Labour force participation rate

IBISWorld forecasts the labour force participation rate to fall by 0.64 percentage points in 2024-25, to reach 71.33%. This slump is expected to be in response to subdued economic activity. The labour force participation rate typically falls during periods of weak economic activity. A rise in the unemployment rate often characterises these periods. Some unemployed individuals do not immediately seek work, which is considered an exit from the labour force. For this reason, the sharp rise in unemployment in 2024-25 is projected to cause a decline in the labour force participation rate over the year.

The labour force participation rate has been trending upwards over several decades. New Zealand's ageing population has had a mostly positive effect on workforce participation over the past five years. Healthcare improvements have resulted in better health among older workers, allowing many individuals to prolong their careers. Technological changes that have reduced the manual intensity of some labour functions have also supported longer working lives. Even so, population ageing also places slight downward pressure on the labour force participation rate, as workers who reach retirement stop seeking employment. Therefore, these individuals are excluded from the workforce.

Changing social norms have had a mixed effect on the labour force participation rate over several decades and over the past five years. Females have increasingly been entering the workforce as parenting norms continue to evolve. The labour force participation rate among women aged between 25 and 54 years old has risen over the period. Meanwhile, participation among males in the same age bracket has inched upwards, albeit at a slower rate over the past five years. Also reflective of evolving social norms, this only small hike is partially attributable to more males taking on stay-at-home parenting roles. In addition, younger males are also becoming increasingly likely to complete secondary and tertiary education before entering the workforce. Even so, the COVID-19 pandemic has normalised flexible work arrangements, allowing many younger males to take up part-time work alongside studies. This has partly contributed to the labour force participation rate among males aged between 15 and 19 years rising over the past five years. For both sexes, labour force participation among people aged 65 and over has risen strongly over the period. This is in response to an increasing number of New Zealanders pushing back retirement. Overall, the prevailing upward pressures of increasing participation among females and older New Zealanders are expected to more than offset the slump in the labour force participation rate during the COVID-19 pandemic and the current year. IBISWorld forecasts the participation rate to increase at an average annual rate of 0.15 percentage points over the five years through 2024-25.