5. Supply of Labour

The three sources of potential supply of workers into the labour market are the unemployed, New Zealanders entering (or re-entering) the labour force and migrants.

Population and labour force growth

The working age population (everyone aged 15 years and over) grew by around 1.4% in the year to September 2009, slowing from a peak of 1.7% annual growth in December 2006. Although the labour force (those with a job or actively seeking a job) grew by 0.6% in the year to September 2009, a fall in the rate (driven mostly by males) at which people participate in the labour force saw a large rise in the number of working-age people not in the labour force. In the year to September 2009, those not in the labour force grew by 3.2%.

Movement into study

Over the past year there has been a large increase in the number of people studying, however, this growth has slowed in recent months. In the year to September 2009, those not in the labour force due to being engaged in study increased by 3%. This pattern of workers leaving the labour force to study also occurred in past recessions. The movement of workers out of the labour force during a recession, is because of what is referred to as the ‘discouraged worker effect’ - as individuals find it increasingly difficult to find employment, they exit the labour force.  

Over time, the proportion of the population with post-school qualifications is increasing and this is expected to continue. Between the 2001 and 2006 census, the growth in the number of people with post-school qualifications was 4.8%.

Department of Labour projections indicate that the average qualification level in occupations will increase for all skill levels² in the future. The percentage of highly skilled workers with degree or higher qualifications is forecast to increase from 47% in the 2006 census to 55% in 2013. The percentage of skilled with vocational qualifications is expected to increase from 41% to 48%. The share of elementary level workers holding vocational or higher qualifications is expected to increase from 31% to 35%.

Training rates

In 2008, the occupation groups with the highest training rate (percent of new graduates relative to current employment) were forestry workers (22%), special education teaching professionals (17%), and safety and health inspectors (16%). In contrast, the groups with the lowest training rates for 2008 were leather goods makers (2.7%), electricians (2.6%), and glass cutters (2.6%). Most occupations experienced a decline in training rates between the 2007 and 2008 school years, with food products machine and trades workers seeing the largest declines followed, interestingly, by safety and health inspectors. This decline in occupational training rates reflects a twenty-two percent decline in level 1 and above completions overall from a five year peak in 2006 (driven by a recent decline in level 1-6 qualifications).

Unemployed workers

The unemployment rate rose to 6.5% in September 2009, up from 3.5% in December 2007. As a result of the economic downturn, the unemployment rate is expected to continue rising to mid-2010. 

Unemployment and qualifications

In September 2009 the unemployment rate for those with no qualifications (10.7%) was well above the total unemployment rate and had risen strongly from 7.5% in September 2008. While the rate for those with school qualifications rose by only 3.9 percentage points (to 8.1%) in the year to September 2009, the post-school qualifications rate increased by only 1.3 percentage points (to 6.4%). The unemployment rate was much lower (4.0%) for the most qualified workers – those with both post-school and school qualifications. This shows that those with higher qualifications are retaining employment better in the current economic climate. Table 3 summarises this information.

Table 3: Unemployment rate by qualification level, March 2009

Qualifications	Unemployment rate, March 2009	Unemployment rate, March 2008
No Qualifications	10.7%	7.5%
School Qualifications	8.1%	4.2%
Post-school Quals Only	6.4%	5.1%
Post-school & School Quals	4.0%	2.6%

Source: HLFS, Statistics New Zealand

Unemployment and occupations

The number of people unemployed rose for all broad occupations in the year to September 2009.  This is the number of people seeking employment in an occupation and so is an indicator of labour market supply, but does not indicate the suitability of this supply. The biggest rise in unemployment was for those seeking plant and machine operator positions followed by legislators and professional positions (occupations at both ends of the skills spectrum). The smallest increases were for sales and service workers, however, this occupation had the highest unemployment rate which could indicate that the unemployed seeking other occupations after being unable to find a job in their preferred area.

Net migration is increasing

Immigration is a key source of future supply to the labour market and to the skills pool. The 2006 Census tells us that 60% of the workforce growth from 2001 to 2006 came from people born overseas. Almost all workforce growth for 30 to 49 year olds over this period was due to those born overseas.

The current economic climate is expected to encourage migration of highly skilled professionals back into New Zealand. There has also been a noticeable slow down in the number of New Zealanders leaving. There is a large pool of kiwi skilled workers overseas – according to the OECD in 2006, 25% of NZ born graduates were overseas.

Recent research by the Department of Labour also suggests that New Zealand has less potential to use highly skilled migration compared with Australia. By using historical employment growth and the data we have on migration into New Zealand, it appears that one in six highly skilled workers could potentially have been filled by migrants, compared with one in three for Australia. This potential for migrants to fill skilled jobs is also lower in New Zealand, however, for semi-skilled and elementary level positions this number is lower.

Between 2001 and 2006 there was a large increase in the percentage of migrants holding managerial and professional positions (up from 12.4% in 1996 to 19.6% in 2006 in comparison to New Zealand born which increased from 14.0% to 16.3%). The percentage of migrants in managerial or professional occupations was therefore higher than the New Zealand born equivalent in 2006. Migrants were also less likely to be employed in technical or trades occupations in 2006. Some of this can be explained by New Zealand’s selection of migrants, and it has also been found that earlier migrants were more likely to fill these managerial and professional roles.

Overall, there were 18,600 more permanent and long term arrivals than departures in the year to October 2009, up strongly from a net inflow of 4,700 in the year to April 2008. Most of the increase in net migration has been due to a decrease in departures from New Zealand.

There was a large increase in net migration for professionals in the year to October 2009. Migration data indicates that this has been driven by a larger inflow of teaching professionals. Net migration for semi-skilled workers also grew in the year to October 2009. In general, there has continued to be positive highly skilled net migration (arrivals-departures), as demonstrated in figure 2 below.

Figure 2: Net migration by skill level, 2004-2009

Source: PLT data (Statistics New Zealand) and Employment Estimates (Department of Labour)

Data table for Figure 2

Supply is needed to fill the gap left by retiring workers

One factor that lowers supply of workers (particularly skilled workers) is the effect of retirement and movement out of occupations into other occupations or out of the labour force.

The Department of Labour uses a measure called ‘net replacement demand’ to measure this effect by occupation. Net replacement demand calculates the percentage of workers in an occupation that will need to be replaced per year due to movements out of an occupation (due to retirement or occupational shifts).

Occupations with the highest net replacement demand rates and forecast positive employment growth include physicists, chemists and related professionals, legislators and secondary teaching professionals. These occupations are the ones that will require additional supply to keep employment at the same level in the future, and on top of this will require supply to fill the additional demand.

 

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