In the CIE AS courses labour participation is examined in Unit 5. Here is a graph from the book entitled: The New Zealand Economy – Lattimore & Eaqub 2011. How is it worked out? Below is a flow chart explaining it.
The participation rate of people of working age in the labour force is also quite variable over time – see graph below.
Recession – participation rates tend to fall as people who have lost their job will sometimes move into full-time training to develop new skills or leave the labour force as they become despondent about finding a paid job. In New Zealand rates fell after the recessions of 1985, 1997, and 2008.
Boom – participation rates tend to rise as people see that there is greater opportunity for acquiring gainful employment. In New Zealand rates increased with upswings in the business cycle – 1993 and 2001.
Government policy can also influence labour force participation. If wages increase for younger people or older people, or if tertiary education fees rise, the participation rate will typically rise. If welfare benefits for single parents rise, the participation rate can be expected to fall.
Although the recent figures for the rate of unemployment in New Zealand have increased from 6.4% to 6.7% there are some interesting statistics with regards to participation rates and employment rates.
The employment rate increased 64.2% of the total working-age population, from 63.9%. The BNZ highlighted the following:
1. The unemployment rate hasn’t been affected too greatly during the last 4 years as NZ nears the bottom of the economic cycle;
2. NZ employment rate has settled well above that seen following the 1998 recession and significantly above that which was experienced following the early-1990s recession;
3. New Zealand’s early-1990s employment rate is about where a lot of the troubled developed-world economies now find themselves – Greece, Spain, and even the US. See graph below;
4. New Zealand, in contrast now has one of the highest employment rates in the world (testimony to its relatively high participation rate, coupled with a high rate of placement into jobs).
With firms indicating that it is their intention to take on more staff the BNZ estimate that the unemployment rate will be:
6.2% Dec 2012
5.6% Dec 2013