When Covid closed the borders, the economy replaced overseas workers with young New Zealanders. The latest jobs data suggests they’re now bearing the brunt of the rising unemployment rate – and that’s likely to have a lasting impact.
Many people suffer when an economic downturn occurs. Right now, the people most impacted by our struggling economy are the young. If you consult the data released by Stats NZ recently, the monthly employment indicators for June showed yet another fall in the number of young people in work. Since last year, the number of 15 to 24-year-olds filling jobs has fallen by more than 22,000 people, or 6%. The data appears to tell the story of an economy that used young people when the labour market was tight (ie when there are many unfilled vacancies) and is now in the process of leaving them behind.
2022 was a boom time for New Zealand’s youth in the labour market. Analysis undertaken by BERL using Statistics New Zealand’s monthly employment indicators finds that in May 2019, 111,000 15 to 19-year-olds were filling jobs. By December 2022, that number had grown by 52% – 170,000 people.
There is a significant degree of seasonal variation in the information, but essentially, the data shows a huge increase in youth employment between March 2021 and the end of 2022. The increase and decline in youth employment are not simply urban or rural phenomena. Significant youth employment growth took place in every region of New Zealand between 2019 and 2022.
The highest increase in employment was found in Hawke’s Bay, where a 60% growth occurred. The lowest increase was found on the West Coast, where 35% growth took place. In our two largest urban centres, Auckland and Wellington, 55% and 51% growth occurred respectively.
On August 1, 2022, New Zealand reopened its borders fully for the first time since the pandemic started. For every region except three (Otago, Tasman, and Marlborough), the opening of the border marks the point at which growth in youth employment starts to decline. Nationally, the number of jobs filled by 15 to 19-year-olds falls nearly every month after this point. Today, fewer 15 to 19-year-olds are in work than at any point over the past three years.
Looking at other age groups helps to demonstrate how unusual this trend in youth employment is. The number of jobs filled by those aged between 30 and 49 is at record levels. Even the number of jobs filled with those aged 65+ is 0.5% below its record peak.
The employment market for young people over the past three years has behaved like a rollercoaster, yet for all other age groups, it’s been a picture of calm.
This data is important for three reasons. Firstly, it suggests that during the Covid-19 pandemic, the economy replaced overseas employees with younger New Zealanders. These Kiwi workers now face losing their jobs with rising general unemployment. It also suggests that increased inward migration will see demand for youth labour fall away, risking returning New Zealand to the structurally higher levels of youth unemployment seen before the pandemic.
Secondly, many young people may have been sucked into work rather than training during the tighter labour market. That means they might have missed the opportunity to access tertiary education or an apprenticeship when leaving school. Now, with increased unemployment, they face a need to access retraining later in life. Accessing training now will likely be harder for them due to the ending of the first year fees-free, the recent decision to increase tuition fees by 6&, and the halving of support for apprenticeships in the 2024 budget.
Finally, it suggests that New Zealand is likely to need a plan for youth unemployment in the future. A plan that recognises that the easy drivers of employment growth for youth over the past few years have likely ended. A plan that understands the systematic disadvantage that groups such as Māori, Pacific people and disabled people face already in the labour market.
Internationally, the evidence suggests that the longer young workers stay away from work or education, the deeper the scarring impact on their incomes for the rest of their working lives. That’s not only bad for them individually, but it’s also a tragedy for us as a country. New Zealand already lags behind many other countries in terms of labour productivity. Without action to tackle that problem, we will be storing it again for the future.