracking down, towards levels seen before the global financial crisis in 2008." While the under-utilisation rate was down; which includes people who are unemployed, people who are employed part-time but would like more work, and people who are not actively looking for a job; the under-employment rate was up.

Along with rising average wage growth and a significant jump in the minimum hourly rate this quarter, many New Zealand workers also benefited from new collective agreements. The healthcare sector was positively affected, with nurses and other healthcare professionals contributing strongly to higher annual wage growth. Collective pay agreements for primary and secondary school teachers were also finalised in late June, with these increases likely to contribute to positive wage growth next quarter.