§ Mr. Fieldasked the Secretary of State for Employment, pursuant to his reply on the retail prices index to the hon. Member for Mid-Sussex (Mr. Renton) 26W on 22 October, Official Report, c. 241–42, on what basis the monthly index of average earnings is compiled; to what extent it is a matter of judgment rather than measurement; what sources exist on the method of construction; and what recent changes have been made.
§ Mr. WaddingtonThe average earnings index is designed to provide an up to date monthly indicator of changes in average earnings. It is based on returns from a sample of just over 9,000 firms and organisations with a total employment of about 10 million.
The method of constructing the index and changes in its scope and coverage were described in the following issues of Employment Gazette: April 1963 (page 142), March 1967 (page 214) and April 1976 (page 350).
The method of compiling the basic index has not changed since 1976. It is essentially a matter of measurement rather than judgment, being based on detailed and representative quantitative information compiled on well established statistical procedures.
From this basic series, two others are derived to facilitate the assessment of trends. One is the seasonally adjusted index which was introduced in 1980 as described in Employment Gazette for October 1980 (page 1132). The other is the "underlying trend" index, which excludes from the seasonally adjusted index the estimated effects of temporary fluctuations, from such factors as large payments of back pay, which tend to obscure the trend. This was introduced in 1981 as described in Employment Gazette for April 1981 (page 193). Both these series aim to be a measure, on the basis of regular and defined estimation procedures, rather than a matter of judgment, but inevitably have less precision than the basic series from which they are derived.