Calculation of Labour Cost Index and automation of process

Calculation of Labour Cost Index and automation of process Boro Nikič Miran Žavbi Statistični urad Republike Slovenije Statistični dnevi 2004, 8-10 november, Radenci

What is Labour Cost Index? (1) Data onLabour Cost in Europian Union is followed by: • Labour Cost Survey, which is carried outevery four year • Quarterly Labour Cost Index

What is Labour Cost Index? (2) • Short time indicator of movement of labour cost • Indicate quarterly movement of the most important components of labour cost for the time when Labour Cost Survey is not carried out • Methodology is based on chained Laspreyres index and is prescribed by regulations of Europian Union

History of Labour Cost Survey(1) • Labor Cost Survey (LCS)in the some countries of the EU started in themiddle of 60-th and it was carried out every three years • Since 1970the similar Survey, which includedbanking, insurance, retail trade and from 1974 alsothe wholesale, was parallely carried out • In 1978 both Surveys were joined and from 1984 period of survey was changed (every four years)

History of Labour Cost Survey(2) • In 1988 all twelve members of EU carried out Labour Cost Survey • The last LCS was carried out in 2000. In that year Europian Union adoptedregulation which determine methods of collecting and dissemination of data. Regulation was obligatory for all member of EU and recommended for EU candidates.

Historyof Labour Cost Survey(3) • Users (main EU institutions) were not fullysatisfied and requested data for short time period • In 2002 new regulations byEuropian Union for quarterly Labour Cost Index (LCI) wereadopted

Some of themost important provisions of the regulations • Methodology of LCI is based on chained Laspeyres index • Various sources of data are allowed (e.g. new survey, registers, administrative data) • Components for which LCI has to be calculated are determined • Sections A and B of Standard Classification of Activity are excluded from survey • Index series has to be calculated from 1996 (base year is 2000)

Sources used in our Statistical Office • Statistical surveyMonthly Report on Earnings and Persons in Paid Employment in Enterprises, Companies and Organizations – ZAP/M • Daily data from Administration of the Republic of Slovenia for Public Payments (PPA) • Register of Enterprises with transaction accounts • Estimations of average number ofhours actually worked

Compilation of the sources From those sources, the data are compiled and inserted in the database. Main variables in the database are • Gross earnings (ZAP/M) • Bonuses (included in Earnings) • Taxes (PPA) • Social Security Contributions (PPA) • Number of paidEmployees (ZAP/M)

Estimations of average number ofpaidhours actually worked • Sources: Statistical surveyMonthly Report on Earnings and Persons in Paid Employment inEnterprises, Companies and Organizations; Labour Force Survey (LFS) • Ratio of number of actually worked hours (LFS) and number of usually worked hours (LFS) is multiplied by number of paid hours (ZAP/M)

The relative difference between estimated hours worked and hours worked collected from the LCS for the year 2000

Imputation of missing values (1) • The data for some of the enterprises from the target population (private enterprises with one or two persons in paid employment, individual private entrepreneurs and persons employed by them, self employed and farmers) is not available. We estimate that the overestimation due to the missing values is approximately 5%. • Data for enterprises are imputed only for Taxes and Social security contributions. Imputation is carried out by groups of activity using following method:

Imputation of missing values (2) • In each group the variables Number of employees and Gross earnings are standardized and Euclidian metric between these two variables is defined • For every unit which doesn't have data on taxes and/or social security contributions the nearest neighbor is founded among units who have data for those variables • When the nearest neighbor is found for a certain unit, two rates are calculated: rate of TaxesandEarningsand rate ofSocial security contributions and Earnings • Imputed values for missing data are calculated by multiplying that Gross earning by those two rates

Imputation of missing values (3) Rate of imputed data for the years 2000-2003 for the sections of activities C-O (in %)

Laspeyres formula used for calculation

Chained LCI formula

Calculated indices • LCI_WAGLabourCostIndex- wages and salaries • LCI_OTHLabourCostIndex- other labour coststhanwages and salaries • LCI_TOTLabourCostIndex- total labour costs • LCI_TXBLabourCostIndex- total labour costs excluding bonuses

Automation of process of calculation of LCI • Monthly collected data from various sources are matched and stored in Oracle database • Missing data are imputed using program package SAS • LCI indices for current quarter are calculated (SAS) and stored in Excel database • Seasonally and working day adjusted series are calculated by the Tramo/Seats

Plans for the future In thefuture more emphasisshould be put on followingthe different aspects of quality. The plan is to provide Standard Quality Reportfor LCI every year

Calculation of Labour Cost Index and automation of process