Media uses wrong data to reach wrong conclusion … again

Wages not keeping up with inflation” that is the headline we get here.  While I’m sure that will get a lot of people wound up and complaining about something, its a load of cr*p.

Actually looking through the numbers, we see that gross wage growth is roughly inline with the growth in consumer prices excluding GST.  Why do this?  Well the increase in GST was met with a corresponding cut in income taxes, so that NET wage growth is that much larger than gross wage growth.

But lets ignore this, and lets focus on what they said:

That took annual wage inflation to 1.9 per cent … well-short of the 5.3 per cent annual pace of inflation.

Looks like a big difference.  And that is what you can do when you cherry-pick and compare incomparable data series to fit the story you want to write.  Let me explain step-by-step.

The 1.9% figure comes from the Labour Cost Index – this is a quality adjusted index that captures growth in wages that are unrelated to the type of job or changes in productivity.  This doesn’t tell us anything about income gains for people – in fact, I use this as a measure of inflation expectations not wage growth.

If we want wage growth we should probably look at … wage growth figures right.  So, average hourly earning according to the Quarterly Employment Survey were up 3.1% from a year earlier.  Taking into account hours have risen, total wage income (excluding sole traders and agriculture) was up 4.7% from a year earlier.

Given that the changes in tax cancel each other out we have to ignore the increase in GST when talking about the cost of living (or include the tax cut in the wage growth figure above).  As a result, labour income growth has well beaten increases in the cost of living.

Furthermore, again inflation is a whole different concept – however, I’m not going to ping them too hard for using that term here.  What I will ping them about is the fact that:

  1. They didn’t understand (or wanted to misrepresent) the data and used the wrong series
  2. They didn’t understand (or wanted to misrepresent) the data and inappropriately included/excluded tax changes

Overall, both of these “adjustments” were to make the data fit their narrative – which is a load of bullsh*t.

How about writers either learn what the data is before writing this sort of thing – or talk to someone (either at Statistics NZ or an economist) who knows.  Then they wouldn’t write factually false pieces like this.