The Australian Financial Review
January 15, 1997
Geoff Hogbin's comments about New Zealand in a recent article - "Wage Flexibility is a Clever Move" - are somewhat misleading.
The main impacts of greater wage flexibility appear to have
been in the areas of income distribution and productivity. Wage
workers have had to work many more hours in order to maintain
their income relativity with other stakeholders in the New Zealand
economy. Productivity growth per hour of labour supplied has fallen
significantly below the historical pattern in the 1990s, presumably
because low wages has meant a reduced need by employers to take
steps to raise the productivity of each worker. The labour force
participation rate for males is almost certainly lower in New
Zealand than it is in Australia, although it is higher for females,
reflecting the greater difficulty in New Zealand for a single
earner to support a family. According to official figures, the
percentage of men over 15 employed in New Zealand is three percentage
points higher than in Australia.
. The percentage of such men officially classed as unemployed is similarly lower in New Zealand. But comparisons are made difficult by differences in the processing and presentation of the data. The Australian data I have is for the civilian population only. More importantly, Australian labour force survey data is adjusted to the quinquennial census. New Zealand data is left unadjusted, despite significant discrepancies between the 1986 and 1991 censuses and the surveys. After making the necessary corrections, the New Zealand male employment rate comes out as about the same as Australia's, and the percentage of working age males classed as outside the labour force becomes higher. This last problem, of discouraged workers, reflects an area of considerable inflexibility in the New Zealand labour market. It relates to the very tight means-testing procedures faced by social security recipients. While there has been a proliferation of parttime jobs, very few people on social welfare benefits are willing to give up their benefits for parttime or insecure employment. This applies equally to their partners. Compared to Australia, New Zealand has more women and more young people employed. Many are over-employed, in that they are also secondary or tertiary students, or caregivers of young children who would prefer to work less. Since the raising of the age of eligibility for a public pension in 1991, there has also been rapid employment growth amongst older Kiwis. These groups are largely on the margins of the labour force. New Zealand still faces a major problem in providing satisfactory employment opportunities for middleaged adult males and for young adults generally.
© 1997 Keith Rankin
Keith Rankin teaches economic history at the University of Auckland.
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