The New Zealand workforce is changing rapidly.
Over the past 20 years there has been a massive 488 per cent increase in the number of those aged 65 years and over in employment, from 23,800 to 139,090, while there has been a mere 7 per cent increase in the number of employed 15 to 24-year-olds, from 324,200 to 347,700.
These trends, which are expected to continue, are having a big impact on the financial positions of our older and younger generations.
The accompanying table is derived from Statistics New Zealand’s Household Labour Force Survey. This survey assesses the number of individuals in each age group, the number who want to work and those employed and unemployed.
The survey’s participation rate is the percentage of any age group who would like to work. For example, in the March 2016 survey there were 645,800 individuals in the 65 years-plus age group, but only 142,200 of them wanted to work, representing a participation rate of 22 per cent.
Only 2,300 of these 142,200 individuals were out of work but looking, an unemployment rate of just 1.6 per cent for the 65-plus age group.
By comparison 59,400 of the 407,100 individuals in the 15 to 24 age group wanting work were unemployed, an unemployment rate of 14.6 per cent.
There have been three major workplace changes in recent decades: an ageing society as post-WWII baby boomers reach their sixties; the transformation of the New Zealand economy from one based on manufacturing and manual labour, to a service and white collar based workforce; and the huge increase in female workforce participation.
The dramatic increase in 65-plus workers is expected to continue, with Statistic NZ’s medium projections indicating that workforce participation by those aged 65 years and over will increase from 142,200 at present to 229,000 in 2023 and 278,000 in 2028. This is the number in the 65-plus group who want to work, not the total number in this age group.
Meanwhile, the number of 15 to 24-year-olds in the workforce is projected to remain relatively static over the next decade or so.
Baby boomers are fortunate that the economy has an increasing number of desk and service sector jobs as they reach their late 60s and early 70s.
The number of manufacturing jobs has declined from 242,400 to 193,500 since 1996, and forestry and mining employs only 10,200 workers now, compared with 14,600 two decades ago.
Meanwhile, employee numbers in the professional and administrative support services sector soared from 119,400 to 260,500 since 1996. The retail sector has 195,300 employees compared with only 146,300 in 1996 and accommodation and food services employs 149,900 compared with 88,800 two decades ago.
Manufacturing was the the biggest employer by a wide margin in 1996 but it now ranks well behind the professional and administrative support services sector, the healthcare and social assistance sector and retail.
This economic transformation has benefited older workers and females. For example, only 26 per cent of manufacturing workers are women while female workers represent 45 per cent of the professional and administrative support services workforce, 82 per cent of healthcare and social assistance workers and 59 per cent of retail employees.
One of the most dramatic changes since 1996 has been the increase in the female participation rate, from 56.1 per cent to 63.6 per cent, while the male participation rate has remained steady at just over 74 per cent.
Female participation in the 55 to 64 age group has soared from 39.6 per cent to 72.8 per cent since 1996 as more women return to the workforce after their children leave home. This has been facilitated by the huge increase in white collar and service sector jobs.
It is extremely difficult for older men with manual jobs to remain in the workforce after 60, and women 55 and over could not return to work unless there were a large number of white collar and service sector opportunities.
Another development is the reduction in the 15 to 24-year-old participation rate, from 67.3 per cent to 62.2 per cent since 1996. This is because more and more young people are continuing their education into their mid-20s, with 202,600 individuals in the 15 to 24 age group now involved in post-secondary school education.
The clear winners in the modern economy are older workers, particularly women. This is a fairly remarkable development as many older workers find it difficult to master the recent huge advances and changes in technology.
There are only 1,400 unemployed males in the 65-plus age group and 900 unemployed females. By comparison, there are 31,200 unemployed males in the 15 to 24 age group and 28,200 unemployed females, for an overall unemployment rate of 14.6 per cent.
Individuals in the 15 to 24 age group, particularly those without educational qualifications, are struggling because they are either underqualified or lack the personal skills to work in the professional, retail or services sectors.
This is a worldwide problem as the unemployment rate in the 15 to 25-year age group is over 50 per cent in Greece, 45.5 per cent in Spain, 36.7 per cent in Italy and 30.7 per cent in Portugal. In a number of these countries the unemployment rate for 15 to 24-year-old females is higher than for males in the same age group, indicating that these economies still have a high percentage of manual jobs.
The transformation of the New Zealand economy from low skilled manual jobs to high skilled professional and services sector employment has major implications for the younger and older generations.
Young males with limited education don’t have as many opportunities as they did in the past, while young people with good qualifications can end up with large student loans. Meanwhile, older men and women find it easer to find and keep jobs.
These workforce changes are having an impact on the financial position of the younger and older generations.
Take for example a young couple in their early thirties with two children living in Auckland. They both have university degrees and large student loans. They purchased a modest house in Auckland for $1.5 million with $100,000 of their own equity, a $350,000 loan from their parents and a $1,050,000 mortgage.
They both work, put their pre-school children in daycare and have withdrawn funds from KiwiSaver to purchase their first home.
This young, well-educated couple are under huge financial pressure.
At the other end of the scale are a couple in their late 60s who both continue to have well-paid jobs. Their home, which is now worth $1.5 million, was purchased for $250,000 in the mid 1980s and they have fully repaid their mortgage.
They have their own company-sponsored superannuation schemes and are receiving national superannuation. They expect to work until their mid-70s and move into a retirement village in their late 70s.
Their children, who could be similar to the young couple described above, can expect an inheritance but this will be substantially eroded by long overseas holidays, retirement village costs and health expenditure.
Could the current 20 to 40-year-old generation be one of the first to be less well off than their parents?
Brian Gaynor is an investment analyst and the Executive Director of Milford Asset Management.