Sluggish wage growth shows power still in bosses' hands

Wage growth remained sluggish in the first three months of the year.

Private sector ordinary time wage rates in Statistics New Zealand's labour cost index (LCI) rose 0.4 per cent in the quarter, making 2 per cent for the year.

The quarterly increase was down from 0.6 per cent in December, but the annual increase was up from 1.9 per cent. It had troughed at just 1.3 per cent a year ago.

A broader measure which includes the public sector and overtime rates rose 0.5 per cent for the year - unchanged from the previous two quarters - for an annual increase of 1.9 per cent.

Of the wage rates surveyed, 56 per cent had increased over the past year, the highest proportion for two years.

By contrast a year ago 56 per cent had not increased over the previous year.

"Bargaining power is still largely on the side of employers, but the picture is changing fairly quickly,"ANZ economist Sharon Zollner said.

Among the rates which did rise the median increase was 3 per cent and the average rise 3.5 per cent - the lowest for 10 years.

The LCI measures changes in the rate of pay for the same quantity and quality of labour. Increases arising from promotion or service increments, or otherwise relating to the performance of an individual, are not included.

The unadjusted index, which leaves them in, rose 0.7 per cent for the quarter and 3.9 per cent for the year, or 0.6 per cent and 3.6 per cent respectively when the public sector is included.

"Overall, the data points to a gradual recovery in wage growth from very subdued levels," ASB economist Jane Turner said.

"Wage growth has picked up from the rapid deceleration seen a year ago, as firms controlled wage costs during the recession. Nonetheless, the patchiness of the economic recovery and subdued profitability are continuing to weigh on wage growth."

Meanwhile, the quarterly employment survey, released yesterday, recorded a rise of 2.6 per cent in average hourly earnings compared with the March quarter last year.

When combined with a 2 per cent increase in paid hours that increased gross earnings by 4.6 per cent from year-ago levels.

It is the strongest annual increase in gross earnings since September 2008, but compares with rates above 4 per cent prevailing between mid-2005 and mid-2009.

CREEPING UP

0.4pc rise in private sector wages in first quarter.

2pc rise for the year to March.