INSTITUTIONAL ENVIRONMENT

For information on the institutional environment of the Australian Bureau of Statistics (ABS), including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms
for scrutiny of ABS operations, please see ABS Institutional Environment.

RELEVANCE

The Labour Price Index measures change in the price of labour services, unaffected by changes in the quality and quantity of work performed (that is, indexes are unaffected by compositional change). It enables analysts and policy makers to assess the impact of changes in wage and non-wage costs on the labour market, the economy more generally, households and the community. The survey results are used in formulating industrial relations, wages policies and economic analysis.

Wages and salaries account for the majority of expenditure on labour costs by employers. The 'headline' measure of the wage price index is the index for total hourly rates of pay excluding bonuses. Wage price indexes are released for state and territory; sector (private/public) and broad industry groups.

• Industry is classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006 (cat. no. 1292.0). Prior to September quarter 2009, the ANZSIC 1993 version of the classification was used.
• Wage price indexes for broad occupation groups have been discontinued, with the last data in the series relating to the September quarter 2008. For information about where to find the historical occupation series, refer to Appendix 3 of the December quarter 2008 edition of the Labour Price Index publication.

Four non-wage price indexes are produced for financial years relating to annual and public holiday leave, employer funded superannuation, payroll tax, and workers' compensation.

From the individual wage and non-wage components, a labour price index can be constructed. Like the wage price indexes, non-wage and labour price indexes are available for various combinations of state/territory, sector and industry.


TIMELINESS

Wage price indexes have been produced each quarter commencing from September quarter 1997. The survey reference date is the last pay period ending on or before the third Friday of the middle month of the quarter, except for bonuses which are collected in respect to those paid during the three month period ending on the third Friday of the middle month of the quarter. Wage price indexes are released about three months after the reference date.

Non-wage indexes are produced in respect of financial years. The full set of non-wage indexes are updated in the September quarter edition of the Labour Price Index publication, with the other editions containing a summary.


ACCURACY

There are two principle sources of error in surveys, sampling error and non-sampling error. Non-sampling error arises from inaccuracies in collecting, recording and processing the data. Every effort has been made to reduce non-sampling error in the Labour Price Index by:

• careful design and testing of questionnaires and processing systems by providing instructions to businesses on how to select a sample of employee jobs
• detailed checking of completed survey forms
• instituting a range of procedures to ensure that jobs are priced to constant quality and quantity.

Sampling error occurs when a sample or subset of the population is surveyed rather than the entire population. One measure of the likely difference resulting from not including all of the population in the survey is given by the standard error. While the selection of employers and employee jobs are based on sampling techniques, standard errors are not available for the labour price index. While it is reasonably straightforward to calculate sampling errors for a level estimate such as the total number of employees jobs, it is not so straightforward to determine standard errors for the LPI which uses both sampling and index methodologies.

Original index numbers are released as final figures at the time they are first published. Revisions have never occurred and will only occur in exceptional circumstances. Trend and seasonally adjusted indexes are revised as extra quarters are included and seasonal factors are updated.

COHERENCE

The methodology used to construct the LPI is similar to that used for other price indexes produced by the ABS such as the Consumer Price Index and the Producer Price Indexes. The sample for the LPI, is selected from the ABS Business Register which is primarily based on registrations to the Australian Taxation Office's Pay As You Go Withholding scheme.

Employers are classified to an industry using the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006 (cat. no. 1292.0). Up until June quarter 2009, the content and format of tables containing industry data reflected the 1993 version. Indexes for previous periods have been reproduced on an ANZSIC 2006 basis by reclassifying the businesses that reported data in earlier periods to the appropriate industry division of ANZSIC 2006. Index movements for Australia, state/territory, sector and All industries original series were not affected by the introduction of the new industry classification. Details about the change to ANZSIC 2006 are outlined in Information Paper: Update on ANZSIC 2006 Implementation for the Labour Price Index, Australia 2009 (cat. no. 6345.0.55.001).

The ABS conducts a number of sample surveys of businesses which collect information about wages and salaries. One of these series, Survey of Average Weekly Earnings (AWE), is designed to measure the level of average earnings in Australia at a point in time. Period to period movements for the AWE series are not comparable with those from the wage price index. The two series have different purposes. Consequently, they have different concepts, and use different sample selection and estimation methodologies.


INTERPRETABILITY

The LPI publication (cat. no. 6345.0) contains Explanatory Notes, Appendices and a Glossary that provide information about data sources, terminology and other technical aspects of the series. More detailed information can also be found in the Labour Price Index, Concepts, Sources and Methods, (cat. no. 6351.0.55.001).

The total hourly rates of pay excluding bonuses index Australia and sector level indexes are the only indexes of the LPI that are seasonally adjusted.


ACCESSIBILITY

For links to data and publications relating to the labour price index and other prices series, please see the Prices Theme Page.

Additional labour price indexes are available on request. To make enquiries about such data, telephone Kathryn Parlor on Perth (08) 9360 5151 or email <labour.price.index@abs.gov.au>