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Labour Force Participation and GDP in New Zealand - WP 04/07

Publication Details

  • Labour Force Participation and GDP in New Zealand
  • Published: Jun 2004
  • Status: Current
  • Author: Bryant, John
  • JEL Classification: J21; J24; O12; O56
  • Hard copy: Available in HTML and PDF formats only.
 

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

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Abstract

Table of Contents

List of Tables

List of Figures

1  Introduction

2  International comparison of labour force participation rates

3  Modelling the effect of increased labour force participation on GDP

  • 3.1 Labour force participation scenarios
  • 3.2 New employees
  • 3.3 The hours and productivity of the new employees
  • 3.4 The extra GDP generated by the new employees

4  Alternative specifications

5  Conclusion

References

Appendix 1 – Supplementary data

Appendix 2 – Calculation of GDP per hour

Appendix 3 – Deriving age-specific employment rates for Alternative Specification 5

Appendix 4 – Adjusting women’s labour force participation rates for paid maternity leave

twp04-07v2.pdf (348 KB) pp. 1–21

List of Tables

List of Figures

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.

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