Norman Russel: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeNorman Russel: Questions for Oral Answer — Questions to Ministers[Sitting date: 11 February 2014. Volume:696;Page:15748. Text is incorporated into the Bound Volume.]4.Dr RUSSEL NORMAN (Co-Leader—Green) to theMinister for Tertiary Education Skills and Employment: By how much did wages and salaries increase between December 2008 and December 2013 according to the Labour Cost Index and how does this compare to inflation according to the Consumer Price Index over the same period?Hon STEVEN JOYCE (Minister for Tertiary Education Skills and Employment): I will give the member the information he has asked for but the House also needs to know that the labour cost index he refers to is not a measure of actual wage and salary increases in the workforce. Wage and salary increases in the workforce are captured by the quarterly employment survey and in particular the measure ofaverage weekly earnings. That has increased 16.1 percent since December 2008. The labour cost index on the other hand is a statistical construct designed to measure inflation in the labour market. It ignores pay increases that are due to increased performance or productivity for promotion for taking on extra responsibilities or for changing jobs. The labour cost index increased 9.3 percent since December 2008 which not surprisingly is similar to the other measure we have of inflation which is the CPI which increased 10.8 over the same period.Dr Russel Norman: Can the Minister confirm that the labour cost index went up by 9.3 percent under the National Government over this period while inflation increased by 10.5 percent over the same period meaning that people’s pay packets have gotten smaller in real terms under the current Government?Hon STEVEN JOYCE: No. With the greatest respect to the member he is being a bit tricky here because the labour cost index does not measure changes in wages salaries and earnings over the period. It mentions the pure inflation in the labour market for somebody who does not get any pay increases from improved productivity or anything like that. The quarterly employment survey is actually the method via which changes in employment total weekly gross earnings total weekly paid hours and average hourly and average weekly earnings are reflected. I think the member does know that because he has asked questions on the quarterly employment survey previously. Today interestingly he is asking only about the labour cost index.Dr Russel Norman: Is the Minister aware of Statistics New Zealand’sUser guide for Statistics New Zealand’s wage and income measures the third edition which says that “if you are interested in changes in earnings across time the Labour Cost Index (LCI) is a better measure than the QES.”?Hon STEVEN JOYCE: I have not got that particular example in front of me but I can tell the member that on page 15 of the quarterly employment survey which has just been released last week—helpfully on the same day as the labour cost index which may be why the member has confused it—it says: “The unadjusted LCI measures changes in salary and ordinary-time wage rates for a fixed quantity of labour.”—Grant Robertson: Arrogant man.Hon STEVEN JOYCE: —no just correct Mr Robertson in this case—“It fixes the relative importance of industries and occupations” but does not fix the market rates and so on in terms of the quarterly employment survey. Again successive Governments have used the quarterly employment survey for calculating things such as superannuation and paid parental leave because that measures the change in actual earnings of New Zealanders and if the member was not being tricky that is what he would use.Dr Russel Norman: Does the Minister not understand what Statistics New Zealand is saying in the quote from its own documents where it says that the labour cost index is the official measure of the change in earnings over time not the quarterly employment survey—which is why it puts it in its documents—because the quarterly employment survey will produce misleading results such as showing an increase in the average wage when lots of low-wage jobs are lost as has happened under this Government?Hon STEVEN JOYCE: I disagree with the member on a couple of points here. Firstly if he has noticed in the previous question we were able to show the increase in jobs over the period that this Government has been in office—certainly in recent times and since Budget 2010. But again I think the member is I am sorry being deliberately disingenuous here because the labour cost index is about a measure of pure inflation in the labour market for a fixed and equal quantity of labour that does not change. In reality people’s income goes up because they are more productive it goes up because they have been given a promotion it goes up because they have changed jobs. That iscaptured in the quarterly employment survey and that is the actual measure of wages for New Zealanders and of how they have changed over time.Dr Russel Norman: Who is right: Statistics New Zealand which produces both the labour cost index and the quarterly employment survey and says as I quote again that if you are interested in changes in earnings over time the labour cost index is a better measure than the quarterly employment survey—is Statistics New Zealand right about the right measure or is the Minister right because he seems to know more than Statistics New Zealand?Hon STEVEN JOYCE: Well the member and I can exchange these phrases as often as we like. The unadjusted labour cost index according to Statistics New Zealand measures changes in salary and ordinary time wage rates for a fixed quantity of labour. It does not fix the quality of labour within occupations. As that changes that actually changes with the quarterly employment survey. So perhaps to try to resolve this we could make a suggestion. If the member believes that the labour cost index is the correct way that we should calculate the increase in wages of New Zealanders then perhaps he would like to commit to using that calculation for the calculation of New Zealand superannuation which would mean that we would all have to reduce New Zealand superannuation to go back to the labour cost index level and perhaps he would like to commit to that for paid parental leave. I think regardless of how the Greens spin this the reality is that when in Government Labour and the Greens use the quarterly employment survey because that is what measures New Zealanders’ wages.Tim Macindoe: In light of the previous member’s questions can the Minister clarify for us what in legislation has been used as the definitive measure of wage and salary growth and what in particular that measure tells us about average weekly earnings?Hon STEVEN JOYCE: The New Zealand Superannuation and Retirement Income Act passed under the previous Government uses a measure of wage growth to set the floor for New Zealand superannuation payments. That measure is average weekly earnings from a thing known as the quarterly employment survey. Also the Parental Leave and Employment Protection Act which was amended by the previous Government uses a measure of wage growth to increase the payment rate for paid parental leave. That measure is average weekly earnings from the quarterly employment survey. Average weekly earnings have gone up by 2.8 percent in the last year compared with inflation of 1.6 percent. Once again if the Greens and their friends are going to be consistent they should go out and tell superannuitants that they would intend to give them less superannuation from a Labour-Green Government because they are changing the way they measure wage growth in the New Zealand economy.Dr Russel Norman: Well then could the Minister tell the House how Statistics New Zealand has got it wrong when it says in itsUser guide for Statistics New Zealand’s wage and income measuresthird edition—the most recent edition—if you are interested in changes in earnings across time the labour cost index is a better measure than the quarterly employment survey? Can the Minister explain exactly how Statistics New Zealand has got it wrong and he has got it right?Hon STEVEN JOYCE: Well I can only quote Statistics New Zealand to the member and I suppose we could go on all afternoon if we liked but the labour cost index according to Statistics New Zealand measures as I say changes in salary and wage rates for a fixed quantity and quality of labour input. That is a statistical construct that determines inflation in the labour market. What it does not determine is how much people get paid because in fact the quality and quantity of their labour does not stay unchanged over a time period. They get promotions they change jobs—Hon David Parker: They work longer hours.Hon STEVEN JOYCE: —they work more hours—all those things. That adds up to their quarterly employment earnings which is reflected in the quarterly employment survey. If the member wants to ask another five supplementary questions we could save the House’s time if I just table the answers the same way.Dr Russel Norman: Given that the Minister thinks that he is right and Statistics New Zealand is wrong does he also believe that he is right and everybody else in New Zealand is wrong when most New Zealanders’ lived experience is that under this Government they have struggled to get ahead as prices have gone up and wages have not kept up with rising prices? That is exactly what the statistics produced by Statistics New Zealand show: the labour cost index is falling behind inflation.Hon STEVEN JOYCE: I am sorry; the member is simply wrong in this case and he really does need to go and get some advice. The simple reality of the situation is he is wrong on so many levels. Firstly wages have been going up. Real after-tax wages have been going up faster than inflation under this Government by some margin. Under the previous Government it might have looked like people’s wages were going up but as we all know the inflation was much higher. If the member cannot make a distinction between inflation and wages then we really do have a problem.