On Wednesday, the Australian Bureau of Statistics (ABS) released its labour price index (LPI), which showed wage growth collapsing to a fresh all-time low in the June quarter, driven by the private sector:
However, yesterday the ABS also released half-yearly average weekly earnings (AWE) data for May, which showed a surge in average earnings:
Driven by the private sector:
While the findings appear contradictory, they are actually easily explained.
Unlike AWE, the LPI measures like-for-like wages and, therefore, does not account for changes in the composition of the labour market.
As the COVID-19 pandemic has seen huge numbers of lower paid jobs lost in areas like hospitality, it has increased average earnings while placing downward pressure on wages within industries.
As noted by the ABS:
Average weekly earnings for all employees rose by 3.8% in the six months to May 2020 (seasonally adjusted). This was the greatest biannual rise in the published seasonally adjusted series (commencing May 2012, when the frequency of the survey was changed) and was considerably greater than the recent average biannual increase over the November 2013-November 2019 period (around 1%). Using original figures, the current biannual increase is the greatest since November 2009.
Through the year to May 2020, average weekly earnings rose by 5.4%, underpinned by the strong biannual increase…
The Accommodation and food services industry, which saw the greatest decrease in payroll jobs, also had the lowest median pay of all industries at $516.00 in May 2018. This compared with median pay of $1,490.00 in the Financial and insurance services industry, which recorded a 0.3% increase in payroll jobs.