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3  Employment and skills

Knowledge and skills enable individuals to participate in society and the economy. New Zealand's education outcomes remain strong by international standards - with high rates of participation and performance in school and tertiary education. This, combined with a flexible labour market, has enabled high labour market participation and relatively low unemployment compared with other OECD countries. However, as highlighted in the previous section, improving New Zealand's labour productivity growth is the main opportunity for boosting wage growth over time.

As the nature of work continues to evolve and skill requirements continue to change, education and training systems will be challenged to ensure all New Zealanders are ready for the future. Ensuring that high education performance is achieved consistently across and within all providers lays a foundation for skill development. Training and development opportunities beyond school, both in and between jobs, are also important. This is particularly so for those groups most likely to be affected by technological and other workforce changes. Immigration will continue to play an important role as part of an integrated system response to shortages in skills and broader human capital.

The demographic composition of New Zealand is evolving, which presents future challenges and opportunities for our workforce. While New Zealand currently has relatively high participation rates of older citizens, realising the full potential of our ageing workforce will become increasingly important.

Employment and skills play a key role in New Zealand's public finances. A labour market consisting of highly skilled, diverse, connected, and adaptable people is more likely to grow the economy.[48] Rising labour quality is estimated to account for almost half of New Zealand's labour productivity growth between 1998 and 2005, with around 70 percent of the increase in labour quality attributable to rising qualification levels.[49] Stronger economic performance brings increased choices and reduced need for government assistance through welfare and social expenses. This reduces fiscal pressures and increases the ability of governments and citizens to withstand, or manage the impact of, shocks to the economy, environment or society.

Skills and employment also provide much more than just income and growth. Educational performance is associated with a range of other individual and societal goods, such as healthier lifestyles, lower propensity to commit crime, and richer social networks[50]. Work provides income as well as social connections, provides learning opportunities, develops people's confidence and self-worth, and gives them opportunities to improve their living standards,[51] including nurturing the development of the next generation of New Zealanders.[52]

Government plays a role in enabling people to move into work that is meaningful, productive and sustainable through regulatory settings, education and skills systems, and immigration policies. While these areas are explored below, they should always be considered alongside other influencers of people's ability to participate in the labour market (e.g. housing, health, and transport).


  • [48] See, for example, Eric Hanushek and Ludger Woessmann (2008). The role of cognitive skills in economic development. Journal of economic literature, 46:3, 607-668, and Eric Hanushek and Ludger Woessmann (2012). Do better schools lead to more growth? cognitive skills, economic outcomes, and causation. Journal of Economic Growth 17 (4), 267-321.
  • [49] Kam Szeto and Simon McLoughlin (2008) Does Quality Matter in Labour Input? The Changing Pattern of Labour Composition in New Zealand. New Zealand Treasury Working Paper 08/01.
  • [50] OECD (2013) What are the social benefits of education? Education Indicators in Focus 2013/01.
  • [51] John Helliwell, Richard Layard, and Jeffrey Sachs (eds) (2012) World Happiness Report.
  • [52] See, for example, Keith McLeod, Robert Templeton, Christopher Ball, Sarah Tumen, Sarah Crichton, and Sylvia Dixon (2015) Using integrated data to identify youth who are at risk of poor outcomes as adults.
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