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National Labour Force Projections: 2006(base)–2061 update
Embargoed until 10:45am  –  25 May 2010
Commentary

Background 

This release contains updated 2006-base labour force projections for New Zealand. These supersede the 2006-base national labour force projections released in May 2008. The new projections have the estimated resident population in the labour force at 30 June 2006 as a base, and cover the period to 2061 at one-year intervals.

Detailed projection results, including projections for individual years and by single-year of age and sex, are available from Statistics New Zealand (email demography@stats.govt.nz or phone toll-free 0508 525 525).

The labour force comprises people aged 15 years and over who regularly work for one or more hours per week for financial gain, or work without pay in a family business, or are unemployed and actively seeking part-time or full-time work.

The projections are neither predictions nor forecasts. They provide an indication of possible future changes in the size and composition of the labour force. While the projection assumptions are formulated from an assessment of short-term and long-term demographic trends, there is no certainty that any of the assumptions will be realised. 

What has changed from the previous 2006-base projections?

National labour force projections are updated every 2–3 years (on average). These national labour force projections have been updated to incorporate the latest demographic information, notably the 2009-base national population projections (released 27 October 2009).

Compared with the previous 2006-base national population projections (released 24 October 2007), mid-range series 5 of the 2009-base national population projections assumes higher fertility, higher mortality, and higher net migration in the short term. The projection assumptions for the national labour force projections incorporate these changes. The combined effect of these changes with updated labour force participation rates is that in 2061 the new labour force projections have the total labour force at 3.00 million according to series 5M. By comparison, the previous projections had the total labour force at 2.79 million in 2061.

Which projection series should I use?

Nine projection series have been produced to illustrate a range of possible scenarios using different combinations of fertility, mortality, migration, and labour force participation assumptions. Users can make their own judgement as to which projection series is/are most suitable for their purposes. However, at the time of release, Statistics New Zealand considers mid-range projection series 5M to be the best indication of future labour force changes. Series 5M is consistent with mid-range series 5 of the national population projections (2009-base, released October 2009). The analysis in this release is based on series 5M unless otherwise stated. All projection data have a reference date of 30 June.

    Table, alternative projection series

Among the projections, series 1L uses low labour force growth assumptions and projects the lowest labour force throughout the projection period. In contrast, series 9H uses high labour force growth assumptions and projects the highest labour force throughout the projection period.

Graph, alternative labour force projection series 

Total labour force

The total labour force is projected to rise from an estimated 2.24 million at 30 June 2006 to 2.75 million in 2031 and 3.00 million in 2061 (series 5M, which assumes medium fertility, mortality, and labour force participation, and a long-run annual net migration of 10,000). Series 9H, which assumes high fertility, low mortality, high labour force participation, and a long-run annual net migration of 15,000 people, projects the highest labour force of the nine alternative series. Under this projection, the labour force would reach almost 3.00 million in 2031 and 3.59 million in 2061. Series 1L, which assumes low fertility, high mortality, low labour force participation, and a long-run annual net migration of 5,000 people, yields the lowest labour force in 2031 (2.51 million) and 2061 (2.46 million).

Male and female labour force

The male labour force was 0.97 million in 1991, 1.07 million in 2001, and is projected to increase from 1.20 million at 30 June 2006 to 1.30 million in 2012, 1.40 million in 2022, and 1.50 million in 2035. With labour force participation rates remaining constant (after 2051), the male labour force will grow at a slowing rate, reaching 1.64 million in 2061.

The female labour force stood at 0.75 million in 1991 and reached 0.89 million in 2001. The female labour force is projected to exceed 1.2 million in the late 2010s, compared with 1.04 million in 2006. The female labour force would grow only slightly from the 2020s, reaching 1.30 million in 2040 and continuing to 1.36 million in 2061 assuming labour force participation rates remain at 2051 levels.

Labour force growth

All projection series show a slowing of growth over the projection period. From 2011, the oldest baby boomers will reach age 65 years and will begin to retire from the labour force in significant numbers. The youngest baby boomers will reach 65 years in the year 2030. From the early 2020s, only small increases in the size of labour force are expected as the number of people retiring from the labour force approximates the number of new entrants.

Future growth in the labour force is expected to be lower than the relatively large increase of 270,000 between 2001 and 2006, partly due to the increasing proportion of older people who are less likely to participate in employment, and partly due to lower levels of net migration. With an average annual growth rate of 0.5 percent over the 2006-61 period, the labour force is projected to increase by 170,000 from 2.24 million in 2006 to 2.43 million in 2011. Further growth of 117,000 is projected between 2011 and 2016. However, subsequent growth continues to decline for the remainder of the projection period, with growth of only 25,000 projected between 2056–61.

Graph, change in labour force 

Age structure

The labour force is projected to continue ageing. Half of the labour force was aged over 36 years in 1991. The median age (half of the labour force is older, and half younger, than this age) is projected to increase from 40 years in 2006 to 42 years in 2011. After 2011, the median age is likely to remain about 42–44 years. The gradual increase in the median age reflects the general ageing of the population and the labour force, and the large number of people born during the 1950s to early 1970s moving into the older ages.

Age group less than 25

The labour force aged less than 25 years is projected to increase from 390,000 in 2006 to nearly 420,000 in the early 2010s, and average about 410,000 over the remainder of the projection period. Under series 9H, the labour force will increase significantly to 470,000 in 2031 and to 530,000 in 2061. In contrast, under series 1L, the labour force in this age group is projected to decrease to 380,000 in 2031 and 330,000 in 2061. 

Age group 25–64 years

The labour force aged 25–64 years totalled 1.31 million in 1991, 1.59 million in 2001, and is projected to increase from 1.79 million at 30 June 2006 to 2.08 million in 2031, and to 2.27 million in 2061. The group made up 75.8 percent of the total labour force in 1991, and increased to an 80.9 percent share in 2001. The share of this age group is projected to decrease from 79.8 percent in 2006 to 75.8 percent in 2061. 

A comparison of labour force numbers in age groups 25–44 years and 45–64 years shows the impact of population ageing. In 1991, the labour force aged 25–44 years (870,000) was almost double the labour force aged 45–64 years (440,000). Between 1991 and 2006, the labour force aged 25–44 years increased by 13 percent to 990,000, while the labour force aged 45–64 years increased significantly by 84 percent to 800,000 over the same period. The gap will continue to narrow so that by 2014 the labour force will be about one million in each age group. Subsequently, the numbers will vary but remain within 140,000 of each other.

Age group 65 years and over

The labour force aged 65 years and over (65+) is on an upward trend, with an annual average growth rate over five times the overall labour force growth rate for the projection period. The proportion of the population aged 65+ in the labour force increased from 6 percent in 1991 to 12 percent in 2006, and is assumed to peak at 23 percent in 2028. This rise in labour force participation, coupled with more people at older ages and further ageing of the population, means that the labour force aged 65+ increased from 25,000 in 1991 to 62,000 in 2006 and is projected to reach 240,000 in 2031 and 300,000 during the late 2050s.

Assuming labour force participation rates remain constant at 2051 levels, the labour force aged 65+ will total 300,000 from the late 2050s (series 5M). Series 9H yields the highest number of people in the labour force in 2031 with 270,000, increasing to 360,000 in 2061. In contrast, under series 1L, the number of people in the labour force in this age group is projected to increase to 220,000 in 2031 and 250,000 in 2061. 

Graph, median age of labour force        Graph, labour force by broad age group

People not in the labour force

At ages 17–62 years, most males and females are in the labour force. People not in the labour force include people under 15 years of age, students who do not work for pay, people who are unemployed and not actively seeking work, some people with childrearing responsibilities, people who work without pay (but not in a family business), and people who have retired.

In 2006, the number of people not in the labour force numbered 1.95 million, compared with 2.24 million in the labour force. The labour force is expected to grow faster than the non-labour force until 2016, when the respective totals will be 2.55 million and 2.08 million. After 2016, the non-labour force will grow faster than the labour force as the baby boomers reach 65 years of age. By 2061, people not in the labour force and people in the labour force are projected to be 2.76 million and 3.00 million, respectively.

The majority of people aged 65+ have retired from the labour force. The number of people aged 65+ who are not in the labour force will almost double from 450,000 in 2006 to 830,000 in 2031, and then increase to 1.13 million in 2061 (series 5M). Series 9H yields the highest number of people not in the labour force for this age group, at 850,000 in 2031 and 1.28 million in 2061. The number of people not in the labour force in this age group is projected to increase substantially even under series 1L to 810,000 in 2031 and 990,000 in 2061.

 Graph, projected population by labour force status, age and sex

Labour force participation

Labour force participation rates (LFPRs) measure the proportion of the population in the labour force, either part-time or full-time. In 2006, about 93 percent of males aged 26–55 years were in the labour force. Between 2006 and 2051, LFPRs are assumed to increase significantly among males aged 55 years and over, reflecting increased flexibility in the age of retirement (with no compulsory age of retirement), changing attitudes to retirement, and increasing life expectancy and well-being in the older ages.

For females in 2006, LFPRs were at their highest at ages 42–52 years. At younger ages, female LFPRs are affected by childrearing commitments. Similar to males, LFPRs for females aged 55 years and over are projected to increase substantially between 2006 and 2051.

Overall, 75 percent of males aged 15 years and over and 61 percent of females aged 15 years and over were in the labour force in 2006. These proportions are projected to drop to 71 and 59 percent, respectively, in 2031, and to 69 and 56 percent, respectively, in 2061. The proportion of males and females in the labour force is projected to decline despite static or increasing LFPRs at most ages. This apparent contradiction is caused by the changing age structure of the population, as the population and labour force ages.

 Graph, labour force participation rates (LFPRs) by age and sex

For technical information contact:
Simon Pang
Christchurch 03 964 8700
Email: demography@stats.govt.nz

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