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WAGE PRICE INDEX
Enterprises primarily engaged in agriculture, forestry and fishing activities are excluded because a very high proportion of agricultural enterprises have no employees. It would be disproportionately costly to survey a sufficient number of these enterprises to obtain a sample of jobs that is large enough to adequately represent this industry. In addition, the highly seasonal nature of activities in this industry would make it difficult to track jobs over time.
Private households employing staff and foreign embassies, consulates, etc. cannot be included, because they are out of scope of the ABS Business Register from which the WPI sample of businesses is selected.
A change to WPI coverage in the December quarter 2009 resulted in businesses with 5 or less employees (referred to as micro-businesses) being excluded from the collection. An internal ABS review determined that the size and frequency of pay changes in micro-businesses were similar to businesses with five employees or more. Effectively, micro-businesses could be excluded from the survey without adversely affecting measures of price change. These businesses are still considered within scope of the target population, and continue to be represented in WPI outputs via their inclusion in the expenditure weights.
The ABS uses an economic statistics units model, based on the ABS Business Register, to describe the characteristics of businesses and the structural relationships between related businesses. The units model is also used to break groups of related businesses into relatively homogeneous components that can provide data to the ABS. See Chapter 23: Methods Used in ABS Business Surveys for more information about the ABS Business Register and the ABS statistical units model.
The units model allocates businesses to one of two sub-populations. The vast majority of businesses are in the Australian Tax Office (ATO) Maintained Population, while the remaining businesses are in the ABS Maintained Population. Together, these two sub-populations make up the ABS Business Register population.
All jobs in the target population of employers are in scope of the WPI, except the following:
As such, full-time, part-time, permanent, casual, managerial and non-managerial jobs are in scope of the WPI. Costs incurred by businesses for work undertaken by self-employed persons, such as consultants and subcontractors, are out of scope of the WPI as they do not relate to employee jobs. Workers paid commission without a retainer are also excluded, as a large number of such workers operate in a similar fashion to self-employed persons.
Detailed information on WPI scope and coverage topics, see Chapter 5 - Coverage and classifications in the ABS publication Wage Price Index: Concepts, Sources and Methods, 2012 (cat. no. 6351.0.00.001).
A two-stage sampling methodology is used to generate a sample of employee jobs for the WPI. The first stage selects a sample of businesses, whilst in the second stage a sample of employee jobs are selected from within these businesses.
In the first stage of sampling, approximately 3,000 private and public sector businesses are selected from the ABS Business Register. These businesses are selected by stratifying the target population of businesses by state/territory, sector (private/public), industry division and business size, and selecting a random sample from each stratum. For a number of complex organisations, further sampling is undertaken to simplify reporting arrangements.
In the second stage of sampling, businesses selected in the first stage are asked to select a sample of jobs from their payrolls using instructions provided by the ABS. The number of selections depends on the total number of jobs in the business, but is limited to a maximum of ten jobs per business. Approximately 18,000 jobs are selected.
The WPI uses probability sampling at both stages. Probability sampling means that each unit (i.e. business or job) has an equal chance of selection.
Sampling weights are calculated for each contributing job. Jobs in the WPI are assigned sample weights according to the number of similar units they represent within a stratum. The procedure for assigning a sample weight to a job takes place at the business and job level. Total sample weight is determined by multiplying business and job weights together.
Weighting practices vary at different levels of the WPI. WPI expenditure weights are a measure of the relative importance of each elementary aggregate (EA), based on employers' expenditure on wages and salaries. Below the EA level, sample weights applied to each job on the WPI survey questionnaire indicate the number of jobs in the Australian labour market a particular sampled job represents.
The Laspeyres index methodology requires that prices in each period are compared to those in a given base period. To ensure the index remains relevant, expenditure weights need to be updated to reflect changes in expenditure patterns. This process is referred to as reweighting. Expenditure weights for the WPI are reweighted every two years, following the release of data from the Survey of Employee Earnings and Hours (EEH). This update occurs in the December quarter.
Detailed information on calculating of sampling weights is contained in Chapter 7 – Weights and their Sources and Chapter 10– Wage Price Index Calculation in Practice in the ABS publication Wage Price Index: Concepts, Sources and Methods, 2012 (cat. no. 6351.0.00.001).
DATA COLLECTION PROCESSES
The WPI is compiled quarterly by the ABS. The survey reference date is the last pay period ending on or before the third Friday of the middle month of the March, June, September and December quarters each year. The data are typically released approximately seven weeks after the end of each quarter, in the publication Wage Price Index, Australia (cat. no. 6345.0).
Information for the WPI is collected using quarterly mail-out, mail-back questionnaires.
When a business is first selected in the survey, detailed pricing specifications are collected for each of the randomly selected jobs. These specifications (job position number, title, tasks, grade, location, etc.) enable the same jobs to be identified in subsequent quarters.
Employers providing data for the WPI have the option of reporting either the ordinary time hourly rate of pay or the annual salary for each selected job. Where an annual salary is reported, information about the usual or standard weekly hours for the job is used to convert it into an hourly rate of pay. Other information relating to the jobs is also collected, including:
Sometimes it is not possible to collect data for all of the selected jobs. Some jobs may be temporarily vacant, or the required information is simply not provided by the employer (although this is rare). There are a few options available to deal with temporarily missing observations. These include:
The procedure most commonly used in the WPI is to impute a movement for the missing job, based on the price movements of the other jobs in the sample.
Four sets of wage price indexes are released:
The "headline measure" of the wage price index is the index for total hourly rates of pay excluding bonuses. Separate indexes are released for each of the above series for various combinations of state/territory, sector (private/public) and industry divisions. Estimates are published quarterly, and more detailed data may be available on request. Seasonally adjusted and trend data are produced for the index of total hourly rates of pay excluding bonuses for Australia, for the private and public sectors.
AVERAGE WEEKLY EARNINGS AND WAGE PRICE INDEX
The six monthly Average Weekly Earnings (AWE) and quarterly WPI collections both measure the wages and salaries of employees.
The AWE and WPI collections aim to measure different, albeit related, concepts. AWE is designed to measure earnings, which consist of payments-in-cash and payments-in-kind such as fringe benefits. The WPI is designed to measure inflationary pressures associated with the compensation of employees. Theoretically, WPI would include all elements of compensation of employees, but for practical reasons it focuses on wages and salaries payments in cash, as well as salary sacrifice payments.
The WPI measures changes in the wages and salaries paid by employers for a unit (i.e. hour) of labour where the quality and quantity of labour are held constant. It has the dual purpose of monitoring wages and salaries inflation in the economy and supporting the compilation of the Australian System of National Accounts.
In contrast, the AWE is designed to provide an accurate estimate of the current average value of wages and salaries paid to employees by an employer over a specified period. The emphasis placed on producing a contemporary measure of average wages and salaries mean that the AWE reflects structural changes that occur over time (such as changes in hours paid for and employment). For more information, see the feature article 'Average Weekly Earnings and Wage Price Index - What do they measure?' in Average Weekly Earnings, Australia, May 2014 (cat. no. 6302.0).
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