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Published 27 June 2023 | 2 min read
Are we reaching a turning point in wage growth?
Wage growth in New Zealand may be nearing its peak, despite advertised salaries registering the fastest annual growth on record, according to recent data from SEEK NZ. The findings have raised concerns among small-to-medium managers and decision-makers in the country.
Analysing advertised salary trends
The SEEK NZ Advertised Salary Index (ASI) reveals that advertised salaries expanded by 4.7% in the year to the May 2023 quarter, marking a significant increase. However, a closer look at the data indicates a potential cooling down of salary growth. The quarter-on-quarter growth rate stood at one percent, continuing a downward trend since reaching its peak in May 2022.
Rob Clark, Country Manager of SEEK NZ, suggests that these figures indicate salary growth may be approaching a peak. "Although the year-on-year growth in advertised salaries is the fastest on record, we do see signs that salaries are starting to cool," Clark explained in a media release. "The ASI is a leading indicator of overall wages growth, which suggests wages growth may be nearing a peak in New Zealand."
Which industries are feeling the impact?
The slowdown in economic activity, coupled with rising interest rates, has impacted certain industries more than others. These affected sectors were also less influenced by minimum wage hikes. However, the Advertising, Arts, and Media sector experienced the strongest growth, with a seven percent increase in advertised salaries. Additionally, industries related to home building, including Design and Architecture (6.7%), Engineering (6.7%), and Construction (6.6%), also saw substantial growth.
Regional Variances
On a regional level, the ASI indicates that advertised salaries are growing at a solid pace across New Zealand. Canterbury recorded the fastest annual growth rate at 5.4%, followed by the South Island (excluding Canterbury) at 5.1%. Auckland experienced a 4.9% growth, while the rest of the North Island registered 4.7%. However, Wellington continued to lag behind other regions with a growth rate of 4.2%, largely driven by slow advertised salary growth for government roles. Despite the overall positive growth nationwide, Rob Clark pointed out that advertised salaries still fell behind annual inflation, which stood at 6.7% in March 2023 according to the Consumer Price Index.
Addressing the Gap
The data from SEEK NZ's Advertised Salary Index provides valuable insights for managers and decision-makers in New Zealand. It suggests that wage growth may be reaching its peak, despite the fastest annual growth in advertised salaries on record. While certain industries have experienced robust growth, the overall trend indicates a potential cooling down of salary growth. These findings call for proactive measures to address the gap between wage growth and the rising cost of living.
In response to these trends, managers and decision-makers should carefully consider their salary and compensation strategies. It is crucial to assess the economic conditions, market trends, and industry-specific factors impacting wage growth. Exploring alternative ways to attract and retain talent, such as offering non-monetary benefits, flexible work arrangements, and career development opportunities, can help mitigate the impact of slowing salary growth. Additionally, keeping a close eye on regional variations and ensuring competitive compensation packages are offered in all parts of the country can contribute to a well-rounded approach to wage management.
While wage growth in New Zealand may be approaching a peak, it is essential for managers and decision-makers to remain proactive and adaptive. By closely monitoring the evolving landscape, analysing industry-specific dynamics, and employing innovative compensation strategies, organisations can continue to attract and retain top talent while navigating potential challenges in the labour market.