“Overview of ECB negotiated wage rate indicator”

1. “Overview of ECB negotiated wage rate indicator” Andrew Kanutin European Central Bank – DG Statistics CAWIE Workshop,Brussels, 29 November 2012

2. Overview • Why is the ECB interested? • Main wage indicators used in ECB • Definition and compilation • Current data

3. Why? - ECB primary mandate • Primary objective is to maintain price stability • “Price stability is defined as a year-on-year • increase in the Harmonised Index of Consumer • Prices (HICP) for the euro area of below, • but close to, 2% over the medium term”

4. Why? - Where labour costs fit in

5. Indicators used • Currently, three main indicators of labour costs and wages exist for the euro area: • Hourly Labour Cost Index (LCI) • - quarterly data, about t+75 days • Compensation per Employee (CPE) • - quarterly data, about t+90-105 days • Indicator of Negotiated Wage Rates (INWR) • - monthly & quarterly data, about t+50 days, therefore most timely, also forward looking

6. Definition of INWR The direct outcome of bargaining between social partners. As a general rule excludes: bonuses, overtime & other individual compensation not linked to collective bargaining.

7. Compilation • Monthly euro area indicator produced when 80% underlying data available (in practice normally > 90%) • DE, FR, IT are key for euro area release • Quarterly indicator released to public • Breakdowns excluding and including one-off payments (others examined but not enough source data).

8. One off-payments • High volatility and increased use of one-off payments influence national and euro area series • Target definition of the ECB negotiated wage indicator excludes bonuses, overtime and other compensation that is not the result of collective bargaining at the centralised/union level • However…data availability issues

9. Data

10. Pro’s + Con’s • Pro’s: • Timely • Leading indicator • Forward looking • Con’s: • Lack of harmonisation • No breakdowns • Coverage issues (e.g. FR, SK proxy indicators) • Union penetration / coverage • Changes centralised vs. localised bargaining

11. Thank you for listening!