Average earnings index

The average earnings index (AEI) is experimental and is calculated by the ONS.

TheGuardian newspaper states that the ONS is considering replacing the AEI with the AWE as the national statistic for wages in 2008; which may be a serious mistake.

The Guardian is convinced that there is not enough data in both series from the lower end of the wage distribution. These exclusions mean that the AWE and AEI are not random samples of workers in the way that the Labour Force Survey is. The monthly wages and salaries survey, which is the data source for both measures, is a survey of 8,500 firms with 20 or more employees, and thus not only excludes workers in small firms but also excludes the self-employed, who account for approximately 13% of the workforce.

This is important, as the wages of those in the smallest firms in Britain tend to be particularly flexible downwards in the face of changes in labour market conditions. Furthermore, it tends to be the least skilled, who are disproportionately located in small firms, who gain the most in booms and lose the most in slumps.

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