National Statistical Office Real Wage Mess-up

The National Statistical Office (NSO) is drawing much public criticism after it was discovered that they have miscalculated the real wage increase rate – an important reference index - for the past 11 months while the office was putting together the monthly report `Industry Activity Movement`.

The NSO stated on September 6, ``Consumer price should be the basis for calculating real wage increase rate but due to the official`s mistake, the producer price was used as the basis between May to September last year and last year December to May this year for a total of 11 months, resulting in statistical error.``

Due to the error, last year`s real wage increase rate stopped at 5.6 percent but the statistics report cited 6.8 percent which is 1.2 percent higher than the actual rate.

The NSO reported in September of last year that the rate rose 1.1 percent when in fact it declined 0.3 percent, and reported rises in rates when it actually fell four times.

Furthermore, the NSO behaved in a more unsatisfactory manner by initially announcing that that they made the miscalculations over a 13-month period and then changing the number to 11 months.

Park Hwa-Soo, head of NSO Economic Statistical Department, explained, ``The mistake happened because the official in charge changed last year. We did not deliberately make up the statistics. We found out in August which determines the June statistics and we announced it as soon as we found out.``

One source in a nongovernmental economic research institute observed, ``This incident reveals that there is a hole in the management of national statistics. When you report a rise in real wages by using producer prices during the months when the rates fell, it is hard not to suspect that they did this deliberately.``

The index shows the actual purchasing power of wage earners by dividing the nominal wage by the consumer price number. The average producer price is usually lower than the consumer price. Consequently, calculating real wages by using producer prices as the base will yield a higher wage than the real level.

yhchoi65@donga.com