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Topic 10: Work, knowledge, and skills

Skilled people are required to meet the needs of society now and in the future. Well-educated, highly skilled, and adaptable people in the labour force are important for long-term economic growth. Knowledge and skills are important, not only for economic growth and innovation (see topics 11 and 9), but also for their contribution to social connectedness and personal well-being (see topic 14). Human capital is built through lifelong learning and experience, as well as through formal education. The health dimension of human capital is discussed in topic 13.

Sustainable development requires that people can meet their needs. Paid work is the principal source of income for most New Zealand households. Within the economy, society aims to provide sufficient job opportunities for people to be able to support themselves and meet their needs. As well as providing income, employment has a positive impact on satisfaction and happiness, participation in society, and the productive capacity of the economy.

Main results

In broad outline, the development of human capital as represented by the work, knowledge, and skills indicators has improved over the 20 years to 2008. Participation in the labour force has increased since 1987, matched by falling unemployment rates between 1992–2007. Since 1997, pay inequalities by ethnicity have generally shown little change. Since 1985, the productivity of the labour force has increased. Both educational attainment levels and basic literacy skills have been maintained. Equality of access to early childhood education has also shown some improvement.

Table 10.1
Work, knowledge, and skills indicators – key results

 Work, knowledge, and skills indicators - key results.

What the indicators tell us

Labour force participation rate (indicator 10.1)

The size of the labour force is critical to New Zealand’s capacity to produce goods and services. Short-term changes in the participation rate are linked to current job market conditions, which in turn can fluctuate with cycles of business growth. A job market in which employment is growing often encourages more people to participate.

The labour force participation rate was 66.4 percent in 1987. It declined until the early 1990s. Since then, it has risen from 63.3 percent in 1993 to 68.5 percent in 2008 (see figure 10a).

Changes in the participation rate over a longer time period, however, reflect more fundamental economic and social trends. Since 1987, the female participation rate has risen, increasing steadily every year since 1994.

Over the 10 years to 2008, older age groups have proportionally increased their participation in the labour force, while younger age groups, who have been both staying at school longer and continuing to study after they leave school (indicator 10.6), have reduced theirs. However, as the population ages, the increased participation of older people is projected to be insufficient to prevent the labour force from decreasing (see indicator 1.3).

Annual labour force participation rate, 1987–2008.

Unemployment rate (indicator 10.2)

Unemployment increases the risk of poverty and consequent social exclusion, and accordingly the target trend for this indicator is downwards. However, the unemployment rate fluctuates in line with (business) growth cycles in the economy. Moreover, in a flexible labour market there are always new people entering the labour force and therefore looking for work, as well as others actively changing jobs. Hence, the unemployment rate is not expected to ever fall to zero, as there is always some level of unemployment. This level can be described as a natural rate of unemployment and is the implicit benchmark against which changes in the movement of the indicator are assessed.

After peaking at 10.6 percent in 1992, and again at 7.7 percent in 1998, the total annual unemployment rate decreased to a 20-year low of 3.7 percent in 2007. However, with declining economic activity throughout 2008, there has been an increase in unemployment, with an annual rate of 4.2 percent at December 2008 (see figure 10b).

Rates of unemployment by ethnicity at December 2008 were:

  • Māori – 8.2 percent
  • Pacific peoples – 7.4 percent
  • European – 3.3 percent
  • Asian – 5.4 percent.

Annual unemployment rate, 1987–2008.

Pay equality by ethnicity (indicator 10.3)

Income from wages and salaries are the principal sources of income for most New Zealanders. As income is important for meeting people’s needs, pay inequality affects the ability of individuals to meet their needs (see also topic 12). This indicator compares the ratio of median hourly earnings between different ethnic groups.

Real median hourly earnings increased for all ethnic groups between 1997 and 2008. However, there are differences between ethnic groups. In 2008, the European ethnic group had the highest median real hourly earnings. This indicator therefore compares the earnings of other ethnic groups with the European group as a percentage ratio, to show whether pay inequalities have widened or narrowed. A ratio of 100 percent indicates parity of earnings.

The ratio of Māori to European median hourly earnings increased slightly, from 83.8 percent in 1997 to 85.8 percent in 2008. Over the same period, the ratio between Pacific peoples and European fell slightly, from 80.8 percent to 79.0 percent. The ratio between the ‘other’ ethnic group (including Asian) and European decreased over the period, from 95.9 to 87.2 percent (see figure 10c).

Since 1997, median real hourly earnings have remained higher for men than for women. The ratio of female to male earnings has risen from 83.0 percent in 1997 to 87.5 percent in 2008.

 Median hourly earnings ratios by ethnic group, European to Maori, Pacific peoples, and 'other'.

Labour productivity (indicator 10.4)

Labour productivity is a measure of the efficiency of the labour force (that is, output per worker). Growth in labour productivity implies an increase in the efficiency and competitiveness of the economy.

Productivity estimates are considered to be of most value when analysed as average growth rates from the peak of one (business) growth cycle to the peak of another. Statistics NZ has estimated growth cycles in the data to assist users in interpreting the results of the productivity series, for this reason the data analysed in this report is from 1985 rather than 1988.

Between 1985 and 2008, the average annual growth in labour productivity was 2.2 percent. This was the result of output, as measured by GDP, growing annually by 2.7 percent, with annual labour input growth being 0.5 percent.

The annual growth rate of 1.3 percent for the latest cycle (2000–08) is lower than any of the previous cycles. However, caution should be exercised in this comparison as the 2000–08 period is not a complete cycle. Moreover, growth in labour productivity of 2.0 percent for the 2008 year is above the average for the 2000–08 period (see figure 10d).

 Labour productivity, 1985–2008.

Educational attainment of the adult population (indicator 10.5)

The OECD defines human capital as “the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being” (OECD, 2001b). A high level of human capital can improve economic efficiency by providing organisations and individuals with the knowledge and skills to meet the needs of economic development. At an individual level, educational attainment is important for participation in society and personal satisfaction.

Educational attainment is often used as an indirect measure of human capital due to the ready availability of internationally comparable statistics. The proportion of adults (aged 25–64 years) with qualifications of at least secondary school level increased from 65.4 percent in 1990 to 75.1 percent in 2008. There has, however, been a slight decrease since 2003 when the proportion was above 78 percent (see figure 10e).

The number of adults (aged 25–64) with a bachelor’s degree or higher qualification has risen from 7.6 percent in 1990 to 21.2 percent in 2008.

 Proportion of the population aged 25–64 years with selected educational attainment levels, 1990–2008.

Participation in tertiary education (indicator 10.6)

Sustainable development requires that the stock of human capital is maintained or enhanced over time. Rates of participation in tertiary education provide a measure of input into human capital stock.

The tertiary education participation rate increased from 8.0 percent in 1994 to 13.3 percent in 2007 (see figure 10f). After rising rapidly from 1998 to 2005, the participation rate in tertiary education has declined slightly, principally due to a decline in enrolments for level 1, 2, and 3 certificates in wānanga (tertiary institutions that provide education in a Māori cultural context) and private training establishments.

 Tertiary education participation rate, 1994–2007.

Literacy skills (indicator 10.7)

Measuring the level of skills within a population provides a direct indication of human capital levels. In particular, literacy and numeracy skills are essential for building a competitive, highly skilled, and productive workforce. At an individual level, these skills are strongly associated with participation and advancement in the labour force and participation in society.

This indicator measures whether the proportion of the adult population with very low levels of literacy and numeracy skills is increasing or decreasing. Level 1 is the lowest level of proficiency of literacy and numeracy.

Between 1996 and 2006, the proportion of the adult population (aged 16–65 years) that achieved above the lowest level of proficiency for prose literacy increased from 82 percent to 87 percent. Over the same period, the proportion for document literacy (that is, prose with graphs and tables) increased from 79 percent to 86 percent.

Information on the level of numeracy skills in the adult population is only available for 2006. The proportion above the lowest level of proficiency for that year was 80 percent (see figure 10g).

 Proportion of adult population with literacy and numeracy level 1 and above, 1996 and 2006.

Access to early childhood education, by ethnicity indicator 10.8)

Equal opportunities and access to resources are important for sustainable development. As education contributes to individual economic and social well-being, equal access to education is an important indicator of equity.

Participation in early childhood education is used as a proxy indicator for equal access to education. Time spent in early childhood education enhances future learning and can help narrow the achievement gap between children from low-income families and those from more advantaged families (Ministry for Social Development, 2008). As early childhood education is not compulsory in New Zealand, different participation rates among ethnic groups can indicate differing access to education.

The proportion of year 1 students who had attended regular early childhood education immediately before starting school increased for all ethnic groups between 2000 and 2007. Key observations (see figure 10h) include:

  • New Zealand European children are the most likely to have attended early childhood education before attending school.
  • From 2000 to 2004, the participation rates for both Māori and Pacific peoples year 1 students increased faster than the rate for New Zealand European students, which lessened the difference between the groups.
  • Since 2004, the growth in the rate for Māori and Pacific peoples has slowed.

Early childhood education participation of year 1 students, by ethnic group.

About the indicators

Labour force participation rate (indicator 10.1)

The labour force participation rate is the number of people in the labour force (employed and unemployed) divided by the total working-age population.

The working-age population is the usually resident, non-institutionalised, civilian population of New Zealand aged 15 years and over. Those employed are defined as working at least one hour per week, while the unemployed are those not in work but available for work and actively seeking work.

People who are not in the labour force can include, for example, students, retired people, or people with childcare responsibilities.

Data is from the Household Labour Force Survey.

Unemployment rate (indicator 10.2)

The unemployment rate is the number of people unemployed (that is, not in work but available for and actively seeking work) expressed as a percentage of the labour force.

People who reported more than one ethnic group are counted once in each group reported. This means that the total number of responses for all ethnic groups can be greater than the total number of people who stated their ethnicities.

Data is from the Household Labour Force Survey.

Pay equality by ethnicity (indicator 10.3)

This indicator measures gross (before tax) hourly earnings from wages and salaries for people aged 15 years and over. Income from self-employment, government transfers, investment income, and other income sources is excluded. Earnings for all years are expressed in 2008 dollars. The trend assessment is based on changes between European and Māori, and European and Pacific peoples only.

Median earnings are the middle point of the distribution of hourly earnings. For example, if there were 99 people receiving wages and salaries, then the median hourly earnings would be that of the 50th person when ranked by hourly earnings. Changes in the ratio of earnings between ethnic groups may be a result of changes in the demographic structure of different ethnic groups.

Ethnic group is classified using prioritised ethnicity. This is where one ethnic group is assigned to an individual who has answered with more than one ethnicity. People with multiple responses to the ethnicity question are assigned to one ethnic group using the following prioritisation: Māori, Pacific peoples, other ethnic groups, European.

Data is from the New Zealand Income Survey.

Labour productivity (indicator 10.4)

Labour productivity is measured as the ratio of output to labour input, with output being measured as GDP.

The productivity measures do not cover the entire economy. The industries covered are defined as the ‘measured sector’ and consist of industries for which estimates of inputs and outputs are independently derived in constant prices. Excluded are those industries for which real value-added in the New Zealand System of National Accounts is largely measured using input methods, such as the number of employees. This is mainly government non-market industries that provide services – such as administration, health, and education – free or at nominal charges.

Data is from the Statistics NZ’s Productivity Statistics.

Educational attainment of the adult population (indicator 10.5)

This indicator measures the educational attainment of adults aged 25–64 in terms of two attainment levels: those with at least secondary school qualifications, and those with a bachelor’s degree or higher.

At least secondary school qualifications includes any formal qualification at the level of NCEA level 1 (or its predecessor School Certificate) or higher.

Bachelor’s degree or higher includes bachelor’s degrees, postgraduate certificates or diplomas, master's degrees, and doctorates.

Data is from the Household Labour Force Survey. The measure used here for ‘secondary school’ attainment differs from educational indicators for ‘upper secondary’ used by the OECD (2008a) because it includes NCEA level 1 or School Certificate, whereas these are excluded in the OECD measure of upper secondary attainment.

Participation in tertiary education (indicator 10.6)

The tertiary education participation rate is the number of people enrolled in tertiary education as a proportion of the total population aged 15 years and over. Those enrolled are defined as the number enrolled at any time during the year in a course leading to a recognised New Zealand qualification.

Tertiary education providers include public institutions (universities, polytechnics, and wānanga) and private tertiary education providers receiving government funding or approval, or registered with the New Zealand Qualifications Authority. Qualifications range from certificates and diplomas to bachelor’s and post-graduate degrees. Only domestic students are included. Students who were enrolled at more than one qualification level are counted in each level.

Data is from the Ministry of Education.

Literacy skills (indicator 10.7)

Data is from the International Adult Literacy Survey 1996, and the Adult Literacy and Life Skills Survey 2006. The response rate of the 1996 Survey was 58 percent and the response rate for the 2006 survey was 64 percent.

Prose literacy is concerned with continuous text, such as the type found in books and newspaper articles. Document literacy deals with discontinuous text, such as graphs, charts, and tables. Numeracy is the ability to read and process mathematical and numeric information in diverse situations.

People with very low literacy skills (level 1) may be able to undertake tasks such as locating a single piece of information that is identical to what is in a question. People with level 1 numeracy skills may be able to complete simple one-step arithmetic operations.

Access to early childhood education, by ethnicity (indicator 10.8)

The indicator used is prior attendance of year 1 students at early education services, by ethnic group. Early childhood education includes all forms of organised and sustained centre and home-based programmes designed to foster learning, and emotional and social development in children.

European includes those who affiliate as New Zealand European, other European, or European not elsewhere defined. For example, this includes but is not limited to, people who consider themselves Australian (excluding Australian Aborigines), British and Irish, American, Spanish, and Ukrainian.

Data is from the Ministry for Education, July roll returns.

Table 10.2
Work, knowledge, and skills indicators – defining principles

 Work, knowledge, and skills indicators – defining principles.

See part C for the complete list of defining principles for all indicators.

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