2.4  Economic inactivity

The ten years following the completion of compulsory schooling are a time when divergent paths of human capital accumulation through education, training and labour market experience lead to big differences in long term adult outcomes. By the time they reach school leaving age, a sizeable proportion of young people are unable or unwilling to access opportunities for further education and training, or labour market experience. For instance, data from the CHDS suggests that around 14% of young people accumulate barely more than a half-year in education, training or work over the five years between age 16 and 21.

While access to education and employment is limited by prior educational achievement, these years represent a further opportunity to redress developmental deficits that are likely to have adverse effects on the life-course. Evidence suggests that in New Zealand educational enrolment rates over the years 16 to 18 are quite low, for instance by comparison with Australia (Treasury 2001a).

In 2001, just over half of 15- to 19-year-olds, and almost three-quarters of 20- to 24-year-olds were in the labour force that is, they were either employed (full-time or part-time), or unemployed and actively seeking work. The 1996 Census showed that labour force participation amongst young people increased steadily with each year of age from 15 to 24 years (Statistics New Zealand 1998).

Beginning at around age 17, women have lower participation rates than men, and the difference in their participation rates grows with age (Statistics New Zealand 1998). In the main, this reflects the growing impact of childbirth and childcare on women’s labour force participation. Young Maori and Pacific Island people have much lower rates of participation in the labour force than young Europeans (Statistics New Zealand 1998).

The labour force participation of young people has in general declined since 1987, in part reflecting increased retention in secondary school and greater participation in tertiary education. Within this general decline there has also been a change in the nature of employment of young people, with marked growth in part-time employment and an accompanying decline in full-time employment (Statistics New Zealand 1998). Women are more likely to work part-time than men.

The unemployment rate of 15- to 19-year-olds is very high in New Zealand compared to other OECD countries and much higher than for those aged over 25 years (Curtain 2001, OECD 2000, Statistics New Zealand 1998).[14] This is likely to reflect the lack of education, work experience and, therefore, employability of young people who leave school at a relatively young age. Unemployment rates have fluctuated depending on economic conditions, reaching a peak for young people in the early 1990s.

Maori and Pacific Island young people experience high rates of unemployment compared to Europeans (Figure 4). Maori and Pacific people are much more likely to leave secondary school with no qualifications, or with poor qualifications. A lack of qualifications is itself highly associated with lack of employment. Of 20- to 24-year-olds in 1996, just over 80% of those with a degree were employed while the corresponding figure for those with no qualification was 52% (Statistics New Zealand 1998). However, for most young people, unemployment is relatively short-term, although it may recur.

Figure 4 – Unemployment rates for young people by ethnicity, 1996

Source: Statistics New Zealand (1998).

Some young people may be neither economically active (employed full or part time) nor engaged in education and training. Figures from the 1996 census, show that 15% of 15-17 year olds, 18% of 18-19 year olds and 19% of 20-24 year olds were economically inactive (Figure 5). In each age group, around 15% of young men were inactive. The greater inactivity of women is likely to reflect their responsibilities in looking after children at home (Statistics New Zealand 1997).

Figure 5 – Young people who are not studying and not employed, by age group and gender, 1996

Source: Statistics New Zealand (1997).

The CHDS also provides information on the periods of education and training, and the periods of inactivity, that young people face (Table 4). A sizeable part of the CHDS cohort – 14% – spent an average of 3.4 years inactive between the ages of 16 and 21. Part of this group is likely to be young people characterised by multiple disadvantage.

Source: Tim Maloney pers.comm.

2.5  Ethnic disparities

Some ethnic disparities are evidenced not only in the case studies outlined above, but also in other areas of well-being. Demographic and socio-economic factors underlie some of these disparities between Maori and other population groups. Maori children are far more likely than other children in New Zealand to: live in a lone-parent family; live in a household in the lowest income quintile; be born to a young mother who smokes and become smokers themselves; not be breast fed; not be immunised; have no parent in paid work; be assessed as having suffered physical or sexual abuse or neglect; die in infancy; commit suicide before 24 years of age; have a mental health problem at age 18; have a dependence on cannabis; be prosecuted for a criminal offence; leave school at 16 years; truant and be suspended from school; leave school with no qualifications; have lower literacy and numeracy skills; and not go to university. There are many similarities between Maori and Pacific Island children’s circumstances and outcomes. The causal relationships between these phenomena are complex.

Some, but not all, of these disparities are accounted for by demographic and socio-economic differences between Maori, Pacific Island and other families rather than by features intrinsic to ethnicity. For instance, Maori and Pacific Island children were more likely to live with a lone parent who was not in paid work at the 1996 Census partly because these children were, on average, younger than the rest of the child population and lone parents are more likely to work as their children get older. Similarly, Maori and Pacific Island children were more likely to be in the lowest income quintile partly because their parents tended to be younger than other parents and people’s incomes generally rise with their age, and partly because they were more likely to live in lone parent families that have much lower average incomes than the rest of the population.

Once factors associated with ethnicity that are particularly important for later outcomes, such as education and skills, are taken into account, the relationship between Maori and Pacific ethnicity and poor outcomes is much reduced, though it does not disappear, suggesting that the direct effect of ethnicity is far less than the raw correlations would suggest.

This, in turn, raises the question of why poorer educational attainment and low skills are disproportionately concentrated in the Maori and Pacific Island population, given their importance for later outcomes and destinations. A wide range of explanations has been advanced.

From an historical perspective, the position of Maori as an indigenous people in a country subject to European colonisation is potentially relevant. Immigrant settlement has involved a substantial impact on Maori social and political organisation, demography and economic life. While undoubtedly much of this impact has been negative (as reflected in processes established to redress historic Treaty of Waitangi grievances) for better or for worse it has set indigenous and immigrant peoples on substantially and increasingly shared processes of development, but from very different starting points. The last 50 years have seen a substantial (though uneven and incomplete) convergence between Maori and non-Maori on a range of outcomes commonly used to measure development (including educational attainment and income) (Treasury 2001b).

A different starting point for recent migrants from the Pacific is also part of the explanation. International evidence points to a slow process (a century long in the case of some groups in the US) of convergence in social and economic outcomes between immigrants from less developed countries and the native population of the host country (Treasury 2001b).

The question therefore is not so much why disparities have existed in the past, but rather why they are so persistent. One possible explanation is discriminatory behaviour in the provision of services, and in access to economic opportunities, particularly in the provision of credit and employment. However, the fact that income disparities between Maori and non-Maori diminish as educational qualifications rise suggests that if discrimination in the labour market is important, it is likely to be operating more amongst the low skilled (Treasury 2001b). Other explanations for persisting disparities relate to cultural differences in values and aspirations, and to culturally inappropriate design of goods and services.

Even without discrimination, models of the inter-generational transmission of inequality suggest that disparities will be persistent (Lundberg and Startz 1998). Children’s outcomes in one generation depend on the success of their parents in the previous (Borjas 1992). In addition they also depend on the resources (such as schools and social and economic networks) available in their communities to assist with providing them with the skills and capabilities to be successful. On both these counts, Maori and Pacific children are, on average, disadvantaged relative to the rest of the population (Chapple 2000, Howden-Chapman and Tobias 2000, Maani 2000b). Because of this, even without active barriers to current achievement, reduction in disparities is likely to be a slow process.