Stats NZ has a new website.

For new releases go to

www.stats.govt.nz

As we transition to our new site, you'll still find some Stats NZ information here on this archive site.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
National Labour Force Projections: 2015(base)–2068
Embargoed until 10:45am  –  17 December 2015
Commentary

Important advice for using projections

National labour force projections give an indication of the future supply of people, usually living in New Zealand, available for work. In a new enhancement, these projections also indicate the extent to which people are available for work, by applying assumptions on the average number of hours worked per week to the labour force projections.

The labour force includes people aged 15 years and over who:

  • regularly work for one or more hours per week for financial gain
  • work without pay in a family business
  • are unemployed and actively seeking part-time or full-time work.

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)
  • people who have retired.

The projections cover a range of possible outcomes based on different combinations of assumptions about the population (fertility, mortality, migration) and labour force (labour force participation, average hours worked). Users can make their own judgement as to which projections are most suitable for their purposes.

These projections are not predictions. The projections should be used as an indication of the overall trend, rather than as exact forecasts. The projections are updated every 2–3 years to maintain their relevance and usefulness, by incorporating new information about demographic trends and developments in methods.

At the time of release, the median projection (50th percentile) indicates an estimated 50 percent chance that the actual result will be lower, and a 50 percent chance that the actual result will be higher, than this percentile. Other percentiles indicate the distribution of values (such as projection results or assumptions). For example, the 25th percentile indicates an estimated 25 percent chance that the actual result will be lower, and a 75 percent chance that the actual result will be higher, than this percentile. Shading in graphs indicates the chance that actual results will fall within a certain range. Different shading is used to distinguish different ranges.

The following results highlight the main trends from the projections, while historical data is sourced from the Household Labour Force Survey.

Increasing labour force

The total labour force is projected to rise from an estimated 2.5 million people at 30 June 2015 to 2.9 million in 2038 and 3.2 million in 2068 under the median projection. There is uncertainty, however, in both the future population (size and structure) and future labour force participation rates. It is highly likely that the labour force will be in the range of 2.7–3.2 million in 2038, and 2.7–3.8 million in 2068.

The projections indicate that the male labour force will grow from 1.3 million in 2015 to 1.4–1.7 million in 2038 and 1.5–2.1 million in 2068. The female labour force will grow from 1.2 million in 2015 to 1.3–1.5 million in 2038 and 1.2–1.7 million in 2068.

Slower labour force growth

The labour force is currently growing strongly due to high net migration, increasing participation rates, and age structure effects (eg people moving into ages where participation rates are higher).

In the longer term, however, labour force growth is likely to slow as net migration is likely to be generally lower than the current high levels, and age structure effects are likely to be less positive. For example, the projections indicate increasing proportions of people aged 65+ in the population, who are less likely to participate in the labour force than people at younger ages. Indeed, the projections indicate that new and returning entrants into the labour force are likely to exceed the number of people retiring from the labour force, but by a narrowing margin.

Graph, annual labour force growth rate, 1988–2068.

Ageing labour force

The labour force is projected to continue ageing. The median age of New Zealand's labour force increased from 35 years in the late 1980s to nearly 43 years in 2015. While the median age is unlikely to increase in future as fast as it has in recent decades, half the labour force could be older than 45 years by the late 2050s. The increase in the historical and projected median age reflects increasing labour force participation among males and females aged 50 years and over, and the general ageing of the population, accentuated by the large number of people born between 1950 and the early 1970s moving into older working ages.

Graph, median age of labour force, 1988–2068.                 Graph, labour force by broad age group, 1988–2068.

Lower proportion of younger workers

The labour force aged under 25 years is projected to remain under 400,000 between 2015 and 2068 under the median projection. Because of growth in the older segment of the labour force, the proportion of the labour force aged under 25 years is likely to decrease. From about 1 in 4 of the labour force during the late 1980s, young workers will account for about 1 in 7 of the labour force in 2021, and 1 in 8 by the 2050s (median projection). 

Growth of labour force aged 25–64 years 

The labour force aged 25–64 years totalled 1.9 million in 2015, and is projected to increase steadily to 2.2 million in the mid-2030s and 2.4 million in the 2050s (median projection). This broad age group made up 78 percent of the total labour force in 2015, but its share is projected to decrease to 76 percent in the early 2030s and 75 percent in the 2060s (median projection).

A comparison of labour force numbers in age groups 25–44 years and 45–64 years shows how New Zealand's age structure has changed. In the late 1980s, the labour force aged 25–44 years (820,000) was double the labour force aged 45–64 years (410,000). Between then and 2015, the labour force aged 25–44 years increased by 20 percent to 980,000, while the labour force aged 45–64 years increased by 130 percent to 960,000. The labour force numbers in these two broad age groups will vary as different-sized birth cohorts move through the age structure, but the size of the two groups will remain within 200,000 of each other.

Fastest growth at older ages 

The number of people aged 65+ in the labour force climbed from 25,000 in the late 1980s to an estimated 150,000 or more in 2015. Further increases in labour force participation, coupled with more people at older ages, is likely to grow the older segment of the labour force further. It is highly likely that there will be 240,000–400,000 people aged 65+ in 2038, and 260,000–550,000 in 2068. The largest growth will occur between now and the early 2030s, as the bulk of the baby boomers move into the 65+ age group.

Graph, labour force aged 65+ years, 1988–2068.

Among those aged 65+, barely 6 percent were in the labour force in 1991. Labour force participation among those aged 65+ (Household Labour Force Survey) is now about 22 percent – about 28 percent among men and 17 percent among women – and is projected to increase to perhaps 27 percent overall by the late 2020s. Beyond the 2020s, even greater numbers of people aged 80 years and over (80+) are likely to push the overall 65+ participation rate downwards.

As a result, by 2038, it is expected that between 9 and 13 percent of the labour force will be aged 65+, compared with 6 percent in 2015. By 2068, between 9 and 16 percent of the labour force will be aged 65+. 

Within the labour force aged 65+, the number of people aged 80+ will increase significantly. From roughly 7,000 in 2015, it is highly likely there will be 17,000–40,000 people aged 80+ in the labour force in 2038, and 18,000–68,000 in 2068. 

Among those aged 80+, about 1 percent were in the labour force in 1991. It is now 4 percent, and is projected to increase to over 6 percent by the late 2020s.

Lower proportion overall in the labour force

The projections indicate that New Zealand is currently near peak labour force participation, and this is likely to fall over the coming decades. In recent years, 68–69 percent of adults (aged 15 years and over) were in the labour force. The median projection indicates a gradual drop to 64 percent in 2038 and to 62 percent in 2068. This drop is despite the assumptions of static or increasing labour force participation rates (LFPRs) at most ages. This apparent paradox is caused by the changing age structure of the population, which sees a growing number and proportion of the population at the oldest ages where LFPRs are at their lowest. See Projection assumptions in the data quality section for more information about LFPR assumptions.

Among males aged 15 years and over, 74–75 percent were in the labour force in recent years. Under the median projection this proportion drops gradually to 70 percent in 2038 and to 68 percent in 2068.

Among females aged 15 years and over, 63–64 percent were in the labour force in recent years. This proportion is also near its peak, declining to 59 percent in 2038 and to 56 percent in 2068 (median projection). 

 Graph, percentage of population aged 15+ in the labour force, 1988–2068             Graph, economic dependency ratio, 1991–2068.

At ages 18–64 years, most males and females are in the labour force. Over all ages, there are more people in the labour force than not. The ratio of those not in the labour force to those who are (the economic dependency ratio) stands at 84 per 100 in 2015. The projections indicate that the ratio may decline to about 83 per 100 around 2020, before gradually increasing. However, there is significant uncertainty in this ratio, largely reflecting the uncertainty in future LFPRs, although uncertainty in the age distribution of the population (from the interplay of fertility, mortality, and migration) also has an effect and increases over the projection period. 

Average hours worked stable overall

The average number of hours that people in the labour force are working (or available for work) has dropped slightly from about 39 per week in the late 1980s to 37 per week in 2015. The projections indicate that this average is likely to remain around that level, assuming current age-specific trends continue.

Among males in the labour force, average hours worked has dropped from 44 per week in the late 1980s to 41 per week in 2015. This is projected to drop to 40 hours per week beyond the 2020s, reflecting small further decreases in hours worked of males aged 15–59 years, and the changing age composition of the male labour force, which more than offsets the assumed increases in hours worked by males aged 60–79 years.

Females in the labour force have averaged about 32 hours work per week since the late 1980s. The average is projected to remain around 32 hours per week despite assumed increases in average hours worked at some ages, especially at ages 55–66 years. As with males, changes in the age composition of the labour force has a deflationary effect on the average across all ages, as a higher proportion of the female labour force will be in ages where average hours worked is lower.

Graph, average hours worked (or available for work), 1988–2068.

Growing number and proportion of people not in the labour force 

In 2015, the number of people not in the labour force (at all ages) numbered 2.1 million, compared with 2.5 million in the labour force (aged 15 years and over). By 2038, people not in the labour force and people in the labour force are projected to total 2.6 million and 2.9 million, respectively (median projection). By 2068, people not in the labour force and people in the labour force are projected to be 3.0 million and 3.2 million, respectively.

The majority of people aged 65+ have retired from the labour force. The median projection indicates that the number of people aged 65+ who are not in the labour force will increase steadily from 520,000 in 2015 to 960,000 in 2038, and to 1.3 million in 2068. Future LFPRs are particularly uncertain at these ages because LFPRs are currently increasing strongly and there is considerable scope for LFPRs to increase further. Future LFPRs will also be strongly influenced by non-demographic factors such as the age of eligibility for government superannuation, although these projections are necessarily based on current policies (ie they assume no change to the age of eligibility and other policies which may affect future LFPRs).

Projected population by labour force status, age, and sex
50th percentile in 2015, 2038, and 2068
Graph, projected population by labour force status, age and sex, 50th percentile, 2015.Graph, projected population by labour force status, age, and sex, 50th percentile, 2038.Graph, projected population by labour force status, age, and sex, 50th percentile, 2068.

Additional 'what if?' scenarios

The projections discussed above cover a range of possible outcomes based on different combinations of assumptions about the population (fertility, mortality, migration) and labour force (labour force participation, average hours worked). Five additional projections have been derived to explore other scenarios of interest.

The median projection indicates that the labour force will increase by more than 700,000 people, from 2.5 million in 2015 to 3.2 million in 2068. Labour force growth would be higher if fertility, life expectancy, or net migration (arrivals minus departures) were higher.

Graph, New Zealand labour force, alternative scenarios, 1988 to 2068.               Graph, percent of labour force aged 65+, alternative scenarios, 1988 to 2068.

What if fertility was higher?

The labour force would reach nearly 3.8 million by 2068 with a total fertility rate of 2.5 births per woman (very high fertility). The very high fertility scenario would also produce a younger age structure. The number of young workers (15–24 years) would rise by 40 percent between 2015 and 2068, compared with virtually no change under the median projection. Labour force ageing would be less pronounced, with a median age of 42–43 years over the projection period. By comparison, in the median projection, the median age increases gradually to 45 years in 2068.

The very high fertility scenario results in a higher economic dependency ratio in 2068 of 100 per 100 – equal numbers of people in the labour force as not – compared with 92 per 100 in the median projection.

What if migration was higher?

Net migration of 25,000 a year would also produce a labour force of about 3.8 million in 2068 – 17 percent larger than the median projection. A very high migration scenario would have only a small impact on the ageing of the labour force, because the migrants themselves age. The median age would be about 45 years in 2068, the same as in the median projection. The economic dependency ratio would be slightly lower – 89 per 100 in 2068, compared with 92 per 100 in the median projection.

What if life expectancy was higher?

The median projection assumes recent reductions in age-specific death rates continue over the projection period. If recent increases in period life expectancy at birth continue, people could live even longer. Life expectancy could reach 96.0 years for males and females in 2068 (very low mortality). In this scenario the labour force would reach 3.3 million in 2068. This is 33,000 (1 percent) more than under the median projection. About 19,000 of these people would be in the 65+ age group in 2068. The 80+ age group would increase to about 55,000 in 2068 – 11,000 more than the median projection.

With more workers at older ages, labour force ageing would be slightly more pronounced than in the median projection. The median age of the labour force would still be about 45 years in 2068, but the economic dependency ratio would be 98 per 100 in 2068, compared with 92 per 100 under the median projection. 

What if there was no migration?

An interesting projection for comparative purposes is to assume no arrivals and no departures. This shows how the labour force is affected solely by births and deaths. With no migration, the labour force would peak at under 2.7 million in the early 2050s, then slowly decline as retirements outnumber new entrants. Despite the decline, the labour force of 2.6 million in 2068 would still be 150,000 higher than the 2015 labour force. Compared with the median projection, the labour force would be lower in all age groups, but the median age and economic dependency ratio would be higher.

What if migration fluctuated?

The projections assume that net migration varies each year, although the median assumption equates to a constant level of 12,000 from 2017. However, actual net migration tends to fluctuate significantly from year to year. The cyclic migration scenario assumes net migration fluctuates between -10,000 and +35,000 on a 10-year cycle. The net migration gain between 2015 and 2068 is the same as the median projection.

The labour force in 2068 is just 2,000 lower in the cyclic migration scenario than the median projection (3.2 million). However, between 2015 and 2068, the labour force varies by as much as 48,000 between the two projections, because of the annual differences in net migration. Other characteristics of the labour force (eg age distribution, economic dependency ratio) are very similar between the two projections. A constant level of migration in the long term is therefore a sufficient assumption for most purposes.

For more detailed data see the Excel tables in the ‘Downloads’ box.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
Top
  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+