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Underutilisation rates in New Zealand
Key findings

Underutilisation is an aggregate measure of individuals within a workforce that have more capacity to work. As individuals move from being underutilised to working at full capacity, the industry they move into can provide insight into where there has been a historic success in attracting previously untapped capacity in the New Zealand labour market.
Women are shown to have higher underutilisation rates than men. As they move out of being underutilised, women are least likely to transition into construction (out of the sectors explored in this report), while for men, this is the sector that they are most likely to move into. This suggests that the construction industry is an attractive employment option for underutilised men, but the least attractive for women as women mostly transition into retail (from the sectors explored). In addition, younger age groups show higher underutilisation rates thus, confirming the need for youth investment initiatives. These conclusions are consistent across all regions in New Zealand.

Introduction

Underutilisation is a measure of labour market efficiency capturing the proportion of the population that are not being fully utilised in the labour force. It considers not only unemployment and underemployment but the additional inefficiencies and inequalities in the labour market. This measure represents a useful way to understand employment in New Zealand and the untapped potential the labour force holds.

The workforce capabilities and gaps in New Zealand are explored in this report with a focus on gender, age and geographic location. The transition of individuals from underutilisation into the workforce is explored to draw out potential new sources for new workers in specific industries.

Methodology

Underutilisation statistics are derived from the Household Labour Force Survey (HLFS) which can be found in Statistics New Zealand’s Integrated Data Infrastructure (IDI). The underutilised population is made up from those that are either unemployed, underemployed or in the potential labour force (available and unavailable job seekers). Below are the definitions of these four components:

  • Unemployed: Those not in any form of formal employment. This would include NEETs (Not in Education, Employment or Training).
  • Underemployed: This refers to persons who are employed but would prefer to work more hours. Note that in the Household Labour Force Survey underemployment does not capture skills related to under-employment. It only refers to hours-based under-employment. If for example, someone with a master’s degree was working as a receptionist, this form of under-employment would not be captured.
  • Available job seekers: Those who are not employed and are not seeking work but may work if a job was offered to them.
  • Unavailable job seekers: Persons who are not employed and are not seeking paid work but may start searching soon.

One of the focuses of this report is the underutilisation in the construction sector. To derive the underutilisation rates in the construction sector, individuals from the HLFS and their IRD number were combined to determine whether they will be employed in the construction sector within three years of being classed as underutilised.

Underutilisation rates by age and gender

Underutilisation rates can be broken down by age and gender, as shown in the chart below. After the 2008 financial crisis, a 5% increase in underutilisation rates can be observed across the whole population. The higher rates have maintained at these higher levels since with slight declines in the 20-34 age group. It can be observed that overall women have higher underutilisation rates than their male counterparts, which is consistent with every age group.

Age has also shown to have a negative correlation with underutilisation rates, meaning the older the age group the less underutilised they are. The age results may be slightly overestimated as they include individuals that are participating in education, hence working less or not at all. However, the results do suggest that there could be cause for concern for youth underutilisation. This issue is being addressed by the New Zealand Government with a $63m investment into youth investment initiatives.

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Methodology

Data is derived from the Household Labour Force Survey (HLFS) through the Integrated Data Infrastructure.

Underutilisation is a measurement of labour force efficiency. It combines those working but seeking more hours of work (underemployment), those seeking work (unemployment), as well as those who aren't seeking working but would either take a job if offered or will start seeking work soon (potential labour force).

The HLFS does not capture those those who are employed under their skill level, e.g. someone working in a fast food chain with a masters degree in engineering.

Employment of underutilised people in construction

The chart below represents the proportion of underutilised workers who will find employment in select industries within three years of becoming underutilised. The construction industry, as of 2017, is shown to be at the two extremes for males and females. Women are least likely to transition from an underutilised status into being employed in construction out of the industries explored. Men, on the other hand, from 2013 have been more likely to transition into the construction industry than into manufacturing, retail or agriculture. This suggests that employment in the construction industry is more attractive to males with females being drawn into alternative industries, such as retail.

The result of women showing a low transition rate into construction from underutilisation is surprising considering that female participation in the construction industry is growing. This trend may demonstrate that females moving into the construction industry are coming from alternative sources. Underutilised women could, therefore, be a fruitful alternative for attracting women into construction.

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Methodology

We link individuals who report being underutilised in the Household Labour Force Survey through to their tax records and determine how many go on to find employment in the construction industry within the next three years.

Underutilization is a measurement of labour force efficiency. It combines those working but seeking more hours of work (underemployment), those seeking work (unemployment), as well as those who aren't seeking working but would either take a job if offered or will start seeking work soon (potential labour force).

The HLFS does not capture those those who are employed under their skill level, e.g. someone working in a fast food chain with a masters degree in engineering.

Underutilisation by gender and region

The chart below demonstrates the spread of underutilisation rates of males and females across the regions in New Zealand. Across all regions, it can be observed that females remain above males in terms of underutilisation rates. Generally, male underutilisation sat 2-5% lower than females across the regions.

As of 2018, Manawatū-Wanganui is the region with the highest underutilisation rates. From 2008 to 2016 the region with the highest rates was Northland but has recently been surpassed by Manawatū-Wanganui. This may have been a result of the new investment package in the Northland region providing more employment opportunities. Urban centres, such as Auckland, Wellington and Canterbury, have lower underutilisation levels due to more employment opportunities.

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Methodology

Data is derived from the Household Labour Force Survey (HLFS) through the Integrated Data Infrastructure.

Underutilisation is a measurement of labourforce efficiency. It combines those working but seeking more hours of work (underemployment), those seeking work (unemployment), as well as those who aren't seeking working but would either take a job if offered or will start seeking work soon (potential labourforce).

The HLFS does not capture those those who are employed under their skill level, e.g. someone working in a fast food chain with a masters degree in engineering.

Underutilisation by age and region

The negative relationship between age and underutilisation rates is consistent across all regions. This shows that there is little relation between age and geographic location for underutilisation.

Download data

Methodology

Data is derived from the Household Labour Force Survey (HLFS) through the Integrated Data Infrastructure.

Underutilisation is a measurement of labourforce efficiency. It combines those working but seeking more hours of work (underemployment), those seeking work (unemployment), as well as those who aren't seeking working but would either take a job if offered or will start seeking work soon (potential labourforce).

The HLFS does not capture those those who are employed under their skill level, e.g. someone working in a fast food chain with a masters degree in engineering.

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