Demographics and the employment rate

The NY Fed has an interesting take on the impact of demographics on the employment rate. They argue that you need to make adjustments for demographic and other effects to get a clear picture of the economic cycle. On this basis, our labour market performance between 2006 and 2013 is roughly a 1/3 better (or 1/3 less bad)!

A did a quick decomposition of employment data by age group from the Census. It shows that the employment rate, employed share of the working age population, has fallen from 65.0% to 62.3%. This 2.7%point decline can be roughly broken down to:

  • roughly 1/3 is from the age composition effect (1.0%pt)
  • remaining 2/3 is within age group and other factors. (1.8%pt)

Looking within the age groups it is clear to see there are large changes within age groups. Older people are still less likely to work than young, but the current generation of oldies are staying in employment for longer.

Between 2006 and 2013, the employment rate rose for only those aged between 60-84. The rest were worse off.


4 replies
  1. Eric Crampton
    Eric Crampton says:

    2006’s a pretty poor choice of base year, though one that the Census kinda forces. Last I’d looked at HLFS, 2006 was about an all-time high on the employment rate. 2005/6 is also when I was nervous as hell that RBNZ was ignoring crazy high inflation rates and capacity constraints. About the only cohorts that could have had an increase relative to 2006 would have been the elderly.

    It would be way too easy to look at your graph and put a “National’s screwed up the labour market” story on it when the (to me) more plausible alternative is that NZ was running hella-hot 2005-6 relative to historic norms.

    • Shamubeel Eaqub
      Shamubeel Eaqub says:

      Hi Eric and Matt, Good point re the cyclical position. In this instance I was specifically interested to see how much of the ‘recession’ was really cyclical factors and how much can be explained by demographic factors. I will have a look at the 2001 data at some stage, it just wasn’t handily available in the ridiculous spreadsheets Stats NZ publish.

      I despise attributing economic conditions to government of the day – policy effects are seen over much longer periods.

      • Eric Crampton
        Eric Crampton says:

        All good. Was more noting that even where I know you had nothing but great intentions here, Labour’s been pushing tons of “Since National Took Office” nonsense, as though there weren’t some international recession in the interim and as though we weren’t pretty overheated in the mid 2000s; seems pretty likely they’d pick up this kind of thing and attribute it entirely to government effects.

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