Are older workers youth job threat?

BNZ economist Stephen Toplis wants the Government's policy-makers to get a better understanding of the way the nation's labour market is working.

"There's a lot of wild and woolly stuff going on that is raising significant question marks over whether the necessary labour supply is available to meet New Zealand's ongoing growth needs." Policy-makers at both Treasury and the Reserve Bank would need a deep understanding of the labour market to set the ground rules, he said.

There had been a disproportionate rise in the nation's youth unemployment rate for workers aged 15 to 19 years, which was now a "staggering" 27.5%, and the next age group - 20 to 24 years - had a rate of 13.5%.

Workers over 25 - who could be seen as a proxy for "skilled workers" - had a rate of just 4.6%, lower than the 6.3% peak level for that age group in 1998 and 8.5% in 1992.

On average, the youth unemployment rate had been 11.8 percentage points higher than the non-youth rate since 1986, but by March this year that difference had climbed to 21.9 percentage points.

Whatever the reason for youth unemployment being so high, there were three key risks involved, Mr Toplis said.

They were: social problems associated with a high number of young unemployed; the future social problems if the young people were unemployed for a sustained period because of lack of access to jobs; immediate inflationary problems if labour supply could not match demand.

But he said it was "curious" that despite the relative surge in the youth unemployment rate, the proportion of unemployed people who were youths had actually fallen.

"What this means is that youth employment fell and rather than unemployment rising, folk simply left the labour force altogether," he said.

Between the peak in youth employment at the end of 2007 and now there were 50,500 fewer workers in the 15-19 year age group, a fall of 31.6%, even though there had been an increase of 2400 in the total number of people employed.

"The oldies are on the march ... it's an oldies takeover."

Despite the general economic malaise, more than 56,000 people aged over 60 found jobs over the same period, and 41% of them were aged 65 and over.

Reasons could include people living longer and in better health, rising costs making life on a benefit more uncomfortable, and reduced investment earnings and general wealth losses for older people requiring them to work longer than planned.

It was probably positive for the economy to have people work longer, and for young people to stay longer at school.

"But is the growing participation rate of the older generation crowding out opportunities for the youth of today to enter the labour force?"

It was important to find out exactly what was happening, including whether the kinds of jobs the elderly were taking were the sort that young people could have done.

"As things stand, we maintain our view that the labour market is probably tighter than many care to believe.

"The ultimate impact of this is to lower the economy's potential growth rate."