How New Zealand Solved It’s Worker Shortage Crisis

Written by:
12 February 2024
How New Zealand Solved It’s Worker Shortage Crisis - Featured image

Australia is currently experiencing unprecedented, yet persistent, worker shortages. According to the latest data released by the Australian Bureau of Statistics, the number of job vacancies across the Australian economy—meaning a job position that is available for immediate filling and for which recruitment action has been taken—is currently above 388,000.

Worker shortages make it difficult for entrepreneurs and investors to create or expand a business, and this in turn negatively affects government revenue. Previous economic analysis by the Institute of Public Affairs (IPA) has found that this crisis accounts for  $32 billion in foregone wages annually, and  $7 billion in foregone income tax revenue.

Recently released IPA research found that there are effective reforms available to the federal government to resolve the worker shortage challenges currently facing Australia. These include reforming welfare laws so that pensioners, veterans, and students are not penalised under the complex rules that reduce benefits if recipients are active in the labour force.

The IPA research has observed that pensioner workforce participation in Australia is atypical in an international context. For instance, in New Zealand 25.2 per cent of pensioners work, compared to  3 per cent in Australia. This report compares and contrasts the social services legislation in New Zealand and Australia, and explores the relationship of this legislation to labour force participation and job vacancies, with a particular focus on the period 2019 to 2023.

The Ministry of Business, Innovation & Employment in New Zealand produces statistics on job vacancies with a proxy measure titled ‘Jobs Online’. It is a regular data series that measures online job advertisement from Seek, Trade Me Jobs, and Education Gazette. This data series doesn’t produce raw numbers, but rather indexes the percentage increases of vacancies at December 2010 levels. This is unlike the Australian Bureau of Statistics’ use of raw numbers in its Job Vacancy data series.

Another difference is that while both the New Zealand and Australia data is collected in quarterly periods, the quarters used in each do not align. To address this inconsistency, this report smooths out the data sets by creating a yearly average and indexes Australia’s and New Zealand’s level of job vacancies at 2019 levels. 

From this, the analysis compares how both countries have recovered from the increase in job vacancies caused by governmental responses to the COVID-19 pandemic.

The analysis finds: 
New Zealand has recovered from the sharp increase in job vacancies during the COVID-19 period of labour market disruption and is now just 5.4 percent above the number of vacancies in 2019. This is in sharp contrast to Australia, where job vacancies are almost 85 per cent above 2019 levels.

  • New Zealand’s job vacancy recovery is due to its higher labour participation rate, particularly among pensioners. In the December 2023 quarter, New Zealand’s labour participation rate (71.9 per cent) was 5.1 percentage points higher than Australia’s (66.8 per cent).
  • 90 per cent of the difference between Australia’s and New Zealand’s participation rate is attributable to the gap in pensioner participation. One in four New Zealand pensioners work, compared to only 3 per cent of pensioners in Australia. However, if New Zealand pensioners participated in work at the same rate as Australian pensioners, there would be almost 197,000 more unfilled jobs and the labour force participation rate would be 67.3 per cent.
  • Following New Zealand’s lead by allowing Australian pensioners and veterans to work without being subject to excessive tax rates would help increase Australia’s participation rate and alleviate Australia’s persistent worker shortage crisis. Adopting New Zealand’s pensioner and veteran work rules could result in 520,000 more Australians participating in the labour force. This is 34 per cent higher than the 388,000 job vacancies currently in Australia.

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