2  International comparison of labour force participation rates

In this section, we compare New Zealand’s labour force participation rates with those of a selection of similar OECD countries. The selection of countries is identical to that used by the Australian Commonwealth Treasury in a similar investigation of participation and GDP (Gruen and Garbutt 2003: 3). Korea, Mexico, the Slovak Republic, and Turkey are excluded on the grounds that government social expenditures are very low, resulting in much stronger incentives to remain in work in older ages. Hungary is also excluded because it lacks data on social expenditures, and Luxembourg because its employment data appear to include non-residents. This leaves 24 countries.[2]

Figure 1 shows trends in New Zealand’s labour force participation rates, and indicates how these compare with other countries in our sample. As can be seen in the left panel, the rate for New Zealand women aged 25-34 has been relatively low since the late 1980s. In 2001 it was well under the median rate for countries in our sample. While the New Zealand data has been adjusted for paid maternity leave (see Appendix 4) and the OECD median has not, even the unadjusted New Zealand data falls well below the median. The New Zealand data is also nearly 13 points below the average rate for the 5 countries with the highest participation rates for women aged 25-34, after they have been adjusted for paid maternity leave. In contrast, New Zealand’s “overall” participation rate, for the whole population aged 15 or more, has been relatively high. The participation rates for 2001 implied by the scenarios described in the next section are marked with an X.

Figure 1 – Labour force participation rates, females aged 25-34, and population aged 15 and over

Women aged 25-34

Population aged 15 and over

 

Source: calculated from data in the OECD Labour Market Data online database.

Notes – The sample of OECD countries excludes the following: Hungary, Korea, Luxembourg, Mexico, the Slovak Republic, and Turkey. Participation rates are defined as the percent of people in a given age group who work or are actively looking for work.

Figure 2 provides more detail on age-specific participation rates in 2001. The data used to construct the figure, plus comparable data on employment and unemployment rates, are given in Appendix Tables 1 and 2. As can be seen in Figure 2, participation rates for New Zealand males are similar to the sample medians in the middle age groups, but are relatively high in the youngest and oldest age groups. The pattern for New Zealand females is similar, except that—consistent with Figure 1—the rate for females aged 25-34 is relatively low.

The participation rates for young women are different from those of other groups for a number of reasons. Women, particularly those that are highly skilled, are likely to enter the workforce and work full-time through their twenties before family responsibilities and motherhood appear to encourage many to work only part-time. Although participation rates recover for women over forty, there seems to remain a preference for part-time work. This broad pattern is consistent with the observation of Jaumotte (2003: 20) that New Zealand is one of a group of OECD countries with below-average public childcare spending and above-average part-time female employment.

Figure 2 – Labour force participation rates, 2001

Males

Females

 

Source: calculated from data in the OECD Labour Market Data online database.

At all ages, females with no qualifications have the lowest participation rate, although it increases steadily with age until 45-59 years old and then declines. In general, women with tertiary qualifications have higher participation rates, although the effect is confounded for young women, presumably as a result of participation in education (although, it should be noted that few in the 15 to 19 age group have finished a degree). Women with post compulsory schooling qualifications all exhibit a dip in participation, presumably associated with childbearing, and the dip occurs at later ages for those with higher qualifications. This pattern is likely to reflect the opportunity cost of childbearing for these women.