Wage movements across the economy have been slower since the global financial crisis in 2008/09, as indicated by movements in the Labour Cost Index (LCI)[1] produced by Stats NZ (refer to chart: Annual wage growth rates by sector).

Over the nine-year period, Jun-2010 to Jun-2019, the public sector wage growth had in most quarters tracked below the private sector. The public sector wage rates grew at an average pace of 1.5% per year and within it the Public Service at 1.4% per year, compared to a faster pace in the private sector of 1.9% per year.

There is a cyclical pattern to wage movements in the public sector and the Public Service, as shown in the chart below. The peaks and troughs are influenced by the timing, and level, of pay settlements in various large collective agreements. The spikes in Public Service were driven by pay increases in large agencies, while the wider public sector spikes were largely driven by the health and education sectors.

In the year to June 2019, the LCI measured an increase in wages and salaries of 2.2% in both the public sector and the private sector. Within the public sector, wage movement in sub-sectors varied: Public Service (up 2.5%), health sector (up 4.4%), education sector (up 0.8%, key collective agreement settlements have not yet been reflected in June figure) and local government (up 1.8%). By comparison, general inflation as measured by the Consumer Price Index (CPI) increased by 1.7%.

The 2019 annual increase in Public Service wages and salaries was the largest since 2009, as was the increase in the private sector. Contributing factors, other than the settlement of various collective agreements include:

  • There have been two significant pay equity settlements affecting: a relatively large workforce of social workers at Oranga Tamariki, and Ministry of Education support workers (a smaller workforce that support children in early childhood and primary schools with learning and behavioural challenges).
  • As part of the Public Service’ commitment to the Gender Pay Gap Action Plan, departments have been reviewing the pay of their employees in the same or similar roles to ensure that an employee’s gender is not adversely affecting their salaries. This has resulted in salary corrections for some employees.
  • In the last year pay adjustments were made to ensure all Public Service employees were receiving the 2018 Living Wage. In addition, the Government Expectations on State Sector Employment Relations include an expectation that agencies will reduce the gap between their highest and lowest earners. Some agencies have responded to this by lifting the salaries of their lowest paid employees.

The chart on the second tab of the visualisation above, shows the LCI trend in salary and wage movements of selected sectors since March 2010, on a quarterly cumulative basis. Generally, the gap in wage increases widened between the public and private sectors over time. By 30 June 2019 (nine years and a quarter later), public sector wages had increased by 14.9% compared with 18.9% in the private sector. The CPI increased by 13.1% over the same period (excluding the effect of the GST increase on 1 October 2010 from 12.5% to 15%). Within the public sector, Public Service wages increased by 13.5%, compared with 12.7% in the education sector, 15.9% in the health sector and 19.0% in local government. The health sector had a significant increase from its latest round of wage settlements in 2018-2019.

[1] The LCI is an official measure of wage inflation. It measures changes in salary and wage rates that employers pay for the same job done at the same standard. The LCI does not reflect compositional change in the workforce, service increments, merit promotions and increases relating to performance.

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