Average Earnings Index
How we measure growth in pay
The Average Earnings Index (AEI) is an indicator of how fast earnings are growing in Great Britain. It is no longer the lead measure of short term changes in earnings, having been replaced by the Average Weekly Earnings Statistic in January 2010.
The Average Earnings Index will be discontinued after September 2010.
The AEI is based on information obtained from the Monthly Wages and Salaries Survey (MWSS). It is used to calculate annual rates of increase, based on the average of the seasonally adjusted index values for the latest three months compared with a year earlier.
Average earnings are obtained by dividing the total amount paid by the total number of employees paid, including those employees on strike and temporarily absent. The lead measure of change is the three-month average rate of increase. The index measures how earnings in the latest month compare with those for the last base year when the index took the value of 100. The current base year is 2000.
Indices are published for the whole economy, public and private sector earnings, and for manufacturing, services and private sector services. Series are presented including and excluding bonuses. Each of these indices are presented seasonally adjusted, together with annual growth rates. Until December 2009, these figures appeared in the Labour Market Statistics Bulletin. They now appear as an internet-only release one week after the Labour Market Statistics Bulletin is published, alongside a wealth of supplementary information.
Unlike the Average Weekly Earnings statistic, the AEI is not designed to measure levels of earnings. The AEI only covers earnings in Great Britain, as earnings information is not collected for Northern Ireland and regional data are not available.
Changes in the composition of the workforce (such as the proportion of the workforce employed full-time or part-time or in skilled or unskilled capacities) can affect the path of the index, but this is inherent in a measure of average levels of pay per employee rather than the average pay rate. No adjustments are made for changes in hours worked, notably overtime, although increases in average pay as a consequence of increased overtime will be correctly reflected in the index. Unlike the AWE, changes in the composition of the workforce by industry are not reflected in AEI.
Information on bonuses is provided by all respondents to the survey that pay them during the reference period. Bonus payments are recorded for the month in which they are paid, rather than for the period to which they relate. For example, an annual performance bonus paid at the end of a financial year may be recorded in the data for March or April, whereas the bonus is paid for work carried out over the whole of the financial year.
Bonus data are only available since May 1996 and therefore it is only possible to calculate growth in pay excluding bonuses since May 1997. In addition, the bonus data are subject to a discontinuity in the series. This is a result of a change in the survey questions on bonuses, introduced in February 1999. Data for the period proceeding that month are not comparable with those that follow it. Due to this discontinuity, the seasonally adjusted series excluding bonuses is available only from July 2000.
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