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Youth labour market dynamics in New Zealand

Youth (people aged 15–24) are more mobile within the labour market than other age groups. In this article, we discuss the impact these movements have on the overall dynamics of the New Zealand labour market. In particular, we explain how the lack of usual seasonal movements in employment and unemployment by youth in the December 2012 and March 2013 quarters influenced the quarterly changes seen in the Household Labour Force Survey (HLFS).

The youth labour market

  • Around 40 percent of all employed youth are in part-time employment.
  • 109,000 youth are employed in retail trade and accommodation and food services – around one-third of all youth employed.
  • Youth account for more than one-third of total unemployment in New Zealand.
  • 360,000 youth currently participate in education (around 6 in 10 of the total youth population).
  • Less than one-third of the 15–19-year-old population is employed, compared with around two-thirds of 20–24-year-olds.

This article uses the HLFS and Linked Employer-Employee Data (LEED) to help explain why youth move around more frequently in our labour market.

Youth more dynamic in the labour market

Youth are more likely than people aged 25 and over to transition in and out of the labour force. They are also more likely to move between spells of employment and unemployment, and move around within the workforce.

A higher worker turnover rate suggests a greater number of people are moving in, around, and out of the workforce. Between 2007 and 2011, the average worker turnover rate for youth in any given quarter was 28 percent. For people aged 25 and over, the average worker turnover rate was only 13 percent. This means that around 1 in 4 youth changed their workplace in any quarter, compared with only 1 in 7 for people in other age groups.

Figure 1 gives a more detailed breakdown of the youth population compared with people aged 25 and over.

Figure 1

Graph, Worker turnover rates, by age group, 2007 to 2011.

We can also analyse the youth labour market by examining movements between labour force categories for people interviewed in consecutive quarters in the HLFS.

The likelihood of remaining employed, unemployed, or not in the labour force (from one quarter to the next) differs between age groups. Youth are less likely to remain in the same labour force category. Over the previous two years, the likelihood of a 15–24-year-old remaining employed between quarters was around 89 percent, while the likelihood of remaining not in the labour force was just under 77 percent. Roughly one-third of unemployed youth remained unemployed.

Figure 2 shows that these proportions are much lower than those for people aged 25 and over.

Figure 2

Graph, Proportion of people remaining in the same labour force status, by labour force status and age group, average of March years, 2012 to 2013.

Youth are more likely than people aged 25 and over to move between labour force categories. Overall, people aged 25 and over only have a higher likelihood of moving from unemployment into employment – which may reflect the difficulties young people face when looking for employment.

Figures 3 and 4 show that youth have a greater likelihood of leaving the labour force after being either employed or unemployed the previous quarter. This is partly a reflection of more youth moving in and out of study.

Figure 5 shows that youth are just as likely to enter the labour force as employed as they are to enter it as unemployed. Youth are also more likely than people aged 25 and over to enter the labour force in general , largely due to their movements in and out of study.

 Figure 3

 Figure 4  Figure 5
 Graph, Likelihood an employed person changes status, by new status and age group, average of March year, 2012 to 2013.  Graph, Likelihood an unemployed person changes status, by new status and age group, average of March years, 2012 to 2013.  Graph, Likelihood a person not in the labour force changes status, by new status and age group, average of March years, 2012 to 2013.

The worker turnover rates and movements between labour force categories show that youth move between jobs and labour force groups more frequently than other age groups do. These movements can be in part explained by two factors.

  • Youth have a greater likelihood of participating in education – around 6 in 10 of the youth population currently participate in education, as opposed to 1 in 20 people aged 25 and over. Youth in education are more likely to move in and out of the labour force during education breaks.
  • Youth are more likely to work in temporary employment and in industries with more casual work and seasonal work such as retail trade, accommodation and food services, and agriculture.

These two factors contribute to regular seasonal patterns within the youth labour market. Participation in study typically occurs during June and September quarters. New temporary and seasonal jobs arise in December quarters and decrease again in March quarters, while youth are not in study.

Youth labour market follows seasonal pattern

In this section, we’ll focus on unadjusted seasonal movements. In December quarters, employment typically rises as more seasonal and holiday work becomes available. Youth are a traditional source of seasonal labour. Many youth complete their studies for the year and look for temporary work during summer holidays. This leads to a usual rise in the number of people in the labour force and the labour force participation rate, and pushes down the number of people not in the labour force.

The March quarter signals the end of seasonal work and more youth move out of employment than in other quarters. These youth either continue to look for work and become unemployed, or exit the labour force. Over the past decade, unemployment for youth rose by 10.1 percent on average in March quarters, while the average number of youth not in the labour force increased by only 2.4 percent.

The end of the March quarter is also the end of summer holidays for youth attending tertiary education. As many youth move out of the labour force and back into education in June quarters, the number of youth in the labour force declines and the labour force participation rate falls. Because students are studying in June and September quarters, there are no large seasonal movements between those quarters.

These seasonal movements occur every year. The main HLFS seasonally adjusted series takes these movements into account. When these seasonal movements do not occur, it significantly affects the seasonally adjusted values.

Youth unemployment did not increase as expected in the March 2013 quarter

In the March 2013 quarter, we did not see the typical seasonal increase in youth unemployment. Usually, the number of unemployed youth rises by around 9,000. Figure 6 shows that youth unemployment did not increase in the March 2013 quarter, but instead fell by 11,000. A fall in youth unemployment in a March quarter has only occurred on one other occasion in recent years – in March 2010, when unemployment fell by 6,500.

Figure 6

Graph, Change in unadjusted youth unemployment, March quarters, 2006 to 2013.

An atypical fall in unadjusted unemployment is accentuated in the adjusted series once we remove the ‘expected’ seasonal factors. Because youth account for around 40 percent of the total number of unemployed people in New Zealand, the higher-than-expected fall in youth unemployment resulted in the overall unemployment rate falling by 0.6 percentage points (from 6.8 percent to 6.2 percent). A more typical change in youth unemployment over the quarter would have resulted in a smaller fall in the overall seasonally adjusted unemployment rate.

A combination of labour market movements by youth over the December 2012 to March 2013 quarters were behind this irregular fall in unemployment. Fewer people than usual in the 20–24-year-old age group were unemployed in the March quarter after being either employed or outside the labour force in the previous December quarter.

An unusually large number of youth also remained outside the labour force over the December to March quarters. In the HLFS, there were 25,000 more youth in study and not in the labour force in the year to March 2013 compared with the previous year.

Youth employment falls in the December 2012 quarter

In the December 2012 quarter, the usual seasonal increase in youth employment did not occur. The unadjusted number of 15–19-year-olds in employment fell by 7,200 (offset by a small rise for the 20–24-year-old age group). Usually in December quarters, both 15–19- and 20–24-year-olds would experience similar increases in employment.

Figure 7 shows typical employment movements for youth in December quarters, and how the unadjusted change in youth employment differed considerably in the December 2012 quarter.

Figure 7

Graph, Change in unadjusted youth employment, December quarters, 2005 to 2012.

Youth account for around half of usual unadjusted employment increases in December quarters. An unusual fall in youth employment therefore has a significant impact on the overall change in employment. The fall in youth employment in the December 2012 quarter was accentuated once the seasonal factors were removed. It contributed to the overall seasonally adjusted number of people in employment falling by 1.0 percent. The lack of movement into employment also saw the labour force participation rate fall by 1.2 percent.

In the December 2012 quarter, there was also a slightly smaller than usual increase in unadjusted employment for people aged 25 and over. While unadjusted employment for this age group also usually increases in December quarters, the size of the usual increases are not as consistent as they are for youth.

The employment patterns of youth have a large impact on our labour market

Youth play a big part in determining the quarterly movements within the New Zealand labour market. They transition between various labour force categories more frequently. This places the importance on other youth labour market indicators, including the statistics on youth not in employment, education, or training (NEET). NEET figures identify unused youth labour potential and youth who are at risk of becoming disadvantaged or marginalised in the future.

Quarterly changes in youth labour market outcomes are highly influenced by seasonal patterns. When these seasonal movements do not happen, it affects the overall HLFS seasonally adjusted labour force series – as shown in the December 2012 and March 2013 quarters.

For more information contact:

Daniel Frischknecht
Wellington: 04 931 4600
Email: info@stats.govt.nz

Published 24 July 2013

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