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Degrees of Separation in the New Zealand Workforce: Evidence from linked employer-employee data

Abstract

Objectives

Recently published analysis of messages sent over the Microsoft Messenger instant-messaging network has shown that the old maxim of six degrees of separation is not far from the truth. The idea is that, on average, you are connected by no more than six links to all other 6.7 billion people on Earth. These links can be through blood, friendship or an acquaintance – you know someone who is friends with someone whose sister is married to someone ... and so on. Using Statistics New Zealand's Linked Employer-Employee Dataset (LEED), this maxim is tested on a network of wage and salary earners in New Zealand.

Methods

This paper uses Statistics NZ’s Linked Employer-Employee Data (LEED) over the nine-year period April 1999 – March 2008 to create a 'knowledge network' of wage and salary earners in New Zealand. This network is then used to calculate the average shortest path between wage and salary earners, together with a range of measures which describe characteristics of this unique view of the New Zealand labour market.

Findings

The network of wage and salary earners in New Zealand displays attributes of a small-world network, with any two random people able to be connected within four steps on average. The largest connected component of the network encompasses over 98 percent of wage and salary earners and appears relatively resilient to node deletion. The network displays a high degree of cliquishness.

Conclusion

The LEED dataset provides a unique opportunity to observe the New Zealand labour market through a network 'lens'. The structure of this network has possible implications for the efficiency of knowledge creation and diffusion, and for policy analysis and development. The analysis presented here is nascent in nature and will hopefully stimulate more in-depth analysis and research.

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