The COVID-19 pandemic in Ireland has had a significant impact on the Earnings and Labour Costs (ELC) release. Preliminary estimates for the second Quarter (Q2) of 2020 and Final estimates for Quarter 1 (Q1) 2020 are being published tomorrow, 08 September 2020. The aim of this Technical Note is to outline to ELC users the impact of COVID-19 on the ELC release being published tomorrow.
The ELC release is published based on data collected by the Earnings, Hours and Employment Costs Survey (EHECS). The EHECS collects data from enterprises with three or more employees in the NACE Rev 2 Industrial Sectors B–S inclusive.
The following are the groupings of NACE industrial sectors that are used when presenting ELC data:
Sector Group Sector Name
G Wholesale & retail trade: repair of motor vehicles & motorcycles
H Transportation & storage
I Accommodation & food services activities
J Information & communication
K-L Financial, insurance & real estate activities
M Professional, scientific & technical activities
N Administrative & support services activities
O Public administration & defence
Q Human health & social work activities
R-S Arts, entertainment, recreation & other service activities
All enterprises with 50 or more employees and a sample of those with 3 to 49 employees are surveyed as part of the EHECS each quarter.
The information collected from an enterprise as part of the survey includes:
Imputation is carried out for non-responding enterprises with 50 or more employees. Where an enterprise responded in at least one of the previous four quarters ratio-imputation is used to estimate figures for that enterprise for the current quarter. For enterprises that did not respond in any of the previous four quarters a stratum average imputation method is used to estimate the missing variables. These estimates are based on respondent enterprises of a similar size and activity.
For enterprises with 3 to 49 employees inclusive, a weighting factor (the reciprocal of the sampling fraction) is used to weight the estimates up to the total population for both employees and enterprises. Enterprises with 50 or more employees are assigned a weight of 1 as the EHECS sample consists of a census of these enterprises.
All enterprises' data are contained in the quarterly dataset which is tabulated to produce the aggregates which are published in the ELC quarterly release. Results for the most recent quarter are published initially as “Preliminary” estimates and are revised and relabelled as “Final” when the next quarterly release is published three months later.
During Q2 2020, two major schemes were being operated by the Government to support those whose income from employment had been affected due to COVID-19.
The COVID-19 Pandemic Unemployment Payment (PUP) scheme, which is administered by the Department of Employment Affairs and Social Protection (DEASP), operated to provide a social welfare payment to those who lost their employment because of the COVID-19 crisis.
The Revenue Temporary Wage Subsidy Scheme (TWSS) was also operational during Q2 2020 enabling employees, whose employers are affected by the pandemic, to receive significant supports directly from their employer through the payroll system. The scheme was expected to last 12 weeks from 26 March 2020 but has now been extended until the end of August 2020 (See Revenue website for more information on the TWSS scheme). As of the 01 September 2020, the TWSS has been replaced by the Employment Wage Subsidy Scheme (EWSS).
The Central Statistics Office (CSO) have engaged extensively with both the Revenue Commissioners and the DEASP to understand the mechanics behind the various income supports. The CSO have also engaged with Eurostat, the European statistical agency, to determine the statistical treatment of these income supports for the purposes of the collection of data for EHECS and the reporting of the related outputs.
Any payments related to the PUP scheme are not collected by EHECS or recorded in the ELC release. Such payments are paid by DEASP to a person who has lost income from employment and where no attachment in the form of an employment contract is maintained between the employer and employee. Eurostat has confirmed that such payments should not be recorded in labour costs statistics.
TWSS payments are recorded as follows in the ELC release:
Data for Earnings, Hours and Employment Costs Survey (EHECS) is collected quarterly at enterprise level. Questionnaires for Q2 2020 were issued to enterprises at the end of June 2020.
Due to the unprecedented emergency, Government measures were put in place in response to COVID-19, which resulted in the sudden closures of non-essential businesses at the end of Q1 2020. These restrictions were ultimately extended, with some sectors being affected for some or all weeks of Q2 2020. These restrictions and closures affected the ability of enterprises to respond during the Q2 2020 EHECS data collection period.
The overall response rate for the Preliminary estimates for ELC Q2 2020 is 42%. This contrasts with the comparable response rate for Preliminary estimates of 53% for ELC for Q2 2019 and of 43% for ELC for Q1 2020. Because of the low response rates, 51.7% of enterprises required imputation for Q2 2020.
Enterprises engaged with the CSO to outline their difficulties in accurately recording the government income support measures on their EHECS return for Q2 2020. In relation to enterprises included in the reporting of ELC results, approximately 57% of enterprises and 26% of employments benefitted from the TWSS at some point in Q2 2020.
Caution is therefore advised in relation to drawing inferences from the Preliminary estimates for Q2 2020.
We understand the difficulties enterprises faced in both accessing and sending us the required data and acknowledge the efforts made by our survey respondents during this time. The CSO is hopeful that businesses who have been unable to submit their Q2 2020 return yet will be able to provide this data in the coming weeks for inclusion in the Q2 2020 Final ELC Release, scheduled for publication in November 2020.
Data in relation to changes in the composition of employment with respect to the individual characteristics of employees (e.g. age, education or gender), employment types (e.g. permanent or temporary contracts) and sectoral shifts are not collected by EHECS. When considering the change in earnings, it should be noted that there is a compositional effect due to the significant changes in employment in certain sectors. The composition of the labour market in Q2 2020 is very different to the composition of the labour market in previous quarters including Q2 2019, against which the annual changes are measured. There were significantly fewer employments in certain sectors in Q2 2020 and a significant number of employments being supported by TWSS in Q2 2020.
The Earnings Analysis team within the CSO have engaged with Eurostat and colleagues from the Methodology division within the CSO to determine what changes were required to the usual methodology that is required for the ELC release due to the impacts of COVID-19.
Definitions of the variables included in the ELC release are available in the background notes for the ELC release which are also available separately here.
Registered employment refers to the employment of respondent enterprises at the end of the reference quarter.
Average employment refers to the average of the quarters’ opening employment and closing employment.
Average weekly earnings are calculated by dividing the total earnings for the quarter by the average number of persons employed during the quarter and then dividing that by 13 (the number of weeks in a quarter).
Average weekly paid hours are calculated by dividing the total paid hours for the quarter by the average number of persons employed during the quarter divided by 13 (number of weeks in a quarter). Total paid hours are the sum of regular paid hours and overtime hours, where regular paid hours are the normal working hours of an employee and not the hours actually worked.
Average hourly earnings are calculated by dividing the total earnings for the quarter by the total paid hours for the quarter.
The ELC release presents aggregate results which are based on enterprises’ survey returns. Many enterprises have engaged with the CSO to advise that they have difficulties recording TWSS payments as wages, refunds or both. As a result, EHECS data was linked with an administrative data source from the Revenue Commissioners that contains information about the TWSS scheme to allow for the correction of reporting errors. The linkage and analysis were undertaken by the CSO for statistical purposes in line with the Statistics Act, 1993 and the CSO Data Matching Protocol.
Registered employment refers to the employment of respondent enterprises at the end of the reference quarter. For non-respondent enterprises and enterprises not in the sample, registered employment refers to the employment from the Business Register. The Business Register bases enterprise employment on data from the latest revenue P35 files. The Business Register has a lag of between 12 and 18 months between the current quarter and the latest revenue P35 file and is therefore not a suitable measure of short-term trends in employment. Thus, sectoral registered employment is adjusted to reflect the trends of the Labour Force Survey (LFS) sectoral employment. The LFS defines employment in accordance with International Labour Organisation (ILO) definitions and as a result the LFS, and therefore ELC, may not fully capture the impact of COVID-19 on the labour market.
Average employment is the variable used as the denominator in calculating average earnings per person and average paid hours per person.
Government measures put in place in response to COVID-19 related to some or all weeks of Q2 2020 for a number of sectors. For example, there was a phased return to work in the construction sector from 18 May 2020 and enterprises operating as restaurants were permitted to reopen on 29 June 2020.
Across and within the sectors, the impact of the COVID-19 crisis was experienced very differently. Within Q2 2020 there was increased volatility in the labour market with an increased churn within certain sectors for the duration of the quarter, over and above the churn evident from the last day of Q1 2020 and the first day of Q2 2020. The EHECS survey, capturing the quarters’ opening and closing employment, is not designed to account for such churn in employment in the intervening weeks of the quarter.
As a result, in certain sectors EHECS overestimated the average employment for Q2 2020, resulting in deflating weekly earnings and hours and inflating hourly earnings. An average employment factor was created for NACE sectors 41 (Construction of buildings), 42 (Civil engineering), 43 (Specialised construction activities), 55 (Accommodation), 56 (Food and beverage service activities), 93 (Sports activities and amusement and recreation activities) and 95 (Repair of computers and personal and household goods). This factor was calculated and applied to average employment to account for the increase in the average number of employees availing of PUP during Q2 2020 in these economic sectors.
Total paid hours are the sum of regular paid hours and overtime hours, where regular paid hours are the normal working hours of an employee. EHECS does not collect information on hours actually worked. The total number of paid hours for the quarter for all employees of an enterprise are reported in EHECS, being an aggregate of full-time hours, part-time hours, contracted hours and hours of hourly paid employees. The aggregated hours also encompass the hours of those employees who were supported by TWSS.
The Labour Market Insight Series 1 Q2 2020 which was published last month alongside the LFS results for Q2 2020. An analysis of total usual hours worked and total actual hours worked was undertaken for that bulletin. For NACE sector 55 total paid hours were benchmarked against the reduction in total usual hours worked as reported in the LFS.
As advised above, many enterprises have engaged with the CSO to advise that they have difficulties recording TWSS payments as wages, refunds or both for their EHECS return in Q2 2020. Because of the difficulties encountered for the EHECS survey and the impact of those on the ELC release for Q2 2020 the CSO have undertaken an analysis of administrative data for Q2 2020 from the Revenue Commissioners. The CSO will be presenting some high-level results of that analysis in the second iteration of the Labour Market Insight Series which will be published alongside the ELC release tomorrow. This bulletin will include some sectoral analysis to quantify the contribution of TWSS on employments and earnings in Q2 2020 as well as the percentage change in the volume of all employment and earnings by sector between Q1 2020 and Q2 2020.
The Earnings and Labour Costs Q2 2020 (Final) and Q3 2020 (Preliminary Estimates) release is currently scheduled to be published on 25 November 2020 and, as usual, any amendments to the schedule will be signalled on the CSO release calendar.
Previous reviews of Preliminary and Final estimates indicated that Preliminary figures can be accepted as a suitable indicator for quarterly trends. Analysis of the results for individual NACE industrial sectors highlighted that the change from Preliminary to Final estimates was broadly in the range of plus or minus 5%. However, response rates can significantly impact on the quality of data at the sectoral level.
In relation to Preliminary estimates for Q1 2020, while response rates were lower than in Q1 2019, the labour market was unaffected for the majority of the quarter. The change from Preliminary to Final estimates remained in the range of plus or minus 5%.
Government measures put in place in response to COVID-19 related to some or all weeks of Q2 2020 for some sectors of the economy. Given the increased volatility in the labour market in Q2 2020, it is anticipated that, because of the increased employment churn, lower response rates and difficulties enterprises had recording income support schemes, there will be a more significant change between the results being published as Preliminary tomorrow for Q2 2020 and those published as Final later this year.
We understand the difficulties that enterprises have faced and are continuing to face. The CSO wish to thank all survey respondents who supplied their data and engaged with the CSO in relation to the difficulties they faced both sending data and recording the information required. We appreciate the continuing efforts of survey respondents to get information to us and it is by collecting survey information that we will be able to report on the effects of COVID-19 on our economy.
If any users have any questions or need any clarification in relation to anything outlined in this Technical Note or the Earnings and Labour Costs release, please contact us at firstname.lastname@example.org
For information, this Technical Note was issued on 07 September 2020