Labour Force Participation and GDP in New Zealand
New Zealand Treasury Working Paper 04/07
Published June 2004
Authors: John Bryant, Veronica Jacobsen, Matthew Bell and Daniel Garrett
Abstract
New Zealand’s participation rates are high relative to the OECD, and similar OECD countries. However, there is scope for increasing participation, particularly among young women. Increases in labour force participation could make a contribution towards closing the income gap between New Zealand and wealthier OECD countries. In this paper we calculate the effect on GDP of hypothetical increases in employment from increased participation, taking into account the differences in productivity between new and existing workers. The results suggest that increasing the labour force participation of women aged 25-34 to the average, adjusted for paid maternity leave, of the top 5 OECD nations increases employment by 28,800 and generates an additional $1,215million of GDP, making GDP 1.0% higher than it actually was in the baseline year 2001. Raising participation overall to the average of the top 5 OECD countries increases employment by 142,600 and generates additional $6,101 million of GDP, an increase of 5.1% more than it would otherwise have been.
Contents
Acknowledgements
We are grateful to Barbara Annesley, Keith Walton and Tracy Mears for their assistance. We would also like to thank Bob Buckle, John Creedy, David Grimmond, David Gruen, Kam Szeto and David Rae for their comments on a draft of the paper. The paper was completed while Daniel Garrett was a summer intern at the Treasury.
Disclaimer
The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury. The Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but to inform and stimulate wider debate.
