Despite the economic slowdown, the labour market is holding up well and wages are up at the record rate.
The average hourly wage is now $24, up from $21.90 an hour 2 years ago. That’s a 9.6% increase. Take away 6.1% inflation and the average Kiwi worker is still 3.5% better off than two years ago. Considering the long-term average has been a 1% annual increase in wages above inflation and that in the 1990s wages went backwards for most, 3.5% in two years is impressive. despite the economy getting tougher this year, the average wage still grew 1.4% in both the March and June quarters.
The number of jobs bounced back in the June quarter, after falling in the March quarter. The number of jobs increased 2.1% in the last year, faster than the increase in the working age population (1%). It will be interesting to see how the unemployment numbers look when they come out later this week. Seeing as the number of people claiming the unemployment benefit continues to fall and the number of jobs continues to grow, we might see unemployment drop back lower, after it rose from 3.4% to 3.6% in the March quarter. Fears of unemployment blowing out beyond 5% may be exaggerated.
With the combination of increasing wages and more jobs means that, in total, Kiwis are taking in 8.8% more in work income than they were two years ago. That is helping to buffer our economy from the huge pressure of record oil prices and the international credit crunch.
Don’t forget that strong wages and employment are a result of government policy as well as economic factors. The minimum wage has been increased 17% in the last two years ($10.25 to $12), which is estimated to directly increase the wages of 300,000 workers and promote pay rises for another 300,000 who earn slightly above minimum wage. Good work rights have continued to help workers unionise, which helps them negotiate higher wage increases. If we choose to weaken those laws and let the minimum wage stagnate, Kiwi workers’ incomes will suffer.