Jobs for Youth/Des emplois pour les jeunes : New Zealandborbelytiborbors.extra.hu/EGYEB/JfY_NZ.pdfNew Zealand, Spain, United Kingdom and United States) have decided to participate

Jobs for Youth

NEW ZEALANDDes emplois pour les jeunes

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ISBN 978-92-64-04185-1 81 2008 03 1 P

Jobs for Youth

NEW ZEALANDImproving the performance of youth on the labour market is a crucial challenge in OECD countries facing persistent youth unemployment. As labour markets become more and more selective, a lack of relevant skills brings a higher risk of unemployment. Whatever the level of qualification, first experiences on the labour market have a profound influence on later working life. Getting off to a good start facilitates integration and lays the foundation for a good career, while a failure can be difficult to make up.

Ensuring a good start will require co-ordinated policies to bring the education system closer to the labour market, to help disadvantaged young people to find a job or participate in a training course and to facilitate the hiring of young people by firms.

OECD has launched a series of reports on the school-to-work transition process in sixteen countries including New Zealand. Each report contains a survey of the main barriers to employment for young people, an assessment of the adequacy and effectiveness of existing measures to improve the transition from school-to-work, and a set of policy recommendations for further action by the public authorities and social partners.

This report is based on the proceedings of a seminar and is published in English only. However, a French translation of the summary and main recommendations has been included in this volume.

Already published in the same series:

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FOREWORD – 3

JOBS FOR YOUTH – NEW ZEALAND – ISBN-978-92-64-04185-1 © OECD 2008

FOREWORD

The OECD’s Employment, Labour and Social Affairs Committee has decided to carry out a thematic review of policies to facilitate the transition from school to work and to improve the career perspectives of youth. This review is a key part of the implementation of the reassessed OECD Jobs Strategy.

Sixteen countries (Australia, Belgium, Canada, Korea, Denmark, France, Greece, Japan, Netherlands, Norway, Poland, Slovak Republic, New Zealand, Spain, United Kingdom and United States) have decided to participate in this review which will take place between 2006 and 2009. Once all these countries have been reviewed, a synthesis report will be prepared highlighting the main issues and policy recommendations. The policies recommended in the synthesis report will be discussed at the OECD’s Employment, Labour and Social Affairs Committee, preferably within the framework of a High-level Forum which would be devoted to “Jobs for Youth”.

In this thematic review, the term “youth” encompasses teenagers (i.e. youth aged 15/16-19) as well as young adults (aged 20-24 and 25-29).

This report on New Zealand was prepared by Glenda Quintini with input from a consultant, Sholeh Maani, Associate Professor in Economics, The University of Auckland. Statistical assistance was provided by Sylvie Cimper and Thomas Manfredi. It is the sixth such country report prepared in the context of this thematic review. A draft of this report was presented at a seminar which was organised in Wellington on 16 October 2007 by the Ministry of Youth Development.

TABLE OF CONTENTS – 5


TABLE OF CONTENTS

Summary and Main Recommendations ................................................................ 9

Résumé et principales recommandations ........................................................... 21

Introduction ......................................................................................................... 37

CHAPTER 1. THE CHALLENGE AHEAD.................................................. 39

1. Economic performance and present barriers to further expansion .......... 39 2. The labour market performance of New Zealand youth .......................... 45 3. The transition from school to work in New Zealand ............................... 50 4. Characteristics of jobs performed by youth: stepping stones or traps? ......... 55 5. Low pay among youth ............................................................................. 59 6. Mismatch between studies and entry jobs ............................................... 60 7. Key points ................................................................................................ 60

CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB.. 63

1. Performance of the education system ...................................................... 64 2. Combating early school-leaving in New Zealand ................................... 68 3. The challenges faced by the tertiary education system............................ 86 4. Between school and work ........................................................................ 98 5. Work-based learning in New Zealand ................................................... 103 6. Key points .............................................................................................. 107

CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS ........................ 109

1. Employers’ views of youth labour market readiness ............................. 109 2. Wages and labour costs ......................................................................... 110 3. Skill shortages and working conditions ................................................. 117 4. The strictness of employment protection legislation

in New Zealand...................................................................................... 119 5. Key points .............................................................................................. 120

CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK ..................................... 123

1. The role of passive labour market measures for youth .......................... 124 2. Activation of unemployed youth ........................................................... 128 3. The community approach to activating inactive youth .......................... 138 4. Key points .............................................................................................. 147

Bibliography ..................................................................................................... 149

6 – TABLE OF CONTENTS


List of Boxes

Box 1.1. Measuring the time needed to find a first job after leaving education ....................................................................... 53

Box 1.2. Non-standard work in New Zealand .......................................... 56 Box 2.1. Strategies to reduce dropout rates and their relevance

to New Zealand .......................................................................... 70 Box 2.2. The role of early childhood and pre-school programmes

in reducing school difficulties of children from disadvantaged families ...................................................................................... 72

Box 2.3. Blits on dropouts: a Dutch programme to tackle early school leaving ............................................................................ 75

Box 2.4. The Suspension Reduction Initiative (SRI) ............................... 77 Box 2.5. He Huarahi Tamariki ................................................................. 79 Box 2.6. Vocational learning in New Zealand’s secondary schools:

the Secondary Tertiary Alignment Resource and Gateway ....... 82 Box 2.7. Polytechnic education in Finland: a successful reform

of tertiary education ................................................................... 98 Box 2.8. The impact of students’ work on future labour market

performance: evidence from other OECD countries ................ 101 Box 3.1. The minimum wage and youth employment:

international evidence .............................................................. 115 Box 3.2. An historical overview of industrial relations in New Zealand .. 120 Box 4.1. The Domestic Purposes Benefit and the Sickness Benefit

in New Zealand ........................................................................ 127 Box 4.2. Active Labour Market Policies for youth ................................ 129 Box 4.3. Training provision in New Zealand ......................................... 134 Box 4.4. Evidence on the effectiveness of Training Opportunities

Programmes for the unemployed in New Zealand ................... 136 Box 4.5. How is youth disadvantage defined? ....................................... 140 Box 4.6. The US Job Corps programme ................................................. 146

List of Figures

Figure 1.1. Decomposition of GDP per capita growth in OECD countries, 1995-2005 ................................................................................... 40

Figure 1.2. Skill shortages in the labour market, New Zealand, 1986-2007 .. 42 Figure 1.3. Share of youth in working-age population in OECD countries,

1975-2025 ................................................................................... 43 Figure 1.4. Youth unemployment and employment indicators, 1986-2006 ... 46 Figure 1.5. Youth unemployment and employment indicators by gender,

OECD countries, 2006 ................................................................ 47 Figure 1.6. Incidence of long-term unemployment among youth,

selected OECD countries, 1996 and 2006 .................................. 48

TABLE OF CONTENTS – 7


Figure 1.7. Share of youth neither in employment and nor in education or training, OECD countries, 1996-2005 .................................... 49

Figure 1.8. Activity status of youth aged 15-27, New Zealand and selected OECD countries, 2002/2005 .................................. 52

Figure 1.9. Incidence of temporary work at labour market entry, New Zealand and selected European countries, 2004 ....................................... 57

Figure 1.10. Incidence of part-time and temporary work in the first job of low-skilled youth, 1985-2004................................................. 59

Figure 2.1. New Zealand students’ performance, based on PISA, 2006 ........ 64 Figure 2.2. Variance between and within schools in PISA maths results,

selected OECD countries, 2006 .................................................. 65 Figure 2.3. School drop-outs in OECD countries, 1996 and 2005 ................. 66 Figure 2.4. Retention rates for youth aged 16 years and a half by ethnicity,

New Zealand, 1992-2006 ........................................................... 67 Figure 2.5. Population that has attained tertiary education, 25-34-

and 55-64-year olds, OECD countries, 2005 .............................. 68 Figure 2.6. Unemployment rates by highest educational attainment,

working-age population, New Zealand, 1991-2006 ................... 69 Figure 2.7. Early-leaving exemptions by ethnicity, 2000 and 2005 ............... 74 Figure 2.8. Participation in tertiary education programmes by ethnicity,

youth aged 18-24, 2005 .............................................................. 88 Figure 2.9. University graduation rates by duration of programmes,

selected OECD countries, 2005 .................................................. 88 Figure 2.10. Breakdown of growth in tertiary enrolments by field of study,

New Zealand, 1999-2005 ........................................................... 90 Figure 2.11. Survival rates in tertiary education, selected OECD countries,

2004 ............................................................................................ 90 Figure 2.12. Employment and unemployment gaps between tertiary

and secondary graduates, 15-64, OECD countries, 1991-2005 .. 94 Figure 2.13. Students aged 15/16-24 who work, selected OECD countries,

2004 ............................................................................................ 99 Figure 2.14. Share of young workers aged 16-21 in Modern Apprenticeships,

2000-2006 ................................................................................. 105 Figure 3.1. Wage profiles of full-time workers by gender, New Zealand

and selected OECD countries, 1998-2006 ................................ 112 Figure 3.2. Overall strictness of employment protection legislation and

its three main components, selected OECD countries, 2003 .... 119 Figure 4.1. Beneficiaries of main welfare benefits by ethnicity and age,

1996-2005 ................................................................................. 126

8 – TABLE OF CONTENTS


List of Tables

Table 1.1. Ethnic composition of New Zealand population, 2001-2021........ 44 Table 1.2. Transitions from temporary to permanent work among

New Zealand youth, 2004 ............................................................. 58 Table 1.3. Scoreboard for youth aged 15-24, New Zealand, Europe

and OECD, 1996 and 2006............................................................ 61 Table 2.1. Age at which vocational education can start, OECD countries .... 81 Table 2.2. Earnings advantage of tertiary over upper secondary education,

25-64, selected OECD countries, 2005 ......................................... 92 Table 3.1. Young Māori’s relative wages, 1998-2006 ................................. 113 Table 3.2. Tax wedge including employers’ social security contributions

in OECD countries, 2000 and 2006 ............................................. 116 Table 4.1. Public spending on youth labour market programmes,

selected OECD countries, 1995 and 2002, .................................. 131 Table 4.2. Distribution of youth across labour market programmes,

New Zealand, 1999-2006 ............................................................ 132

SUMMARY AND MAIN RECOMMENDATIONS – 9


SUMMARY AND MAIN RECOMMENDATIONS

The labour market performance of young people

The recent performance of the youth labour market in New Zealand is very good compared with many other OECD countries. Sustained economic growth at a rate of 3% per year on average over the past decade and a very flexible labour market by international standards have contributed to rising employment rates and falling overall unemployment, including for youth. In 2006, the youth unemployment rate was 9.6% compared with an OECD average of 14.7% and the incidence of long-term unemployment was less than 3% compared with an OECD average of almost 21%. In addition, transitions from school to work are relatively smooth in New Zealand. Youth find a first job more quickly and at a younger age than their counterparts in most OECD countries and there is little or no evidence of temporary-work traps. Nevertheless, the current economic slow-down is likely to reveal some remaining weaknesses in the youth labour market that need to be addressed.

First, there is a hard-core of youth who are at high risk of poor labour market outcomes and social exclusion. Among them are most of the 11% of youth aged 15-24 who are neither in employment nor in education or training. This rate is in line with the OECD average, but it is still much higher than the best-performing countries – notably Denmark, Iceland and the Netherlands – where it stands at 6% or less. Among the hard-core group, Māori and Pasifika youth are more than twice as likely not to be in employment, education or training as Pakeha youth (those of European descent). There is evidence that some of the young people neither in employment nor in education or training in New Zealand find it very difficult to get a job or go back to education. About one-third of youth who were not working or studying in 2003 were in the same situation two years later.

Second, not enough young people pursue vocational studies despite excellent labour market prospects offered by many trade professions. At the same time, some tertiary institutions do not provide youth with the skills required in the labour market.

10 – SUMMARY AND MAIN RECOMMENDATIONS


Finally, current labour market policies do not easily reach young people who have disengaged from school at an early age and are not entitled to welfare support. New Zealand presently devotes considerable efforts to trying to overcome this difficulty. However, coordination between the national and community levels requires further fine-tuning.

The purpose of this report is: i) to analyse these barriers to further progress in youth employment, in particular for the most disadvantaged; and ii) to put forward policy options to address these issues.

Recent reforms

Over the past few years, efforts to encourage more youth to pursue vocational studies have been stepped up, particularly through the introduction of a work-based learning initiative in secondary schools – the Gateway programme – and the launch of an apprenticeship programme – the Modern Apprenticeship scheme. The Gateway programme, introduced as a pilot in 2001 and being progressively rolled out nationwide, is designed to strengthen the pathway from secondary school to workplace learning and vocational post-secondary education. The Modern Apprenticeship programme, launched nationwide in 2001, is meant to attract youth to professions in which they are underrepresented and help raise the profile of apprenticeship training. These initiatives have been accompanied by renewed emphasis on career guidance, particularly for youth making tertiary education decisions, through a number of initiatives launched by Career Services – an independent body providing career guidance and advice – and a reinforced role of both schools and StudyLink – the body managing student loans and student allowances for tertiary education.

The recognition of vocational learning experiences – including ou-of-school ones – in the new qualifications system and the imminent introduction of a new curriculum more focused on work-relevant skills may also contribute to increased engagement of pupils at risk of early school leaving.

The New Zealand government has also recently adopted a new Tertiary Education Strategy for 2007-2012, expected to be fully operative in 2008. The Strategy is aimed at improving the quality and labour market relevance of tertiary studies. The crucial change concerns the shift away from a system in which funding was based on students’ intake, to one based on labour market outcomes. Course provision will be linked to regional labour market needs assessed through closer cooperation between Institutes of Technology and Polytechnics, Industry Training Organisations and employers. The role of Institutes of Technology and Polytechnics is being redesigned in an



attempt to improve the relevance of the class-based vocational training they provide vis-à-vis the requirements of local business.

Finally, Youth Transition Services were introduced in 2004 with the objective of reducing the share of youth neither in employment nor in education or training. This policy is implemented in cooperation with local communities to ensure coherence with regional labour market needs. The Mayor Task Force for Jobs – a nationwide network of mayors working on the issues of youth work and livelihood in their communities – was created in 2000 and has played a key role in the organisation of Youth Transition Services.

Suggested recommendations in response to the remaining challenges

The recent efforts made to strengthen the relevance of education to labour market needs and to tackle disengagement among disadvantaged youth are welcome. However, further rigorous evaluation of the impact of these initiatives, with particular attention paid to their role in improving labour market outcomes of the hard-core of youth who are at high risk of inactivity and social exclusion, is desirable. Some additional measures could also be put in place to complete a more comprehensive strategy.

The strategy would ideally comprise four main components: improving retention rates in secondary education; ensuring that tertiary education provides the skills required in the labour market and improving the quality and scope of vocational education at the tertiary level; monitoring potential demand-side barriers to youth employment; and improving the design and coherence of the current activation strategy for disadvantaged youth.

Improving retention rates in secondary education

In terms of the education system, the priority is, first and foremost, to reduce early school-leaving: only 80% of young people are still enrolled in school six months after their 16th birthday, compared with 89% on average in the OECD. In addition, retention rates in education vary significantly across ethnic groups, with only 60% of Māori enrolled in school six months after their 16th birthday compared with 83% of their Pakeha counterparts. Some early school leavers return to education later or acquire basic qualifications through work-based learning, but many continue to lack the basic literacy and numeracy skills needed to successfully integrate the labour market and participate in lifelong learning. Moreover, in 2005 18.4% of early school leavers were neither in employment nor in education or training, which exceeds the OECD average of 12.4%.



Participation in early childhood education, which helps reduce the risk of early school-leaving, has been increasing steadily in New Zealand over the past few years. In 2005, 94% of children starting school had received some early childhood education. However, in the same year, 10% of Māori and 15% of Pasifika children starting school had never participated in early childhood education. In addition, participation of children under age three was still below 60% in 2005.

A number of practices in secondary education have contributed to low retention rates. First, some young people are granted exemptions from attending the last year of compulsory education on the basis of education problems, conduct and the belief they will not benefit from attending school. Second, the practices of suspending difficult students from attending classes or of sending them to alternative education institutions have contributed to their early disengagement from education.

The lack of a vocational route in secondary education – for youth under 16 – may also contribute to the disengagement of those young people who are not interested in academic learning. The Gateway programme helps secondary students experience the workplace and make informed choices for their further education. However, the organisation of the programme is largely left to the individual school and this leads to unequal provision across the country. In any case, only work-ready students are allowed to participate in Gateway, thus excluding from work placements those students who might benefit most.

In addition to Gateway, schools can also obtain funding for activities such as vocational courses, workplace visits and labour-market-related workshops through the Secondary Tertiary Alignment Resource (STAR). While Gateway and STAR were created to cater for different needs – STAR funding is intended to benefit all students while relatively few opt to participate in work placements through Gateway – some degree of overlap has emerged recently. Indeed, some schools have used STAR funds to organise pre-placement classes for students who would like to participate in Gateway but are judged to be not work-ready.

To improve retention rates in secondary education and ensure that youth have the basic skills needed to enter and progress on the labour market, the following measures could be envisaged:

• Increase regular participation in quality early childhood education and care and ensure sustained intervention. Early childcare services could benefit from greater involvement by the government, particularly in communities where availability of quality early childhood education and care is limited. Special attention should be paid to increasing participation in quality services among Māori and Pasifika children and



in rural communities. To do so, it is important to work with the families to persuade them of the benefits of early childhood education. Monitoring the progress of the children once they enter primary education is also key to ensure that the benefits of early childhood interventions are sustained.

• Abolish early-leaving exemptions. Early-leaving exemptions have contributed to falling retention rates among 16-year olds over the past decade, particularly for Māori youth. The exemption mechanism was designed originally to deal with exceptional circumstances only, but it has worked against the official objective of combating school failure.

• Consider raising the school-leaving age further, possibly with a focus on retention until a qualification is obtained rather than on staying until a given age, as in the recent Dutch initiative to raise the school-leaving age. A change in this direction would require secondary education to be able to cater for a broader age range and provide diversified learning routes. This option could involve significant additional public spending and the expected returns would need to be compared with competing claims on scarce public funds, e.g. from expanding early childhood education and care services.

• Extend the suspension reduction initiative to more schools. Secondary schools have used suspensions as a tool to exclude difficult students. This contributes to explain the high early school drop-out rates that currently prevail in New Zealand. The suspension reduction initiative provides funding to selected schools with high suspension rates of Māori students for activities aimed at reducing suspensions. The initiative has proved very effective and should be extended to more establishments. Examples of good practice – including academic support, personal development for teachers and mentoring – should be shared more widely among schools as they may serve to reduce school failure more generally.

• Improve the educational content of alternative schools. In New Zealand, difficult youth who have not completed compulsory education are sometimes sent to alternative schools. Some of these establishments provide limited educational content, employ social workers rather than qualified teachers and tend to focus on preventing social exclusion rather than providing the basic skills needed to participate actively in the labour market. Overall, it is crucial that every effort is made to keep all youth in mainstream education. When the recourse to alternative schools is justified by the existence of complex needs, it is imperative to ensure that such schools provide sufficient educational support as well as needed social services. Teen Parent Units – special units for teenage



parents with a strong focus on individualised educational support coupled with the provision of childcare facilities – provide an example of good practice from within New Zealand in this domain.

• Ensure consistent implementation of the Gateway programme across schools. The fact that the organisation of the Gateway programme is left to the initiative of individual schools has led to some deviation from the intended model whereby youth should spend one day per week in the workplace. In 2003, only 7% of students spent the full year in the programme and just below a third of participants were enrolled for a total of one week only. It is important to set clearer guidelines at the national level on how much time youth should spend in the workplace and with what frequency, and to ensure that such guidelines are followed.

• Provide additional funding for Gateway preparation classes destined to the least work-ready students. These classes are a key initiative as they ensure that those youth most at risk of dropping out of school can experience work-based learning. However, additional funding should be made available for their organisation so as to ensure that STAR funds are used for their original purpose instead of being diverted to support Gateway.

• Carry out a rigorous evaluation of Gateway. The Gateway initiative, as defined by tighter national guidelines, should be implemented in selected localities to determine whether it improves retention in secondary school in a cost-effective manner. This is essential before the programme is rolled out nationally.

Ensuring that tertiary education provides the skills required in the labour market and improving the quality and scope of vocational education at the tertiary level

Participation in tertiary education in New Zealand has increased significantly over the past decade and the share of young people holding a tertiary qualification is much higher than among older generations. The share of Māori and Pasifika youth attending tertiary institutions has also risen considerably and these groups are now better represented among tertiary attendees. Such achievements have been possible thanks to a system of tertiary funding based on students’ intake.

However, these positive developments have, in some cases, come at the cost of reduced labour market relevance of tertiary education. Some tertiary providers have attracted more funding by lowering entry requirements and creating courses that would attract more applicants. Over a third of the rise



in enrolments between 1999 and 2005 was accounted for by management and commerce and society and culture programmes, two fields of study with very poor completion rates. Returns to tertiary versus upper secondary education in New Zealand are among the lowest in the OECD – in terms of both earnings and employment/unemployment differentials. More research is needed to assess whether this reflects the generally low level of earnings dispersion in New Zealand, or more specifically the fact that some of the best students emigrate to work in countries where wages are higher or an oversupply of graduates in courses which do not match labour market needs.

The tertiary education reform adopted recently (see above) goes in the right direction by making funding more related to labour market outcomes. In the new system, funding decisions are informed by assessed course quality and by regional provision gaps and priorities. Course quality will be evaluated through self-assessment by tertiary providers and external appraisal, but evaluation criteria have yet to be defined. Institutes of Technology and Polytechnics have been given the crucial task – the so-called regional facilitators role – of developing regional statements setting out specific information on local tertiary provision and training needs.

The provision of vocational education for youth aged 16 or older may also need to be revisited. In the present institutional context, Institutes of Technology and Polytechnics should provide school-based vocational training for the needs of local businesses. However, over the past decade, both have deviated from their original mission and have an increasing tendency to imitate the traditional university sector by offering more general courses of limited relevance to the regional labour market.

Parallel to school-based learning, for youth wanting to engage in work-based vocational education, apprenticeship places are available under the Modern Apprenticeships programme – dedicated to youth aged 16-21. Since it was introduced in 2001, the Modern Apprenticeships programme has raised the participation of youth in work-based vocational education and helped re-establish a youth training culture in New Zealand firms. Unfortunately, it remains a prestige pathway limited to a chosen few: only 2.5% of 16-21-year olds were in a Modern Apprenticeship at the end of 2006. It is notable that women, Māori and Pasifika youth are underrepresented among Modern Apprentices relative to their population shares. Also, although some services are included in the Modern Apprenticeships programme, the share of trainees in service professions is below 6%.

Overall, ensuring that youth leave tertiary education with skills required in the labour market, as well as improving the quality and scope of



vocational education at the tertiary level, are key to enhancing human capital. The following measures could help achieve these goals:

• Set clear indicators for Quality Assurance and Monitoring of tertiary education provision. Performance assessment and quality assurance will increasingly guide investment in tertiary education. However, the indicators to be used for internal and external assessment have not been defined yet. The following could be considered as possible evaluation criteria: completion rates, career progression post-completion, research output and teaching quality assessed through surveys. In addition, while self-assessment is important for providers, independent and thorough external evaluation will be crucial to ensure that the reform’s objective of improving quality and relevance of tertiary provision is achieved.

• Revisit the roles of Institutes of Technology and Polytechnics within the education system to support work-based learning. The combination of class-based and work-based learning – the so-called dual system – has proved a winning model for the provision of vocational education/apprenticeships in some European countries. At present, in New Zealand, these two types of training are provided separately: apprenticeships are work-based and polytechnic education is exclusively class-based. The roles of Institutes of Technology and Polytechnics could be revisited to include the provision of a high-quality class-based component preparing youth for work-based learning. This is likely to be beneficial for at-risk youth who are not work-ready but would like to enter an apprenticeship. It may also encourage employers to take on more young apprentices. Indeed, the main objection expressed by employers at present is that youth tend to lack the basic trade-related knowledge needed to be hired as trainees.

• Expand the Modern Apprenticeship programme to include more professions and encourage employers to take on more apprentices. Expansion should be encouraged in two directions: i) the inclusion of all professions; and ii) an increase in the supply of apprenticeship places. This expansion will require overcoming employers’ resistance to hiring more young people as trainees in some professions. At the institutional level, more involvement of the social partners may help employers better gauge the benefits of in-house training. Also, an increase in financial incentives may prove necessary, particularly in the current context of slower economic growth and weaker labour demand. Possible ways of achieving this could include reducing the share of overhead costs covered by employers (currently 30%) and/or lowering the minimum training wage (currently 80% of the adult minimum wage).



• Strengthen the brokerage role of Modern Apprenticeship coordinators to ensure more gender and ethnic balance. Among other roles, programme coordinators – often representatives of an Industry Training Organisations – are charged with recruiting potential Modern Apprentices by establishing links with schools and other institutions and with arranging work placements with employers. It is also their responsibility to ensure that disadvantaged groups in the labour market are aware of the programme and to promote their participation where necessary. However, there is evidence that coordinators have not fulfilled these institutional roles: only 18% of Modern Apprentices had found a placement through a coordinator in 2006, to the greatest disadvantage of the groups that should be receiving more support. To improve their performance, coordinators should be evaluated and remunerated based on the number of youth placed in apprenticeships and the share of under-represented groups among them.

• Evaluate the programme’s returns for young apprentices in terms of both earnings and employment prospects after the apprenticeship experience. Any positive findings could be used to encourage more youth to enter an apprenticeship contract.

Monitoring potential demand-side barriers to youth employment

In New Zealand, limited barriers exist to hiring even the least qualified youth. Wages paid to young people are higher than statutory minima, which illustrates the recruitment difficulties experienced by firms in a buoyant labour market. In this context, past increases in the sub-minimum wage hardly affected the employment prospects of youth. However, the recent abolition of the sub-minimum wage for 16-17-year olds – because of its size and timing – may have negative consequences on youth employment prospects or education participation. According to the new legislation, starting 1st April 2008, the adult minimum wage will be extended to 16-17-year olds with at least 200 hours or three months of work experience, whichever is shorter. A so-called “new-entrant wage” equivalent to 80% of the minimum wage will apply to those 16-17-year olds who have less than the required work experience. This measure will bring about a significant rise in the wage floor for 16-17-year olds – from 43% to 54% of median wages – and would affect over half of youth in this age group. It also comes at a time when the economy is starting to slow down. Overall, not only is it possible that such a move may affect negatively the employment prospects of low-skilled youth but it may run counter to the government efforts to prioritise education over work for teenagers.



Temporary work is increasingly common among youth for their first job but, in contrast to the situation in other OECD countries, conversion rates into permanent work are high. It also seems that most youth appreciate the flexibility afforded by casual work arrangements. As employment protection legislation is among the lightest in the OECD, there seems little need for reform in this area to boost youth job prospects.

While there are few problems on the demand side, it would be desirable to:

• Monitor the effects of the abolition of the sub-minimum wage for 16-17-year olds. In particular, it is key to monitor participation in education as a higher wage floor for youth aged 16-17 may reduce secondary school retention rates further, particularly for the most disadvantaged.

Improving the design and coherence of the current activation strategy for disadvantaged youth

New Zealand has successfully shifted from the passive to active management of unemployment benefits. Another positive move has been the unification of welfare benefits administration – including activation policies – under the responsibility of a single body: Work and Income. Finally, a mutual obligations principle drives most interventions for unemployed youth and benefit sanctions are applied when recipients do not comply with their individualised Job-Seeker Agreement. On the downside, recipients of other benefits – such as lone parents on the Domestic Purposes Benefit (DPB) – are still not submitted to this work-test approach.

As a general rule, unemployed youth aged 18 or older are entitled to unemployment assistance, which is independent of their contributory history. Net replacement rates are among the lowest in the OECD, thus benefits are unlikely to cause dependency if they are associated with requirements for job search and participation in active measures. For unemployed youth, training and education are considered a priority. And evaluations of training programmes organised by Work and Income through private providers have shown more positive outcomes than in other OECD countries.

With the youth unemployment rate falling to historical lows, focus has shifted towards policies to tackle youth inactivity more generally. The Youth Transition Services set up for this purpose focus on those young people who are inactive rather than unemployed. Although the services provided are meant to help all youth, the government hopes that they will help reach the 15-17-year-old group in particular. Indeed, youth in this age group are rarely entitled to benefits, and thus are mostly unknown to Work



and Income. This new policy initiative is a good start on preventing and tackling youth inactivity. However, the services require some fine-tuning – particularly in terms of coordination between the national and community levels, sharing of good practices and outcome measurement. Networking at local level between different actors, particularly schools, social assistance services, the Public Employment Service, and specialist youth outreach programmes, should be systematically promoted, with the aim of ensuring that youths currently not registered for any services are identified and that effective safety nets are in place.

For the hard-core group of youth at high risk of labour market and social exclusion, New Zealand may also want to consider the introduction of a residential programme with a strong accent on learning and employment assistance. The long-standing Job Corps in the United States is a good model for such an initiative; some, but not all, evaluations of it have shown positive benefit-cost ratios for very disadvantaged youth.

The following actions are recommended:

• Extend the mutual obligations principle to DPB recipients. It is key that an effective activation strategy is applied to single parents with young children in order to encourage their return to work. In New Zealand, this is an issue with a strong ethnic dimension: 14% of 18-24-year olds Māori receive DPB versus an overall average of just 4%. And, inactivity among single parents accounts for a large part of the difference in NEET rates between Māori and Pakeha youth.

• Ensure some baseline service provision across communities. At present, Youth Transition Services providers tend to be local NGOs already operating in the area. Those selected receive Youth Transition funding to continue and provide the same services as they did before for a given number of potential clients. As a result, what services are provided in a given area depends mainly on what was offered by NGOs pre-existing Youth Transition Services, thus creating considerable variation across local communities which does not match local needs. It is key to ensure a minimum set of services to be provided in all communities – including mentoring, guidance, training as well as job-search and interview skills.

• Ensure better co-operation with schools to reach youth as soon as possible when risk of disengagement is detected. Referrals from schools to Youth Transition Services are essential if youth disengagement is to be addressed at the earliest opportunity when success is most likely.

• Introduce financial incentives to ensure youth’s continuous engagement with Youth Transition Services. A small allowance paid to youth attending Youth Transition Services could help ensure that a mutual



obligations principle can be applied. An example of this mechanism applied to NEET youth is provided by the “activity agreement pilot” in the United Kingdom. Participating NEET youth agree to search for a job or an education/training opportunity in exchange for a small periodical payment which can be withdrawn if the search obligation is not fulfilled.

• Set up a centralised register to identify the Youth Transition Services client group and measure participants’ outcomes. Data collection should be carried out by an independent body and should include: i) individual as well as family characteristics of youth that are referred to Youth Transition Services; and ii) labour market and education outcomes of Youth Transition Services participants. Measuring the same characteristics and outcomes for a control group of youth would be highly desirable. This information could constitute the basis for an evaluation of Youth Transition Services providers based on clients’ positive outcomes – job placements or returns to education and training – similarly to what is done for providers of training services to unemployed youth.

• Evaluate Youth Transition Services rigorously before rolling them out nationwide. Youth Transition Services are expensive and it is essential that a rigorous evaluation of their cost-effectiveness is conducted before they are extended nationwide.

• Consider the introduction of a residential-type programme to provide intense support for the hardest-to-place young people. The hard-core group of at-risk youth is likely to include youth with complex needs who are very difficult to mobilise but also cumulate a number of problems ranging from behavioural difficulties to alcohol and drug abuse. For this group, a residential programme may well represent a new start in a proactive environment.

RÉSUMÉ ET PRINCIPALES RECOMMENDATIONS – 21


RÉSUMÉ ET PRINCIPALES RECOMMANDATIONS

Les jeunes et le marché du travail

La performance des jeunes Néo-Zélandais sur le marché du travail est très bonne par rapport à celle qui est observée dans de nombreux pays de l’OCDE. Une croissance économique soutenue, à un taux moyen de 3 % par an au cours des dix dernières années, et un marché du travail très flexible en comparaison internationale ont contribué à faire monter le taux d’emploi et à faire globalement baisser le chômage, y compris celui des jeunes. En 2006, le taux de chômage des jeunes s’élevait à 9.6 %, contre 14.7 % en moyenne dans la zone OCDE, et le taux de chômage de longue durée était inférieur à 3 %, alors que la moyenne pour les pays de l’OCDE s’élevait à près de 21 %. En outre, la transition de l’école à l’emploi se passe relativement bien en Nouvelle-Zélande. En effet, les jeunes Néo-Zélandais trouvent un premier emploi plus rapidement et à un âge plus précoce que leurs homologues dans la plupart des pays de l’OCDE et l’on n’observe guère de cas dans lesquels les jeunes se retrouvent cantonnés dans des emplois temporaires. Cependant, le ralentissement économique actuel risque de révéler un certain nombre de faiblesses persistantes du marché du travail des jeunes, auxquelles il convient de remédier.

Premièrement, il existe un noyau dur de jeunes qui risquent fortement de rencontrer des difficultés sur le marché du travail et d’être victimes d’exclusion sociale. On compte parmi eux la majeure partie des 11 % de jeunes âgés 15 à 24 ans qui ne sont ni scolarisés, ni occupés. Ce taux est proche de la moyenne pour la zone OCDE, mais il demeure bien plus élevé que dans les pays les plus performants – en particulier le Danemark, l’Islande et les Pays-Bas – où il se situe à 6 % ou moins. Au sein de ce noyau dur, les jeunes d’origine Māorie et ceux appartenant aux divers groupes ethniques autochtones de la région Pacifique Sud (population Pasifika) risquent deux fois plus que les jeunes Néo-Zélandais d’origine européenne (population Pakeha) de n’être ni scolarisés, ni occupés. On constate que certains des jeunes qui sont dans cette situation éprouvent de

22 – RÉSUMÉ ET PRINCIPALES RECOMMENDATIONS


grandes difficultés à trouver un emploi ou à reprendre des études. Environ un tiers des jeunes qui n’étaient ni scolarisés, ni occupés en 2003 étaient dans la même situation deux ans plus tard.

Deuxièmement, l’enseignement professionnel n’attire pas suffisamment de jeunes, en dépit d’excellentes perspectives d’emploi dans de nombreux métiers. Parallèlement, certains établissements d’enseignement supérieur ne développent pas les compétences requises par le marché du travail.

Enfin, les mesures actuelles dans le domaine de l’emploi ne profitent pas facilement aux jeunes qui ont quitté l’école précocement et qui n’ont droit à aucune protection sociale. La Nouvelle-Zélande déploie aujourd’hui des efforts considérables afin de surmonter cette difficulté. Il est cependant nécessaire de mieux coordonner les actions à l’échelle nationale et locale.

Le présent rapport à un double objet : i) analyser les obstacles qui empêchent d’améliorer ultérieurement la situation de l’emploi des jeunes, en particulier pour les jeunes les plus défavorisés ; et ii) proposer des mesures destinées à surmonter ces difficultés.

Les dernières réformes

Au cours des toutes dernières années, les pouvoirs publics ont accru leurs efforts en vue d’encourager les jeunes à s’engager dans des filières d’enseignement professionnel, en particulier grâce à la mise en place d’une possibilité de formation en entreprise dans le secondaire (programme « Gateway ») et au lancement d’un programme de formation par apprentissage (« Modern Apprenticeship »). Lancé en 2001 sous forme de projet pilote, le programme Gateway est progressivement mis en œuvre dans tout le pays ; son but est de renforcer les voies d’accès entre l’école secondaire d’une part et la formation en entreprise et l’enseignement professionnel post-secondaire d’autre part. Le programme Modern Apprenticeship, lancé à l’échelle nationale en 2001, a pour objet d’attirer les jeunes vers des professions dans lesquelles ils sont sous-représentés et de contribuer à revaloriser la formation par apprentissage. Pour soutenir ces initiatives, les pouvoirs publics mettent fortement l’accent sur l’aide à l’orientation professionnelle, en particulier pour les jeunes qui doivent choisir une filière d’enseignement supérieur. Plusieurs initiatives ont donc été lancées par Career Services, organisme indépendant qui propose des conseils en matière d’orientation professionnelle, et le rôle des établissements scolaires et de StudyLink, l’organisme qui gère les prêts et les bourses accordés aux étudiants de l’enseignement tertiaire, a été renforcé.



La reconnaissance, par le nouveau système de certification des qualifications, des connaissances professionnelles acquises – y compris hors milieu scolaire – et la création imminente d’un nouveau cursus scolaire plus axé sur les compétences requises par le marché du travail, contribueront peut-être également à retenir les jeunes qui risquent de quitter l’école précocement.

Les autorités Néo-Zélandaises ont en outre récemment adopté la Stratégie 2007-2012 pour l’enseignement supérieur, laquelle devrait être totalement mise en œuvre en 2008. Cette stratégie vise à améliorer la qualité des cursus d’études supérieures, ainsi que leur adéquation avec les besoins du marché du travail. La principale réforme consiste à mettre fin à un système de financement fondé sur les effectifs étudiants, au profit d’un financement fondé sur les résultats sur le marché du travail. Les enseignements dispensés dépendront des besoins du marché du travail local, lesquels seront évalués grâce à une collaboration plus étroite entre les instituts technologiques et polytechniques (« Institutes of Technology and Polytechnics »), les organismes de formation des différents secteurs industriels (« Industry Training Organisations ») et les employeurs. Le rôle des instituts technologiques et polytechniques est en cours de redéfinition dans le but d’améliorer la pertinence de la formation professionnelle dispensée en classe, au regard des besoins des entreprises locales.

Enfin, des « Youth Transition Services » ont été créés en 2004 afin de faire reculer la proportion de jeunes qui ne sont ni scolarisés, ni occupés. Ce dispositif est mis en œuvre en collaboration avec les responsables locaux pour garantir sa cohérence vis-à-vis les besoins des marchés du travail régionaux. Créé en 2000, le groupe de travail des maires en faveur de l’emploi (« Mayor Task Force for Jobs ») – réseau national de maires qui se penchent sur les questions de l’emploi et des moyens de subsistance des jeunes de leur localité – joue un rôle déterminant dans l’organisation des Youth Transition Services.

Propositions de recommandations visant à surmonter les difficultés qui subsistent

Les efforts déployés récemment en vue de mieux adapter l’enseignement aux besoins du marché du travail et de s’attaquer au décrochage des jeunes défavorisés vont dans la bonne direction. Il est néanmoins souhaitable de procéder à une évaluation détaillée et rigoureuse des répercussions de ces initiatives, en s’attachant en particulier à déterminer si elles améliorent la performance sur le marché du travail du



noyau dur de jeunes très menacés de chômage et d’exclusion sociale. Des mesures supplémentaires pourraient être adoptées afin de mener une stratégie plus globale.

Dans l’idéal, cette stratégie aurait quatre grands objectifs : améliorer le taux de poursuite des études dans le secondaire ; s’assurer que l’enseignement supérieur permet d’acquérir les compétences requises par le marché du travail et améliorer la qualité et les contenus de l’enseignement professionnel dans le supérieur ; examiner les éventuels obstacles du côté de la demande à l’emploi des jeunes ; et améliorer la conception et la cohérence de la stratégie d’activation actuelle en faveur des jeunes défavorisés.

Améliorer le taux de poursuite des études dans le secondaire

En ce qui concerne le système éducatif, la priorité absolue est de limiter l’abandon scolaire précoce : 80 % seulement des jeunes sont encore scolarisés six mois après leur 16e anniversaire, contre 89 % en moyenne dans la zone OCDE. En outre, les taux de poursuite des études varient sensiblement selon l’appartenance ethnique. Ainsi, seuls 60 % des Māoris sont encore scolarisés six mois après leur 16e anniversaire, contre 83 % des jeunes Pakeha. Quelques personnes sorties prématurément de l’école reprennent des études plus tard ou acquièrent une qualification de base grâce à leurs acquis professionnels, mais nombreux sont ceux qui continuent à ne pas maîtriser les compétences de base nécessaires pour bien s’insérer sur le marché du travail et participer à des activités de formation tout au long de la vie active. De plus, en 2005, 18.4 % des personnes ayant quitté l’école précocement n’étaient ni scolarisés, ni occupés, proportion supérieure à la moyenne de la zone OCDE (12.4 %).

L’éducation de la prime enfance, qui contribue à réduire les risques d’abandon scolaire précoce, progresse de manière constante en Nouvelle-Zélande depuis quelques années. En 2005, 94 % des enfants entrant à l’école avaient bénéficié d’une forme de préscolarisation. Cependant, la même année, 10 % des enfants Māoris et 15 % des enfants appartenant à la population Pasifika entrant à l’école n’avaient jamais bénéficié de ce genre d’éducation. En outre, la participation des enfants âgés de moins de trois ans restait inférieure à 60 % en 2005.

Un certain nombre de pratiques dans l’enseignement secondaire contribuent à la faiblesse des taux de poursuite des études. Premièrement, certains jeunes sont dispensés de la dernière année de la scolarité obligatoire en raison de difficultés d’apprentissage, de leur comportement



et au motif qu’ils ne tireront pas parti de leur présence en classe. Deuxièmement, l’exclusion provisoire des élèves difficiles ou leur transfert vers des établissements scolaires spéciaux contribue à les faire quitter précocement le système éducatif.

L’absence de filières professionnelles dans le secondaire – pour les élèves de moins de 16 ans – contribue peut-être également au décrochage des jeunes que les filières générales n’intéressent pas. Le programme Gateway aide les élèves du secondaire à acquérir une expérience en milieu professionnel et à faire des choix éclairés concernant leurs futures études. Cependant, il appartient pour l’essentiel à chaque établissement d’administrer le programme, d’où l’inégale qualité de ce dernier à travers le pays. De toute façon, seuls les élèves prêts à entrer sur le marché du travail sont autorisés à participer au programme Gateway, ce qui exclut des stages en milieu professionnel les élèves qui en tireraient le plus grand parti.

Outre les dispositions du programme Gateway, les établissements peuvent obtenir des fonds par l’intermédiaire de STAR (Secondary Tertiary Alignment Resource) pour financer diverses activités, formations professionnelles, visites d’entreprises, séminaires en rapport avec le marché du travail, par exemple. Bien que les programmes Gateway et STAR aient été créés pour répondre à des besoins différents – les financements de STAR sont censés profiter à tous les élèves, alors que les élèves qui choisissent de participer à des stages professionnels grâce au programme Gateway sont relativement peu nombreux – on constate depuis peu un certain degré de chevauchement. En effet, certains établissements utilisent des financements du programme STAR pour créer des cours de préparation aux stages en milieu professionnel pour des élèves souhaitant participer au programme Gateway mais dont on estime qu’ils ne sont pas prêts à travailler.

Pour accroître les taux de poursuite des études dans le secondaire et s’assurer que les jeunes maîtrisent les savoir-faire nécessaires pour s’insérer et évoluer sur le marché du travail, les mesures suivantes pourraient être envisagées :

• Élargir l’accès à des services d’accueil et d’éducation de la petite enfance de qualité et veiller à une intervention soutenue. Les services destinés à la petite enfance tireraient parti d’un engagement plus important des pouvoirs publics, en particulier dans les localités où les services de qualité sont limités dans ce domaine. Il convient de s’attacher davantage à accroître l’utilisation de services de qualité par les familles Māories et Pasifika et par celles qui vivent en milieu



rural. Pour ce faire, il est important d’agir auprès des familles afin de les convaincre des bienfaits des services éducatifs destinés aux jeunes enfants. Il est également essentiel de suivre le développement des enfants une fois qu’ils sont entrés à l’école primaire afin de veiller à la pérennité des bienfaits des interventions en faveur de la prime enfance.

• Cesser d’autoriser la sortie précoce de l’école. Depuis une dizaine d’années, les autorisations de sortie précoce de l’école contribuent à faire chuter le taux de poursuite des études chez les jeunes de 16 ans, et en particulier chez les jeunes Māoris. À l’origine, cette disposition était prévue uniquement pour des cas exceptionnels, mais elle est allée à l’encontre de l’objectif officiel, qui est de lutter contre l’échec scolaire.

• Envisager de relever encore l’âge de sortie du système scolaire, éventuellement en subordonnant la sortie plutôt à l’obtention d’une qualification qu’à un âge donné, comme l’ont fait récemment les Pays-Bas pour allonger la scolarité. Une telle réorientation exigerait de l’enseignement secondaire qu’il soit en mesure de scolariser des élèves d’une tranche d’âge plus large et de diversifier ses filières. Cette option pourrait supposer un accroissement sensible des dépenses publiques et il faudrait donc en comparer le rendement attendu avec celui d’autres utilisations concurrentes des rares deniers publics – le développement des services d’accueil et d’éducation des jeunes enfants par exemple.

• Appliquer le dispositif de réduction des suspensions à plus d’établissements. Les établissements secondaires ont recours à la suspension pour exclure les élèves difficiles. Cette pratique explique en partie le taux élevé d’abandons scolaires précoces que l’on observe actuellement en Nouvelle-Zélande. Le dispositif de réduction des suspensions consiste à allouer des fonds à certains établissements dont le taux de suspension d’élèves Māoris est élevé, pour leur permettre de financer des activités destinées à limiter cette pratique. Ce dispositif s’avère très efficace et devrait être appliqué à un plus grand nombre d’établissements. Les exemples de bonnes pratiques – comme le soutien scolaire, le perfectionnement personnel des enseignants et le mentorat – devraient être portés à la connaissance d’un plus grand nombre d’établissements puisqu’ils pourraient servir à lutter plus globalement contre l’échec scolaire.



• Améliorer les contenus d’enseignement proposés dans les établissements spéciaux. En Nouvelle-Zélande, les jeunes en difficulté qui ne sont pas arrivés au terme de l’enseignement obligatoire sont parfois envoyés dans des établissements spéciaux. Certains de ces établissements dispensent un enseignement aux contenus restreints, emploient des travailleurs sociaux plutôt que des enseignants diplômés et s’attachent davantage à prévenir l’exclusion sociale qu’à inculquer les compétences de base nécessaires pour permettre une véritable insertion professionnelle. D’une manière générale, il est capital de faire tous les efforts possibles pour maintenir tous les jeunes dans le circuit scolaire ordinaire. Lorsque le recours à un établissement spécial est justifié par la présence de besoins complexes, cet établissement doit impérativement offrir un soutien scolaire suffisant en plus des services sociaux requis. Les unités spéciales destinées aux jeunes parents isolés, qui offrent un soutien scolaire individualisé associé à des services de garde d’enfants, sont un exemple des bonnes pratiques adoptées en Nouvelle-Zélande dans ce domaine.

• Veiller à la mise en œuvre systématique du programme Gateway dans tous les établissements. L’organisation du programme Gateway étant laissé à l’initiative de chaque établissement, on constate une certaine dérive par rapport au principe de base selon lequel chaque jeune qui participe au programme doit passer une journée par semaine en milieu professionnel. En 2003, seuls 7 % des élèves ont participé au programme pendant une année entière et un peu moins d’un tiers des participants n’en ont bénéficié qu’une semaine en tout. Il est primordial de définir, au niveau national, des lignes directrices plus claires sur le temps que les élèves doivent passer en milieu professionnel et selon quelle périodicité, et de veiller au respect de ces lignes directrices.

• Allouer des fonds supplémentaires pour financer la préparation au programme Gateway des élèves les moins prêts pour travailler. Cette préparation constitue une initiative fondamentale car elle permet aux jeunes qui risquent le plus d’abandonner l’école d’acquérir une expérience professionnelle. Il est toutefois nécessaire de débloquer des fonds supplémentaires pour organiser cette préparation et s’assurer que les financements du programme STAR ont bien l’affectation initialement voulue au lieu d’être utiliser au service du programme Gateway.



• Procéder à une évaluation rigoureuse du programme Gateway. Le programme Gateway, tel que le définiront des lignes directrices nationales plus rigoureuses, devrait être mis en œuvre dans certaines localités pilotes, l’objectif étant de déterminer s’il constitue un moyen rentable d’améliorer le taux de poursuite de la scolarité secondaire. Il est indispensable de procéder à cette évaluation avant de généraliser ce programme dans l’ensemble du pays.

S’assurer que l’enseignement supérieur permet d’acquérir les compétences requises par le marché du travail et améliorer la qualité et les contenus de l’enseignement professionnel dans le supérieur

En Nouvelle-Zélande, la scolarisation dans le supérieur a considérablement augmenté au cours des dix dernières années et la proportion de diplômés du supérieur est beaucoup plus élevée chez les jeunes que dans les générations précédentes. Le pourcentage des jeunes Māoris et Pasifika fréquentant des établissements d’enseignement supérieur a également fortement progressé et ces groupes sont désormais mieux représentés parmi la population étudiante à ce niveau. Ce résultat a été possible grâce à un système de financement de l’enseignement supérieur basé sur les effectifs scolarisés.

Parfois, cependant, cette évolution positive a eu lieu au prix d’une moindre adéquation entre les études supérieures et le marché du travail. En effet, certains établissements d’enseignement supérieur ont obtenu des financements plus importants en assouplissant les conditions d’admission et en créant des cursus susceptibles d’attirer plus de candidats. La filière gestion/commerce ainsi que les études en rapport avec la société et la culture, deux domaines où les taux de réussite sont très faibles, représentent plus d’un tiers dans la hausse des effectifs entre 1999 et 2005. Dans la zone de l’OCDE, la Nouvelle-Zélande est l’un des pays où le rendement des études supérieures par rapport aux études secondaires est le plus faible, qu’il s’agisse de gains ou d’écarts de taux d’emploi/de chômage. Il serait bon de mener des études afin de déterminer si cette situation reflète la faible dispersion en général des salaires en Nouvelle-Zélande, ou plus précisément le fait que certains des meilleurs étudiants s’expatrient dans des pays où les salaires sont plus élevés, ou encore le grand nombre de diplômés dans des formations ne répondant pas aux besoins du marché du travail.



La réforme de l’enseignement supérieure décidée récemment (voir plus haut) va dans la bonne direction en établissant un lien plus direct entre financement et résultats sur le marché du travail. Dans le nouveau système, les financements sont décidés en fonction de l’évaluation de la qualité des formations ainsi que des déficits et priorités en matière d’offre à l’échelle régionale. La qualité des formations sera évaluée par les établissements eux-mêmes et par des acteurs extérieurs selon des critères qui toutefois n’ont pas encore été définis. Les Institutes of Technology and Polytechnics ont été chargé d’une mission capitale, celle de dresser un état des lieux régional renseignant sur l’offre et les besoins locaux d’enseignement supérieur.

Il y aurait peut-être lieu de faire le point sur l’offre d’enseignement professionnel pour les jeunes âgés de 16 ans et plus. Dans le cadre institutionnel actuel, les Institutes of Technology and Polytechnics devraient dispenser une formation professionnelle de type scolaire pour répondre aux besoins des entreprises locales. Cependant, depuis une dizaine d’années, ces établissements se détournent de leur mission initiale et tendent de plus en plus à imiter le secteur universitaire traditionnel en proposant des formations plus générales dont la pertinence est limitée au regard des besoins du marché du travail régional.

Parallèlement à la formation scolaire, pour les jeunes qui souhaitent se diriger vers une formation en milieu professionnel, des places d’apprentis sont disponibles dans le cadre du programme Modern Apprenticeship destiné aux jeunes de 16 à 21 ans. Depuis son adoption en 2001, ce programme a permis d’augmenter la participation des jeunes à des formations en entreprise et a contribué à restaurer une culture de formation des jeunes dans les entreprises néo-zélandaises. Il reste malheureusement une voie prestigieuse réservée à quelques heureux élus : seuls 2.5 % des jeunes de 16 à 21 ans y participaient à la fin de l’année 2006. On constate que les femmes de même que les jeunes Māoris et Pasifika sont sous-représentés dans ce programme par rapport à leurs parts respectives dans la population totale. Enfin, bien que ce programme prévoie des formations dans le secteur des services, moins de 6 % des apprentis étaient placés dans des entreprises de ce secteur.

D’une manière générale, pour renforcer le capital humain néo-zélandais, il est indispensable de veiller à ce que les jeunes sortant de l’enseignement supérieur aient acquis des compétences utiles sur le marché du travail et par ailleurs d’améliorer la qualité et les contenus de l’enseignement professionnel dans le supérieur. Les mesures suivantes pourraient contribuer à atteindre ces objectifs :



• Définir des indicateurs explicites d’assurance de la qualité et du suivi des performances de l’enseignement supérieur. L’évaluation des performances et l’assurance de la qualité sont des éléments qui vont, de plus en plus, conditionner l’investissement dans l’enseignement supérieur. Les indicateurs à retenir dans les évaluations internes et externes n’ont cependant pas encore été définis. Les aspects suivants pourraient être considérés comme des critères d’évaluation : les taux de réussite, le parcours professionnel après l’achèvement des études, les produits de la recherche et la qualité de la pédagogie évaluée grâce à des enquêtes. En outre, si l’auto-évaluation est importante pour les établissements, il sera indispensable de procéder à des évaluations externes indépendantes et approfondies pour s’assurer que la réforme atteint son objectif qui est d’améliorer la qualité et la pertinence de l’enseignement supérieur.

• Revoir le rôle des Institutes of Technology and Polytechnics au sein du système éducatif afin de promouvoir la formation en entreprise. Dans certain pays d’Europe, la formation professionnelle dite en alternance, qui associe une formation en classe et une formation en entreprise, est un système qui a fait ses preuves. À l’heure actuelle, en Nouvelle-Zélande, ces deux types de formation sont assurés séparément : l’apprentissage se fait uniquement en entreprise et l’enseignement polytechnique est uniquement dispensé en classe. On pourrait redéfinir le rôle des Institutes of Technology and Polytechnics afin de prévoir une formation en classe visant à préparer les jeunes à leur expérience en milieu professionnel. Cette solution profiterait sans doute aux jeunes à risque qui sans être prêts pour le travail souhaitent néanmoins entrer en apprentissage. Elle inciterait peut-être aussi les employeurs à recruter davantage de jeunes apprentis. En effet, la principale objection formulée aujourd’hui par les employeurs est qu’en général les jeunes n’ont pas les connaissances de base du métier qui sont nécessaires pour être engagés comme apprentis.

• Élargir le cadre du programme Modern Apprenticeship pour qu’il couvre davantage de métiers et pour encourager les employeurs à embaucher davantage d’apprentis. Il faudrait encourager le développement du programme dans deux directions : i) intégrer tous les métiers ; et ii) augmenter l’offre de places en apprentissage. À ces fins, il faudra vaincre la réticence



des employeurs à recruter davantage de jeunes en tant qu’apprentis dans certaines professions. Au niveau institutionnel, une implication plus grande des partenaires sociaux pourrait aider les employeurs à mieux saisir les avantages que présente la formation en entreprise. En outre, une augmentation des incitations financières peut s’avérer nécessaire, en particulier du fait du ralentissement actuel de l’activité économique et du recul de la demande de main-d’œuvre. Pour ce faire, on pourrait notamment réduire la part des charges fixes qui incombe aux employeurs (actuellement 30 %) et/ou baisser le salaire minimum des apprentis (actuellement 80 % du salaire minimum des adultes).

• Renforcer le rôle d’intermédiaires des coordonnateurs du programme Modern Apprenticeship pour parvenir à un meilleur équilibre du point de vue du sexe et de l’origine ethnique des participants. Les coordonnateurs du programme, qui sont souvent des représentants des Industry Training Organisations, doivent, entre autres missions, recruter d’éventuels apprentis pour participer au programme en tissant des liens avec les établissements scolaires et d’autres institutions et trouver des places d’apprentissage avec les employeurs. Ils doivent aussi veiller à ce que les groupes défavorisés sur le marché du travail soient informés de l’existence du programme et favoriser leur participation lorsque cela est nécessaire. On constate cependant que les coordonnateurs n’ont guère rempli ces missions : en 2006, seuls 18 % des apprentis participant au programme Modern Apprenticeship ont trouvé un stage grâce à un coordonnateur, à détriment des groupes les plus défavorisés qui devraient pour autant bénéficier d’un soutien plus important. Pour améliorer ces résultats, il faudrait évaluer et rémunérer les coordonnateurs en fonction du nombre de jeunes auxquels ils ont trouvé une place d’apprenti et du pourcentage de ces jeunes qui appartiennent aux groupes sous-représentés.

• Évaluer le rendement du programme pour les jeunes apprentis, à la fois en termes de rémunération et de perspectives d’emploi, à l’issue de la période d’apprentissage. Des éventuels résultats positifs pourraient être utilisés pour inciter davantage de jeunes à signer un contrat d’apprentissage.



Examiner les éventuels obstacles du côté de la demande à l’emploi des jeunes

En Nouvelle-Zélande, les obstacles à l’emploi des jeunes, même les moins qualifiés, sont peu nombreux. La rémunération des jeunes est supérieure aux minima légaux, ce qui montre les difficultés de recrutement rencontrées par les entreprises dans un marché du travail très dynamique. Dans ce contexte, les hausses passées du salaire minimum minoré n’ont guère eu de répercussions sur les perspectives d’emploi des jeunes. Cependant, la suppression récente de cette rémunération minorée pour les jeunes de 16 et 17 ans – en raison de l’ampleur de cette réforme et du moment où elle est menée – pourrait bien avoir des conséquences négatives pour les perspectives d’emploi des jeunes ou leur scolarisation. En vertu de la nouvelle législation qui entrera en vigueur le 1er avril 2008, le salaire minimum des adultes s’appliquera aux jeunes de 16-17 ans disposant d’une expérience professionnelle d’au moins 200 heures ou trois mois, la période retenue étant la plus courte. Les jeunes âgés de 16-17 ans qui ne pourront justifier d’une telle expérience professionnelle auront pour leur part droit à un « salaire de premier emploi » équivalant à 80 % du salaire minimum. Cette mesure aura pour effet de relever sensiblement le salaire minimum des jeunes âgés de 16-17 ans – de 43 à 54 % des salaires médians – et concernera plus de la moitié des jeunes de cette tranche d’âge. Elle est en outre mise en œuvre à un moment où l’activité économique commence à ralentir. Il est donc globalement possible qu’elle ait une influence négative sur les perspectives d’emploi des jeunes peu qualifiés, d’une part, et qu’elle contrecarre les efforts déployés par les pouvoirs publics pour encourager les jeunes à rester scolarisés plutôt qu’à travailler d’autre part.

L’emploi temporaire est de plus en plus courant parmi les jeunes en première insertion, mais à la différence de la situation dans d’autres pays de l’OCDE, les taux de conversion des contrats temporaires en contrats permanents sont élevés. Il semble en outre que la plupart des jeunes apprécient la souplesse que permet l’emploi temporaire. La législation en matière de protection de l’emploi étant l’une de plus flexible au sein de la zone OCDE, il semble superflu de mener des réformes dans ce domaine en vue de stimuler l’emploi des jeunes.

Même si les problèmes sont rares du côté de la demande, une action serait néanmoins souhaitable :



• Surveiller les effets de la suppression du salaire minimum minoré applicable aux jeunes de 16 et 17 ans. Il est essentiel en particulier de suivre l’évolution de la scolarisation car le relèvement du salaire minimum pour les jeunes âgés de 16 et 17 ans risque de faire baisser encore davantage les taux de poursuite des études dans le secondaire, surtout des élèves les plus défavorisés.

Améliorer la conception et la cohérence de la stratégie d’activation actuelle en faveur des jeunes défavorisés

La Nouvelle-Zélande est passée avec succès d’une gestion passive à une gestion active des allocations chômage. Une autre action positive a consisté à placer les différents aspects de la gestion des prestations sociales – y compris les mesures actives – sous l’autorité d’une seule instance, le service publique de l’emploi Néo-Zélandais (« Work and Income »). Enfin, un principe d’obligations mutuelles régit la plupart des actions en faveur des jeunes et les allocataires qui ne respectent pas les termes de leur contrat de demandeur d’emploi personnalisé s’exposent à des sanctions directement liées au versement de leurs prestations. En revanche, les bénéficiaires d’autres allocations – les parents isolés bénéficiant des « Domestic Purposes Benefits » (DPB), par exemple – sont pour l’instant dispensés de cette obligation de rechercher un emploi.

Les jeunes âgés de 18 ans ou plus ont généralement droit à une aide en cas de chômage, qui ne dépend pas de leurs cotisations antérieures. Les taux de remplacement nets étant parmi les plus bas de la zone OCDE, les allocations versées ne risquent guère de mener à une situation de dépendance si elles s’accompagnent d’une obligation de rechercher un emploi et de participer à programmes actifs. On considère que pour les jeunes sans emploi, la formation et l’éducation sont des priorités. Enfin, les évaluations de programmes de formation gérés par des prestataires privés à la demande de Work and Income ont donné de meilleurs résultats que dans d’autres pays de l’OCDE.

Le taux de chômage des jeunes ayant atteint les niveaux les plus bas jamais observés, c’est désormais l’inactivité des jeunes d’une façon plus générale qui retient l’attention. Les Youth Transition Services, créés à cet effet, s’intéressent plus particulièrement aux jeunes inactifs, plutôt qu’à ceux qui sont sans emploi. Bien que les services assurés doivent normalement venir en aide à tous les jeunes, les pouvoirs publics espèrent qu’ils aideront à atteindre le groupe des 15-17 ans en particulier. En effet, les jeunes de cette tranche d’âge ont rarement droit à des indemnités et sont



donc pour la plupart inconnus du Work and Income. Cette nouvelle politique est un bon début en matière de prévention et de prise en charge de l’inactivité chez les jeunes. Les services appellent cependant quelques ajustements, en particulier en ce qui concerne la coordination des actions à l’échelle nationale et locale ou encore la diffusion des bonnes pratiques et l’évaluation des résultats. Il convient de promouvoir systématiquement la création de réseaux entre les différents acteurs locaux, notamment les établissements scolaires, les services d’aide sociale, le service public pour l’emploi et les programmes spécifiquement destinés aux jeunes, afin de repérer les jeunes ne bénéficiant d’aucun des services auprès de Work and Income et de mettre en place des filets de sécurité efficaces.

Pour le noyau dur de jeunes dont les risques d’exclusion sociale et professionnelle sont élevés, la Nouvelle-Zélande voudra peut-être envisager de mettre en place un programme d’accueil en internat axé sur l’aide à la formation et à la recherche d’emploi. Le programme « Job Corps » qui existe depuis de nombreuses années aux États-Unis serait un bon exemple à suivre en la matière ; plusieurs évaluations, mais pas toutes, de ce dispositif ont révélé un rapport coûts-avantages positif pour les jeunes très défavorisés.

Il est recommandé de prendre les mesures suivantes :

• Étendre le principe d’obligations mutuelles aux bénéficiaires des DPB. Il est primordial de mettre en œuvre des mesures efficaces visant à inciter les parents isolés ayant de jeunes enfants à charge à retrouver le monde du travail. En Nouvelle-Zélande, cette question prend une dimension ethnique non négligeable. En effet, 14 % des Māoris âgés de 18 à 24 ans perçoivent une allocation de parent isolé, contre une moyenne globale de tout juste 4 %. De plus, le taux d’inactivité parmi les parents isolés explique dans une large mesure l’écart entre le nombre de jeunes Māoris et le nombre de jeunes Pakeha qui ne sont ni scolarisés, ni occupés.

• Garantir une offre de services de base dans toutes les localités. À l’heure actuelle, les Youth Transition Services sont généralement assurés par des ONG locales déjà implantées dans la zone. Les ONG sélectionnées reçoivent des fonds pour assurer les mêmes services que ceux qu’elles fournissaient auparavant à un certain nombre de clients potentiels. Par conséquent, la nature des services proposés dans une région donnée dépend principalement de ce que proposaient les ONG établies avant la mise en place des Youth Transition Services, ce qui entraîne des disparités



considérables entre les localités et ne permet pas de répondre aux besoins locaux. Il est capital d’offrir une série minimum de services dans toutes les collectivités, notamment des services de mentorat, de conseil, d’aide à la recherche d’un emploi et de préparation aux entretiens d’embauche.

• Améliorer la collaboration avec les établissements scolaires afin de prendre en charge les jeunes dès que le risque de décrochage est détecté. Il est capital que les établissements scolaires soient en contact avec les Youth Transition Services afin de remédier au décrochage des jeunes le plus tôt possible, au moment où les chances d’y parvenir sont les plus grandes.

• Instaurer des incitations financières pour pérenniser l’engagement des jeunes vis à vis des Youth Transition Services. Le versement d’une petite indemnité aux jeunes participants aux activités des Youth Transition Services pourrait contribuer à s’assurer que le principe d’obligations mutuelles puisse être appliqué. Le projet pilote « Activity Agreement » lancé au Royaume-Uni est un exemple d’un dispositif de ce genre appliqué aux jeunes qui ne sont ni en emploi, ni en formation. Ces jeunes s’engagent à rechercher un emploi ou une opportunité de formation en échange du versement périodique d’une allocation d’un faible montant, qui peut leur être retirée si l’obligation de recherche n’est pas respectée.

• Créer un registre centralisé permettant de connaître tous les clients des Youth Transition Services et d’évaluer les résultats des participants. La collecte des données devrait être confiée à un organisme indépendant et devrait porter sur : i) le profil individuel et familial des jeunes orientés vers les Youth Transition Services, et ii) le devenir éducatif et professionnel des participants aux Youth Transition Services. Il serait extrêmement souhaitable de déterminer selon les mêmes critères le profil et le devenir d’un groupe témoin de jeunes. Les informations ainsi recueillies pourraient servir de base pour procéder à l’évaluation des prestataires des Youth Transition Services, basés sur les résultats positifs des participants – autrement dit leur insertion dans le monde professionnel ou la reprise d’études ou d’une formation – comme c’est le cas pour les prestataires de services de formation pour les jeunes au chômage.



• Procéder à une évaluation rigoureuse des Youth Transition Services avant de les étendre à l’ensemble du pays. Les Youth Transition Services sont coûteux et il est indispensable de procéder à une évaluation rigoureuse de leur rentabilité avant de les étendre à l’ensemble du pays.

• Envisager la mise en place d’un programme d’accueil en internat afin d’accompagner intensément les jeunes les plus difficiles à insérer. Dans le noyau dur de jeunes à risque, certains dont les besoins sont complexes sont sans doute difficilement mobilisables ; ils peuvent aussi cumuler un certain nombre de problèmes allant des troubles du comportement à l’alcoolisme ou à la toxicomanie. Pour cette population, l’accueil en internat pourrait bien représenter un nouveau départ dans un environnement.

INTRODUCTION – 37


INTRODUCTION

Improving the performance of youth in the labour market is a crucial challenge in OECD countries. Population ageing is looming but this is not a magic pill to solve young people’s problems. While smaller youth cohorts are likely to create more opportunities for youth, it is crucial that young people possess the skills required in today’s and tomorrow’s labour market.

The very positive economic performance of New Zealand over the past decade provides the ideal backdrop for action to tackle the remaining weaknesses in the school-to-work transition. In particular, falling unemployment has left behind a small but hard-to-place group of disadvantaged young people. Beyond that, enhancing human capital is one of the central tools to improve the currently disappointing labour productivity performance of New Zealand.

The New Zealand government has introduced several measures to address remaining weaknesses. While the overall framework seems appropriate to achieve sustained employment outcomes for all youth, some fine-tuning is necessary.

The purpose of this report is to point to areas where further improvement is necessary and possible and to suggest additional actions needed to make the most of the current strategy to improve school-to-work transitions. Chapter 1 presents basic facts on the situation of youth in the New Zealand labour market. The role of education and training in shaping the transition from school to the labour market is analysed in Chapter 2. The demand-side barriers to youth employment are explored in Chapter 3. Finally, Chapter 4 analyses the role of welfare benefits and activation services in helping non-employed youth get a job.

CHAPTER 1. THE CHALLENGE AHEAD – 39


CHAPTER 1

THE CHALLENGE AHEAD

Over the past decade, sustained economic growth in New Zealand has contributed to falling unemployment and increased labour market participation. At the same time, the share of youth in the working-age population has declined considerably as a result of population ageing. While these two trends should serve to maintain the present high demand for younger workers, they also mask a number of weaknesses in the process of transition from school to work. Such weaknesses are among the causes of slow labour productivity growth – an important constraint to the further expansion of the New Zealand economy – and need to be addressed.

The purpose of this chapter is to describe the labour market performance of youth in the context of the rapid growth of the past decade and to highlight the barriers to further expansion that have emerged recently (Sections 1 and 2). The chapter also examines the school-to-work transition process (Section 3) and the nature of jobs performed by youth (Section 4). It concludes by documenting the incidence and persistence of low pay among young people (Section 5) and the link between the skills acquired through initial education and those required by the jobs performed by youth (Section 6).

1. Economic performance and present barriers to further expansion

Despite a recent slowdown, the New Zealand economy has grown at a pace of almost 3.5% per year on average since 2000, with positive repercussions on labour market performance. Today, skill shortages, slow productivity growth and population ageing represent barriers to further expansion.

40 – CHAPTER 1. THE CHALLENGE AHEAD


Figure 1.1. Decomposition of GDP per capita growth in OECD countries, 1995-2005

Average annual trend growth rate of GDP per capita and its components

2.0

0 1 2 3 4 5 6

Ireland

Slovak Rep.

Poland

Hungary

Korea

Czech Rep.

Luxembourg

Greece

Finland

Spain

Iceland

United Kingdom

Australia

Norway

Sweden

Canada

Austria

Netherlands

United States

Belgium

Portugal

Denmark

France

Mexico

Germany

Japan

Italy

Switzerland GDP per capitaa

New Zealand 1.2

0 1 2 3 4 5 6

Labour productivityb

0.7

-1 0 1 2 3 4 5 6

Labour utilisationc

a) GDP divided by working-age population. b) GDP per hours worked. c) Hours worked divided by working-age population. Source: OECD (2007c).



A. Productivity growth is among the weakest in OECD

Despite strong economic growth and policy settings in product and labour markets that for the most part enhance efficiency, labour productivity growth in New Zealand has been weak over the past decade (OECD, 2007b).1 In an international perspective, improvements in labour productivity have contributed less to GDP per capita growth between 1995 and 2005 than in most other OECD countries and have been among the weakest in the OECD (Figure 1.1).

In light of this disappointing performance, the New Zealand government has formulated a plan for Economic Transformation (ET) in which higher productivity growth is a central objective. The plan for ET is aimed at “making New Zealand a high-income, knowledge-based market economy, which is both innovative and creative”, and focuses on several areas: management capability, investment in R&D and more innovative and productive workplaces. Although actions from several areas of government will be required for the plan to achieve its objectives, the government recognises that reducing the share of youth leaving school without qualifications and improving the quality of tertiary education and its relevance to labour market needs are key to improving labour productivity.

B. Skill shortages represent a barrier to further expansion

New Zealand has experienced significant skill shortages over the past decade. Despite some recent easing since record levels of shortages in early 2005, companies surveyed by the Department of Labour in 2007 (Department of Labour, 2007a) continue to find the recruitment of suitable staff problematic. In early 2007, 41% of businesses were experiencing difficulties in finding skilled staff and the figure was 21% in the case of unskilled staff (Figure 1.2). In addition, for 22% of New Zealand businesses, skill shortages were the main constraint to further expansion.

Policies directed at increasing provision of on-the-job training are important to tackle shortages in the short-run. In addition, the New Zealand selective immigration policy will likely continue to be an important route to filling skill shortages, thus reducing pressure on firms to train. However, the role of initial education is fundamental in addressing the issue at its roots. In this respect, it is important to investigate pathways from school to work that bring about a better alignment between the demand and supply of skills, as well as positive and sustained employment outcomes for young people.

1. Modest labour productivity growth may be partly due to increased labour

utilisation, notably higher labour market participation of less skilled workers.



Figure 1.2. Skill shortages in the labour market, New Zealand, 1986-2007

Percentages

-80

-60

-40

-20

0

20

40

60

80

1986

1987

1988

198919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

Firms reporting difficulty of finding skilled labour

Firms reporting difficulty of finding unskilled labour

0

5

10

15

20

25

30

1986

1987

1988

198919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

Firms reporting labour shortages as their main constraint on expansion

Source: New Zealand Institute of Economic Research, Quarterly Survey of Business Opinion.



Figure 1.3. Share of youtha in working-age population in OECD countries, 1975-2025 Percentages

Belgium

Germany

Ireland

Italy

Korea

Mexico

Sweden

EU-19

OECD

Sweden

Italy

Korea

Mexico

BelgiumEU-19

OECD

Germany

Ireland

Italy

Korea

Mexico

Belgium

EU-19

OECD

10

15

20

25

30

35

40

1950 1975 2000 2025

New Zealand

New Zealand

Ireland

Germany

New Zealand

2005 a) Ratio of the population aged 15-24 to the population aged 15-64.

Source: National Projections and United Nations projections for 2006 for Australia, Canada, Denmark, New Zealand and Spain; 2004, for Luxembourg; and 2005 for all other countries.



C. The share of youth in the working-age population has declined significantly

Since the mid-1970s, New Zealand has experienced one of the sharpest falls in the share of youth in the working-age population in the OECD – the fourth largest fall after Korea, Canada and the Netherlands. As a result, the size of younger cohorts has declined relative to that of their older counterparts. Youth aged 15 to 24 accounted for just over one fifth of the working-age population in 2005, down from almost one-third in 1975 (Figure 1.3). However, the pace of decline is projected to decelerate over the next two decades, with the proportion stabilising at around 20% in 2025.

Because population ageing affects ethnic groups in different ways, the ethnic composition of the New Zealand population is projected to change over the next two decades. As Table 1.1 shows, in 2021 the Māori, Pasifika and Asian shares of the youth population are expected to be higher than they were in 2001 while the share of youth of European origin (the so-called Pakeha) is projected to fall by over 10 percentage points. Hence, policies that reduce social and economic segregation – notably, those aimed at improving school performance and retention among the non-European youth cohorts – will have to play an even more crucial role in the years to come.

Table 1.1. Ethnic composition of New Zealand population, 2001-2021

Percentages of the population in each age groupa

European Māori Asian Pasifika

Less than 15 74 25 7 1115-39 75 17 9 840-64 83 10 6 465 and over 92 4 2 2All ages 79 15 7 7

Less than 15 63 28 17 1715-39 64 20 16 1140-64 71 12 15 665 and over 86 7 7 3All ages 70 17 15 9

2001

2021

a) The figures do not sum to 100 because respondents can report multiple ethnic origins. Source: Statistics New Zealand.



2. The labour market performance of New Zealand youth

Over the past decade, the country has experienced sizeable employment growth at a rate of 2.3% per year on average – the fourth largest gain across the OECD after Ireland, Spain and Mexico. In 2006, over 75% of the working-age population was in employment and more than 80% participated in the labour force. The standardised unemployment rate, at 3.8%, was the third lowest in the OECD area after Korea and Norway, and 2.5 percentage points below its 1996 level. Against this favourable macroeconomic background, it is hardly surprising that the labour market performance of young people has improved considerably.

A. Youth unemployment has halved since the early 1990s

In the early 1990s, the youth unemployment rate stood at close to 20%. Since then, it has fallen significantly to stabilise at less than 10% over the past three years compared with an OECD average of over 14% (Figure 1.4, Panel A). This is a considerable achievement by OECD standards (Figure 1.5).

However, youth unemployment rates being strongly affected by the business cycle, the ratio of youth to prime-age adult unemployment rates is perhaps a more relevant indicator of how youth unemployment has evolved over the past decade. This measure shows that, in New Zealand, the improvement in youth unemployment has been considerably smaller than that of adults. While the youth unemployment rate was just over twice that of adults in the early 1990s, the ratio had risen to 3.6 in 2006 (Figure 1.4). This rising trend is not unique to New Zealand. In fact, over the past decade, the relative position of youth has worsened in more than two-thirds of OECD countries (see Quintini and Martin, 2006).

The youth employment rate, another indicator of youth labour market performance – at about 60% in 2006 – stood below the rate of 65% recorded in Australia but well above the OECD average of 43% in 2006 (Figure 1.4). Its reduction, since the peak level of 70% in the mid-1980s, should not be interpreted as an indication of poor performance since it simply reflects the longer time spent in education on average by youth over the past two decades which, in turn, contributes positively to future human capital.

In many OECD countries, gender differences in labour market performance emerge at a relatively young age, despite the fact that young women are often better educated than their male counterparts. In New Zealand, such differences in performance are slightly less pronounced than in the OECD, on average (Figure 1.5). But, for both employment and unemployment indicators, the ranking of New Zealand across OECD countries was slightly lower for young women than for young men.



Figure 1.4. Youth unemployment and employment indicators, 1986-2006a

Percentages

6

8

10

12

14

16

18

20

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

New Zealand Australia OECD

40

45

50

55

60

65

70

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

B. Employment rated

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

C. Youth/adult unemployment ratioe

A. Unemployment ratec

b

a) Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States, and 15-24 for all other countries in the OECD. b) Unweighted average. c) Unemployed as a percentage of the labour force in the age group. d) Employed as a percentage of total population in the age group. e) Unemployment rate of youth (15-24)/unemployment rate of adults (25-54).

Source: National labour force surveys.



Figure 1.5. Youtha unemployment and employment indicators by gender, OECD countries, 2006b

Percentages

C. Employment ratee

61.5

0 10 20 30 40 50 60 70 80

IcelandNetherlands

AustraliaSwitzerland

Denmark

MexicoAustria

United KingdomCanada

United StatesNorwayIrelandSpain

GermanySweden

TurkeyJapan

FinlandPortugal

Czech RepublicItaly

GreeceBelgium

Slovak RepublicFrance

LuxembourgPoland

HungaryKorea

Men

OECDf = 45.5

New Zealand

A. Unemployed to populationc

6.3

0 5 10 15

LuxembourgKorea

MexicoJapan

NetherlandsNorwayIreland

DenmarkSwitzerland

HungaryAustria

Czech Republic

GreeceBelgiumPortugal

United StatesIceland

ItalyGermanyAustralia

FranceSpain

CanadaTurkey

FinlandSlovak Republic

PolandUnited Kingdom

Sweden

OECDf = 6.8

Men

B. Unemployment rated

9.3

0 10 20 30 40

MexicoNetherlands

DenmarkSwitzerland

NorwayIrelandJapan

AustriaIceland

AustraliaUnited States

KoreaLuxembourg

CanadaGermanyPortugal

SpainUnited KingdomCzech Republic

GreeceTurkey

BelgiumHungary

ItalyFinland

SwedenFrance

Slovak RepublicPoland

Men

OECDf = 14.2New Zealand

6.2

0 5 10 15

MexicoKoreaJapan

IrelandLuxembourg

HungaryTurkey

SwitzerlandNorwayAustria

DenmarkCzech Republic

BelgiumUnited StatesNetherlands

GermanyIceland

ItalyAustraliaCanadaPortugal

FranceUnited

Slovak RepublicFinlandGreecePoland

SpainSweden

Women

OECDf = 6.3

New Zealand

10.0

0 10 20 30 40

JapanMexico

SwitzerlandIceland

DenmarkIreland

NetherlandsNorway

KoreaAustria

United StatesAustralia

CanadaUnited Kingdom

GermanyLuxembourg

PortugalFinland

Czech RepublicBelgium

TurkeyHungarySweden

SpainItaly

FranceSlovak Republic

PolandGreece

Women

OECDf = 15.4New Zealand

55.9

0 10 20 30 40 50 60 70 80

IcelandDenmarkAustralia

NetherlandsSwitzerland

CanadaUnited Kingdom

NorwayUnited States

AustriaSweden

IrelandJapan

FinlandGermany

SpainKorea

MexicoPortugal

Czech RepublicBelgium

Slovak RepublicFrance

LuxembourgPoland

ItalyTurkey

GreeceHungary

Women

OECDf = 40.4

New Zealand

New Zealand

a) Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States, and 15-24 for all other countries. b) Data for Luxembourg refer to 2005. c) Unemployed as a percentage of the population in the age group. d) Unemployed as a percentage of the labour force in the age group. e) Employed as a percentage of total population in the age group. f) Unweighted average of countries shown. Source: National labour force surveys.



In 2006, youth employment and unemployment rates varied considerably by ethnicity in New Zealand (Department of Labour, 2007b). While 68% of Pakeha youth aged 15-24 were employed in 2006, the employment rates of Māori and Pasifika youth were only 44% and 47%, respectively. Similarly, the unemployment rate of 15-24 Māori (18.4%) and Pasifika (16%) youth were more than twice the rate for their Pakeha counterparts (5.6%) in 2006.

B. The incidence of long-term unemployment among youth is one of the lowest in the OECD

In 2006, less than 3% of unemployment youth in New Zealand had been unemployed for 12 months or longer (Figure 1.6). This marked a significant improvement since 1996 when the incidence of long-term unemployment was 12%. In terms of this indicator, New Zealand is among the best performing countries in the OECD.

Figure 1.6. Incidence of long-term unemploymenta among youth,b selected OECD countries, 1996 and 2006c

Percentages of unemployed youth

0

10

20

30

40

50

60

70

Korea

Denmar

k

Icela

nd

Mex

ico

Canada

New Zea

land

Sweden

Norway

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d

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tate

s

Austra

lia

Luxe

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ingdom

Austri

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Turke

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Portu

gal

Ger

man

y

Poland

Hungar

y

Czech

Rep

ublic

Gre

ece

Italy

Slovak R

epub

lic

2006 1996

a) Twelve months and over. b) Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States, and 15-24 for all other countries. c) Data for Luxembourg refer to 2005. Source: OECD Education database.



C. One in ten young people was neither in employment nor in education or training in 2005

The proportion of young people neither in education nor in employment or training (NEET) provides another key indicator of labour market performance for youth. Indeed, while this is a very diverse group, some NEET youth are at high risk of labour market marginalisation and social exclusion. In New Zealand, 11% of youth were NEET in 2005 (see Figure 1.7) – just below the OECD average of about 12%. Relative to 1995, the NEET rate had fallen by about 2 percentage points.

Figure 1.7. Share of youtha neither in employment and nor in education or training, OECD countries, 1996-2005b

Percentages of the youth population

0

5

10

15

20

25

30

35

40

45

Turke

y

Mex

ico Italy

Slova

k Rep

ublic

Greec

e

United K

ingdom

Hungar

y

Belgium

Spain

Poland

Korea

Portu

gal

Ger

man

y

Franc

e

New Zea

land

Czech

Rep

ublic

United S

tate

s

Canada

Austri

a

Austra

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Finlan

d

Switzer

land

Sweden

Japa

n

Ireland

Nether

land

s

Iceland

Denmar

k

Norway

Luxe

mbo

urg

2005 1996 OECD 2005 OECD 1996c c

a) Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States, and 15-24 for all other countries. b) For Mexico and Norway data refer to 2004 instead of 2005; for Japan to 2003 instead of 2005; for Germany, Finland and the Netherlands to 1997 instead of 1996; and for Italy to 1998 instead of 1996. c) Unweighted average of countries shown. Source: OECD Education database.

A recent report by the New Zealand Department of Labour (2007b) shows that the incidence of NEET has fallen since 2005 to reach 8.3% for 15-19-year olds and 12.8% for 20-24-year olds in June 2006. The report also highlights marked differences across ethnicity. The share of 15-19-year-old



Māori who were NEET in mid-2006 was 18.6%, compared with 12.4% of Pasifika youth and only 5.9% of Pakeha youth. Differences are even more marked when 20-24-year olds are considered: in this age group, almost 31% of Māori, 21.6% of Pasifika and just 9.7% of Pakeha were NEET. Most of the difference across ethnicity is explained by higher unemployment rates among Māori and Pasifika youth compared with Pakeha and by the larger share of youth looking after children among Māori and older Pasifika youth. About 3% of 15-19-year-old Māori were looking after children and not studying in 2006 compared with 1% among Pakeha. The differences are even more marked for the 20-24 age group: 16.3% of Māori youth versus 11% of Pasifika youth and 4.6% of Pakeha youth.

D. Youth inactivity is quite persistent

Despite the declining incidence of NEET among youth in New Zealand over the past decade, the Survey of Family, Income and Employment provides evidence that some of the young people in this status find it difficult to get a job or go back to learning. Of the 12.4% of 15-24-year-old youth who were NEET when interview in 2003, over half were in the NEET category in 2004 and 30% were NEET at three consecutive interview dates (2003-2005).2 Recurrence is also an issue suggesting that some youth circle between NEET and short and unstable employment spells. Among those who exited NEET in 2004, 17% had become NEET again by 2005.3 Both persistence and recurrence in the NEET status are a concern because they hamper prospects of making a successful transition into the labour market.

3. The transition from school to work in New Zealand

The transition from school to work involves more than just passing from an educational institution to the labour market. In this report, it covers a broader period during which youth start to look for jobs, accumulate work experience and try to improve the match between the skills they learnt at school and those required in jobs.

2. Figures based on longitudinal data from the Survey of Family, Income and

Employment provided by the New Zealand Department of Labour.

3. It is also noteworthy that NEET status is more persistent among 20-24-year olds than among 15-19-year olds while it tends to be more recurrent in the younger age group.



A. New Zealand youth find their first job relatively quickly after leaving education

The transition process from school to work is relatively smooth in New Zealand. Figure 1.8 shows the activity status of youth per single year of age in 2005. The share of youth in education decreases steeply with age and, by the age of 17½ , about half of New Zealand youth has left education, quite early compared to other OECD countries for which this statistic is available. However, the slight rise in the share of youth in education in their early twenties suggests that some young people return to follow tertiary courses after a spell on the labour market.

The figure also highlights labour market inactivity among youth who have left education. The share of youth in this category tends to increase with age until it settles around 12% in the mid-twenties.

The data presented in Figure 1.8 can be used to obtain an estimate of the time needed to find a first job after leaving full-time education. To do so, the age at which half of youth are employed is compared with the age at which half have left education.4 For New Zealand, this methodology gives an estimate of just five months in 2005 and data available for 1995 suggest that transitions were more than twice as long then. This estimate of the length of time to find a first job is much lower in New Zealand than in other OECD countries for which the same statistic can be calculated (see Quintini et al., 2007). In Austria, Belgium, Ireland, Luxembourg and the Netherlands – the best-performing countries in terms of this indicator in Europe – it takes between 14 and 17 months for a young person exiting education to find a first job. New Zealand also compares favourably with Australia and the United States.

Other methods can be used to calculate how long it takes to find a first job after leaving full-time education (see Box 1.1). But, whichever method is used, the evidence concurs that New Zealand youth find a first job very rapidly after leaving school, on average within 3-5 months.

4. This proxy measure corresponds to the difference in the median ages of being in

education as opposed to having a first job. It has the advantage that it can be estimated over time so that one can assess changes in the average length of the transition over the past decade.



Figure 1.8. Activity status of youth aged 15-27, New Zealand and selected OECD countries, 2002/2005a

Percentages

In education

Not in education and employed

Not in education and not in the labour force

New Zealand Spain

Age at which 50% of the youth aged 15-27 are out-of-schoolAge at which 50% of the youth aged 15-27 are in employment

Not in education and unemployed

United States Australia

France United Kingdom

0

10

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100

15 16 17 18 19 20 21 22 23 24

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15 16 17 18 19 20 21 22 23 24 25 26 270

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15 16 17 18 19 20 21 22 23 24 25 26 27

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15 16 17 18 19 20 21 22 23 24 25 26 270

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15 16 17 18 19 20 21 22 23 24 25 26 27

a) Data for Australia, New Zealand and the United States refer to 2005; for Spain, France, and the United Kingdom they refer to 2002.

Source: National labour force surveys for Australia and New Zealand; October Supplement of the Current Population Survey for the United States; and European Union Labour Force Survey for other countries.



Box 1.1. Measuring the time needed to find a first job after leaving education

Several methods can be employed to obtain an estimate of the time needed to find a first job after leaving education. Using the difference in the median ages of being in education as opposed to having a first job gives an estimate of around five months. One alternative is to use a sufficiently long longitudinal database where the labour force status of young people can be followed over time, possibly on a monthly basis. Another relies on retrospective surveys which ask participants to recall the length of their transition from school to a first job.

In New Zealand, estimates of the time needed to find a job after leaving education using longitudinal data can be derived from the Survey of Family, Income and Employment (SoFIE). Results show that 49% of youth aged 15-24 who exited education or training in 2003 and 2004 already had a job upon leaving. Another 16% found a job within a month and by three months after leaving education almost 80% of youth are in work. Still, one in ten youth take longer than 12 months to enter employment. These figures suggest an average of 3-4 months.*

Individual recall data for New Zealand are available through the Labour Market Dynamics Research Programme. In 2004, the programme launched the Pathways to Sustainable Employment (PASE) survey of about 1 000 young people aged 15-34 in four selected areas in New Zealand. Among other information, the survey includes questions on the first job after finishing full-time education. The survey shows that, for 85% of the respondents, it took less than three months to find a first job, roughly in line with longitudinal data findings.

In sum, all three methods used here suggest that New Zealand youth find a first job very rapidly after leaving school, on average within 3-5 months, and they enter employment significantly younger than their counterparts in almost all OECD countries.

While it is not possible to derive the average length of transitions from school to work by socio-demographic characteristics, when looking at a snapshot of what youth aged 15-24 are doing twelve months after leaving education and training, SoFIE allows some decomposition by qualification, gender and ethnicity.** About 73% of Māori youth aged 15-24 were employed one year after leaving education and training in 2003 or 2004. This compares with a proportion of over 85% for Pakeha youth. Youth without qualifications also did badly according to this indicator – only 62% were employed versus 87% of youth holding an upper secondary education qualification or higher. Gender differences were also marked: only 75% of young women were employed twelve months after entering the labour market, 10 percentage points fewer than young men.

* Depending on the average duration assumed for the final interval.

** Note that the sample size when working with these sub-groups is small and results should be taken with caution.



B. Youth find their first job mostly through informal channels

Dupuis et al. (2005) use the PASE survey to investigate how young people find their first job after finishing full-time education. About half of PASE respondents reported that they found their first job through informal channels, such as friends, relatives and personal contacts with employers. Not surprisingly, the authors also show evidence that the recourse to informal channels diminishes over time – notably, relatives had less influence over finding the current job held by respondents than their first one.

C. The first few years in the labour market are characterised by considerable voluntary mobility

In many OECD countries, high job mobility is a defining feature of youth’s initial steps in the labour market.5 While frequent job changes among young people – the so-called job-shopping phenomenon – serve the purpose of looking for a job that more accurately matches qualifications, aspirations and preferences of young people, too-frequent changes may compromise participation in job-related training, hence leading to less human capital accumulation.

For New Zealand, an analysis of median tenure and job mobility among young people was carried out by Dupuis et al. (2005). The authors find a median duration of the first job after leaving full-time education of 1.7 years. According to the survey, about 18% of first jobs lasted less than six months and another 14% lasted between six months and a year. When the first job was permanent, the median duration was slightly longer, at 2.2 years.

The authors also use the PASE survey to show that youth in New Zealand experience a very high degree of job mobility. About 30% of respondents aged 25-29 had had between eight and ten jobs since the age of 15, and another 15% had had more than ten jobs. Although the total number of jobs includes jobs held while studying, the responses still reveal a very high degree of inter-job mobility.

5. Quintini and Martin (2006) calculate the proportion of young new hires – at their

first work experience – who engage in on-the-job search for a better employment opportunity. Evidence is available for European countries only and it shows that in Italy, for instance, 13% of those in work are looking for another job. The corresponding figures for Greece, Denmark and Poland are about 10%.



It is also noteworthy that most respondents appeared to be making their job moves because they wanted to rather than because they had to – in line with the job-shopping hypothesis. About 61% of first jobs were left because of new opportunities elsewhere – for example, to study or to go down a new career track. About 7% of separations were caused by family circumstances. Less than 10% were apparently caused solely by job dissatisfaction. Redundancies, contract terminations and dismissals totalled 14%.

4. Characteristics of jobs performed by youth: stepping stones or traps?

In most OECD countries, entry jobs for youth have become more precarious. This need not be a problem if these entry jobs serve as stepping stones towards more stable employment with opportunities for career advancement. On the other hand, it is important to avoid that they become traps that young people find difficult to exit.

Unfortunately, New Zealand official statistics do not include information on temporary work which is often believed to be the main form of precarious employment. As a result, the PASE survey is used to describe entry jobs for youth and discern changes in the nature of transitions from school to work over the past two decades. But the small sample size is a serious constraint and the results should be taken as only suggestive.

A. One in three youth enters the labour market on a temporary job, often voluntarily

About one-third of respondents in the PASE survey reported entering the labour market on a temporary job – with casual work accounting for over half of temporary forms of employment in the first job. This compares with an incidence of temporary work for the overall population of about 11% (see Box 1.2). It is hard to put this figure in an international perspective as similar estimates are not available for other OECD countries. The closest statistic is the share of employed youth who were in temporary work one year after leaving education, which can be calculated for European countries using data from the European Community LFS – on average, about 40% in 2004 (Figure 1.9).6 It is also noteworthy that more than half of young people in the PASE sample who held temporary contracts declared they did so voluntarily.

6. Data in Figure 1.8 should be regarded as only suggestive of the position of

New Zealand relative to the other OECD counties included. For instance, data for New Zealand do not refer to a specific year and, while the European average increased only slightly between 1998 and 2004, changes for individual countries were at times considerable.



Box 1.2. Non-standard work in New Zealand

A rich literature has developed in New Zealand around the issue of non-standard work and its increase over the past decade. In most studies, non-standard work is defined as including: people working less than 30 or more than 50 hours, self-employed without employees and multiple job holders. Ideally, individuals on temporary jobs should also be included but lack of data makes this difficult. Brosnan and Walsh (1996) provide the only available estimate of the share of workers on temporary contracts – they found an incidence of about 11% in 1995.

For the other forms of non-standard work, Carroll (1999), McLaren et al. (2004), Baines and Newell (2004) and Dupuis and McLaren (2006) show striking increases in New Zealand over the late 1980s and 1990s. Putting together information from different data sources, these studies suggest that in 1986 just over 45% of working New Zealanders were in non-standard employment. This share had risen to 60% by 2001. McLaren et al. (2004) also show that, while the number of workers on standard jobs remained roughly unchanged between 1991 and 2001, total employment rose by 23% during this period. Tucker (2002) and Carroll (1999) explore the precariousness of non-standard work in New Zealand and conclude that most workers tend to appreciate the flexibility that non-standard work affords.

Using the same definition of non-standard employment – i.e. excluding temporary work – McPherson (2006) shows that youth are the group that has experienced the strongest increase in non-standard work, probably driven by the rise of part-time work among students (see figure below). The figure also suggests an interesting age profile of the incidence of non-standard employment. The decline in the incidence of non-standard work between 15 and 24 presumably reflects differing trends of combining work and study. On the other hand, the rising trend from the late 20s on may reflect life-cycle choices.

Trends in non-standard worka by age group, New Zealand, 1986 and 2001

Percentages

0

10

20

30

40

50

60

70

80

90

100

15-16 17-19 20-22 23-24 25-29 30-59 60-64 65-69

2001 1986

a) Non-standard work includes work for longer than 50 or less than 30 hours per week, multiple job holding and self-employment without employees. Source: McPherson (2006).



Figure 1.9. Incidence of temporary work at labour market entry, New Zealanda and selected European countries,b 2004

Percentage of employed youth

0

10

20

30

40

50

60

70

80

90

Iceland

Ireland

Austria

United Kingdom

Slovak Republic

Hungary

Denmark

Czech Republic

New Zealand

Greece

Germany

Luxembourg

Belgium

Netherlands Ita

ly

Finland

France

Sweden

Poland

Portugal

Spain

Involuntary Voluntary

a) Data for New Zealand refer to the first paid job after leaving full-time education (retrospective questions asked in 2004). b) Data for Austria and the Czech Republic refer to 2003. Source: Pathways to Sustainable Employment (PASE) survey for New Zealand; and OECD Secretariat calculations based on the European Union Labour Force Survey.

B. Most youth who enter the labour market on a temporary job move on to permanent employment as experience accumulates

There is some evidence that in New Zealand the incidence of temporary employment decreases with experience on the labour market. Using the PASE survey and focusing on the current job of employed respondents – when different from the first – about 80% are on permanent jobs. This is about 14 percentage points higher than the incidence of permanent work in the first job.

Following individuals over time provides a clearer picture of transitions from permanent to temporary jobs. Among youth whose first job was temporary, 70% had a permanent job at the time of the interview (Table 1.2).7 Unfortunately, it is not possible to derive the time spent on temporary employment before moving to a permanent job.

7. Only 9% of those who entered the labour market on a permanent job had a current

job of a temporary nature.



Table 1.2. Transitions from temporary to permanent work among New Zealand youth, 2004

Percentages of those whose first job was temporary

Inactive or unemployed

Permanent Temporary

15-19 15.2 42.4 42.4

20-24 6.3 62.5 31.3

25-29 11.9 83.3 4.8

30-34 7.9 84.2 7.9Total 10.3 69.7 20.0

Source: Pathways to Sustainable Employment (PASE) survey.

Among those who started on a temporary job, the likelihood of being in permanent employment at the time of the interview increases with age. As Table 1.2 shows, 42% of youth aged 15-19 at the time of the interview who started on a temporary job had a permanent current job. The incidence of permanent work among those aged 30-34 increases to 84%. This rise could be the result of two different effects. First, the likelihood of transition from a temporary to a permanent job increases as experience accumulates on the labour market. Second, older age groups will incorporate more educated youth who may transit from temporary to permanent employment faster than the less skilled.

C. Entry jobs of low-skilled workers have changed in nature over the past decade

Lacking suitable longitudinal surveys, one way of looking at differences in transitions over time is to compare cohorts of young people included in the PASE survey who have less than upper secondary education.8

8. Distinguishing by educational attainment allows the identification of the period in

time during which the person has entered the labour market with a fair degree of reliability – i.e. youth aged 30-34 with less than an upper secondary education qualification left school at age 15/16 between 1985 and 1989, while those without qualifications aged 20-24 left in 1995-1999 and so on. Unfortunately, this exercise can only be conducted for those without an upper secondary qualification as the other two groups are too small to be treated separately and, if merged to allow a larger sample size, the year of labour market entry is hard to establish, even approximately.



Educational attainment can be used to determine approximately when each age group enters the labour market.9 Figure 1.10 shows that the share of low-skilled youth whose first job is part-time or temporary increased significantly between the mid-1980s and the early-2000s.

Figure 1.10. Incidence of part-time and temporary work in the first job of low-skilled youth,a 1985-2004b

Percentages of youth without an upper secondary education qualification whose first job was temporary or part-timec

A. Temporary work

10

20

30

40

50

60

70

80

90

30-34 (1985-89)

25-29 (1990-94)

20-24 (1995-99)

15-19 (2000-04)

30-34(1985-89)

B. Part-time work

10

20

30

40

50

60

70

80

90

30-34 (1985-89)

25-29 (1990-94)

20-24 (1995-99)

15-19 (2000-04)

30-34(1985-89)

25-29(1990-94)

20-24(1995-99)

15-19(2000-04)

25-29(1990-94)

20-24(1995-99)

15-19(2000-04)

a) Low-skilled youth are those with qualifications equivalent to level 1 of the International Standard Classification of Education (ISCED). b) Estimated time of labour force entry, in parenthesis. c) The two categories are not mutually exclusive. Part-time employment is defined as working for less than 30 hours a week. Temporary employment is defined as casual employment, fixed-term contracts, temporary agency employment or seasonal employment. Source: Pathways to Sustainable Employment (PASE) survey.

5. Low pay among youth

Low pay – defined as gross hourly wages lower than two-thirds of median adult wages – is more common among youth than among adults. Only about 14% of 25-54-year olds in New Zealand were low-paid in 2005 according to this definition, versus more than one in three of youth aged 15-24.10

9. The size of the samples is quite small so the results should only be taken

as suggestive.

10. Restricting the analysis to entry jobs – i.e. first jobs held after leaving full-time education or training – shows that 60% of youth aged 15-24 entered the labour market in low-paid jobs.



Quintini and Martin (2006) calculate the incidence of low pay in some European countries for which data is available. The share of 15-24-year olds in low pay in New Zealand is much smaller than in Germany and the Netherlands – where the incidence of low pay is highest in Europe and exceeds 40%. New Zealand is closer to the EU average and to countries such as the United Kingdom, France and Denmark in terms of this indicator. The incidence of low pay among New Zealand youth is also lower than in Australia where 42% of 15-24-year olds are affected (Australian Bureau of Statistics, 2007).

6. Mismatch between studies and entry jobs

A. Entry jobs tend to bear little relation with what is studied in school and things improve only slightly with experience

In common with other OECD countries, most youth in New Zealand enter the labour market on jobs that bear little relation with what they learned as students. About half of respondents in the PASE survey said their first job was not related at all with what they studied and another 12% said they did something not very closely related to their studies. However, there is some evidence that the match between skills acquired in education and jobs tends to improve with work experience. With regard to their current job, only 47% said they did something completely unrelated or not very closely related to what they had studied.

7. Key points

In 1996, the labour market performance of New Zealand youth was already significantly better than the OECD average and the past decade has witnessed further improvements (Table 1.3). Only the incidence of part-time work is higher than the average across OECD countries, but this reflects for the most part a choice – i.e. a part-time job is a way to reconcile work and study and help finance the costs of further education.

New Zealand youth take considerably less time to find their first job after leaving full-time education than youth in other OECD countries. Like in other OECD countries, entry jobs tend to be temporary but there is evidence to suggest that transitions to permanent work happen relatively smoothly. There is also evidence of significant job mobility over the first few years on the labour market.

The buoyant youth labour market provides a good backdrop to address some remaining issues. First, disappointing productivity growth and skill



shortages would benefit from action on initial education. Second, 11% of youth aged 15-24 are NEET. This includes a hard-core of youth who are at high risk of poor labour market outcomes and social exclusion. There is also a marked ethnic dimension to the NEET problem: Māori and Pasifika youth are more than twice as likely to be NEET as youth of European origin.

Table 1.3. Scoreboard for youth aged 15-24,a New Zealand, Europe and OECD, 1996 and 2006

New Zealand EUb OECDb New Zealand EUb OECDb

Employment rate (% of the age group) 59.5 38.8 43.5 58.8 37.9 43.0

UR (% of the labour force) 11.8 19.5 16.2 9.6 17.4 14.7

Relative UR youth/adult (25-54) 2.4 2.4 2.4 3.6 2.7 2.7

Ratio unemployed to population (% of the age group) 8.0 8.7 7.8 6.3 7.2 6.6

Incidence of LTU (% of unemployment) 12.0 32.3 24.9 2.8 27.2 20.8

Incidence of part-time work (% of employment) 32.5 14.5 19.5 36.0 20.5 23.3

NEET rate (% of the age group)c 13.6 14.2 14.3 11.3 11.3 12.0

School drop-outs (% of the age group)d 12.6 13.9 16.7 11.5 11.0 13.2

Relative UR low skills/high skills(<ISCED 3)/(>ISCED 3)e 2.4 2.6 2.5 2.4 2.2 2.2

1996 2006

ISCED 3: International standard of education referring to upper secondary education; LTU: long-term unemployment; NEET: neither in education nor in employment or training; UR: unemployment rate.

a) Youth aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States.

b) Unweighted averages for the 19 OECD and EU countries and for the 30 OECD countries. c) 1995 and 2005 for New Zealand, 1996 and 2005 for EU and OECD. d) Share of youth not in education and without upper secondary education, 1997 and 2005; 1995

instead of 1996 for New Zealand. e) 1997 and 2005. Source: National labour force surveys; and OECD Education database.

CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB – 63


CHAPTER 2

INITIAL EDUCATION AND LEARNING ON THE JOB

The quality of initial education is a key factor in facilitating the transition from school to work and putting youth on a promising career track. Also, training on the job at the beginning of active life allows youth to fill the gaps of school-based education and acquire the skills required by firms. In a number of OECD countries, youth start working during their studies, notably by participating in internships or by combining classroom-based training with work within apprenticeships or the so-called “dual system”. While the combination of work and study is commonplace in New Zealand, students often take up jobs that are unrelated to their field of study. In addition, initiatives to combine work-based and classroom-based learning are still underdeveloped at the secondary-school level. This limited availability of vocational education coexists with significant labour shortages in the trades and several services.

The New Zealand government recognises the importance of initial education and major efforts have been made to increase its relevance to labour market requirements. The recently launched Tertiary Education Strategy 2007-2012 is an attempt to increase the relevance of advanced crafts, technical and professional qualifications to regional and national industry needs. A new system to track secondary school attendance has also been put in place with the aim of ensuring that young people are enrolled in school as per legislative requirements.

This chapter considers whether the New Zealand education system gives youth a good start in the labour market. Section 1 enumerates the challenges facing the system; Section 2 focuses on strategies to reduce the number of school drop-outs; Section 3 addresses the main problems faced by tertiary education; Section 4 discusses students’ work; and the final section reviews young people’s participation in on-the-job training.

64 – CHAPTER 2. INITIAL EDUCATION AND LEARNING ON THE JOB


1. Performance of the education system

A. The performance of 15-year-olds in school is above the OECD average but within-school variation is very high

According to the OECD Programme for International Student Assessment (PISA) for 2003, New Zealand’s 15-year-olds perform well above OECD averages in terms of reading, mathematics and science scales (Figure 2.1). However, dispersion is high. Over 15% of 15-year-olds do not possess the mathematics and reading skills judged necessary for success in future life, compared with about 5% in Finland, the best OECD performer in terms of PISA tests.

Figure 2.1. New Zealand students’ performance, based on PISA, 2006

Total

Levels of knowledge on the reading scale (percentage of all students)

Levels of knowledge on the mathematics scale (percentage of all students)

470480490500510520530540550560570

Science scale

0102030405060708090

100Up to level 1 (score below 407)

0102030405060708090

100Average level (between 408 and 624)

0102030405060708090

100Excellence level (above 625)

0102030405060708090

100Up to level 1 (score below 420)

0102030405060708090

100Average level (between 421 and 668)

0102030405060708090

100Excellence level (above 669)

470480490500510520530540550560570

Reading scale

470480490500510520530540550560570

Mathematics scale

Source: OECD PISA 2006 database.



While differences in maths performance between schools are small relative to the OECD average, within-school variation in students’ scores is among the highest in the OECD (see Figure 2.2). This suggests that educational programmes, schools and teachers may not be appropriately addressing the wide range of student needs and talents that exists within New Zealand schools.

Figure 2.2. Variance between and within schools in PISA maths results, selected OECD countries, 2006a

Mean score and variance

020406080

NorwayNew ZealandIcelandSwedenPolandSpainDenmarkAustraliaFinlandLuxembourgSwitzerlandCanadaUnited KingdomUnited StatesPortugalIrelandGreeceCzech RepublicBelgiumKoreaSlovak RepublicAustriaItalyGermanyTurkeyJapanMexicoHungaryNetherlands

OECDb = 36.8

Total variance between schools

0 20 40 60 80 100

Total variance within schools

OECDb = 64.6

NetherlandsHungaryMexicoJapanTurkey

GermanyItaly

AustriaSlovak Republic

KoreaBelgium

Czech RepublicGreeceIreland

PortugalUnited States

United KingdomCanada

SwitzerlandLuxembourg

FinlandAustraliaDenmark

SpainPolandSwedenIceland

New ZealandNorway

a) For each country, a distinction is made between the variance of students’ performance attributable to differences in results attained by students in different schools (between school differences) and that attributable to the range of student results within schools (within-school differences). The length of the bars on the right shows the within-school differences, and also serves to order countries in the figure. The length of the bars on the left shows between-school differences. Therefore, longer segments on the left indicate greater variation in the mean performance of different schools while longer segments on the right indicate greater variation among students within schools. b) Unweighted average of countries shown. Source: OECD PISA 2006 database.



B. Retention rates in school are among the lowest in OECD with marked differences by ethnicity

On average across OECD countries, 13% of young people left school in 2004 without an upper secondary qualification, which is regarded as a minimum to get a job in today’s labour market and support further acquisition of skills. In New Zealand, the share of school drop-outs among youth aged 15-24 was 11.5% – below the OECD average and down from almost 13% in the mid-1990s (Figure 2.3). While a number of these drop-outs return to education later – approximately 30% – the window of opportunity between age 15 and 20 is lost (see Maani and Maloney, 2004).

Figure 2.3. School drop-outsa in OECD countries, 1996 and 2005b

Percentages

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60

Mex

ico

Turke

y

Portu

gal

Spain

Icela

ndIta

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lands

Belgium

Irelan

d

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any

Hungar

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United S

tate

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ingdom

Sweden

Slovak R

epub

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Japa

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Czech

Rep

ublic

Poland

Norway

Korea

2005 1996

OECD 1996cOECD 2005c

a) Percentage of youth leaving schools without an upper secondary degree. Youth are those aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States, and those aged 15-24 for all other countries. b) 2003 for Japan, 2004 for Mexico and Norway, instead of 2005; 1997 for Australia, Belgium, Japan, Poland, Sweden and the United States and 1998 for Denmark and Italy, instead of 1996. c) Unweighted average of countries shown. Source: OECD Education database.



Another worrying fact is that despite the increase in the age of compulsory schooling from 15 to 16 in 1993, retention rates of 16-year-olds have tended to decline since the early 1990s. Marked differences in retention rates by ethnicity exist, as highlighted in Figure 2.4. In 2006, only 60% of Māori youth were enrolled in education six months after their 16th birthday, down from almost 75% in 1992. Pasifika youth, on the other hand, have rates of retention in education at this age only slightly lower than those experienced by Paheka youth.

Figure 2.4. Retention rates for youth aged 16 years and a half by ethnicity, New Zealand, 1992-2006a

Percentages

Total

Māori

Pasifika

60

65

70

75

80

85

90

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

a) Percentages of youth aged 16 years and a half enrolled in education in each year. Source: New Zealand Ministry of Education, Education counts.

C. An increasing number of New Zealand youth hold a tertiary qualification

In most OECD countries, the share of young people holding a tertiary education qualification is significantly higher than among their older counterparts (see Figure 2.5). This is also the case in New Zealand but the country has not caught up as fast as other OECD countries – the difference



in graduation rates between 25-34- and 55-64-year olds of about 10 percentage points is more modest than in the OECD, on average. As a result, while New Zealand is quite well placed in international comparisons for the older generation, it ranks lower as far as youth are concerned. In addition the share of 18-24-year olds enrolled in tertiary education has stabilised at about 36% since 2000.

Figure 2.5. Population that has attained tertiary education, 25-34- and 55-64-year olds, OECD countries, 2005a

Percentages

0

10

20

30

40

50

Canada

Japa

n

Korea

Belgiu

m

Ireland

Norway

Denmar

k

Spain

Franc

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tate

s

Austra

lia

Finlan

d

Luxe

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Sweden

Icela

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United K

ingdom

New Zea

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Switzer

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Ger

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a

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y

Portu

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Mex

ico Italy

Slova

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public

Czech

Rep

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Turke

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25-34 55-64

OECDb OECDb

a) Countries ranked from left to right in terms of highest to lowest proportions of 25-34-year olds with a tertiary qualification. b) Unweighted average of countries shown. Source: OECD (2007d), Education at a Glance, Paris.

2. Combating early school-leaving in New Zealand

In most OECD countries early school-leaving translates into high unemployment rates for those concerned. This was the case in New Zealand in the early 1990s but, over the past decade, the country’s buoyant labour market – characterised by labour shortages in most industries – has made it easy to find a job, even for the least qualified youth. Figure 2.6 illustrates the convergence of unemployment rates by educational attainment that has taken place over the past 15 years.



Nevertheless, low qualifications translate into a higher risk of youth being NEET: 18% of New Zealand youth without an upper secondary qualification were NEET in 2005, compared with an average of 12.4% in the OECD.

Figure 2.6. Unemployment rates by highest educational attainment, working-age population, New Zealand, 1991-2006

Percentages

0

2

4

6

8

10

12

14

16

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Bachelor or higher Tertiary other than degree

School qualifications No qualification

Source: Statistics New Zealand, Household Labour Force Survey.

In addition, the large share of the population without qualifications is likely to be among the causes of the country’s poor labour productivity performance. In fact, the lack of qualifications translates into low levels of literacy and numeracy in the adult population (see OECD, 2006b), limiting participation in lifelong learning and firm-based training and making it difficult to overcome initial labour market disadvantage.11

11. The government is currently running a work programme across a range of

agencies called “Upskilling the Workforce” which aims to address this issue.



As a result, a coherent strategy to combat school failure is necessary, even in the current buoyant labour market environment. A number of measures put forward by education experts are enumerated in Box 2.1 and some of them could help to improve retention in New Zealand, particularly among Māori youth.

It is noteworthy that New Zealand recently introduced a new qualification system that recognises different learning experiences – including out-of-school ones – and is on the point of introducing a new curriculum explicitly focused on promoting work-relevant skills and lifelong learning. Both these initiatives may contribute to increase engagement of youth at risk of dropping out of school.

Box 2.1. Strategies to reduce dropout rates and their relevance to New Zealand

Several different approaches to reducing early school-leaving have been canvassed in the literature (see Toch et al., 2007; Bost and Riccomini, 2006; Craig, 2006; Dynarski et al., 1998; and Dynarski and Gleason, 1999). The main ones are as follows:

Enrolment tracking and attendance monitoring

Making sure that youth stay in school until the age they are required to by law is a necessary condition to avoid early school-leaving. Enrolment tracking is particularly problematic in New Zealand but it is crucial to reduce the number of youth that leave school before the age of 16. Also, irregular school attendance is an early sign of school disengagement and should be monitored closely and effective steps developed to reduce it. In New Zealand, the age of compulsory schooling was raised from 15 to 16 in 1993 with the aim of improving retention of 16-year olds in education. However, to soften the transition, parents were entitled to apply to the Ministry of Education for an exemption from schooling on the basis of educational problems, conduct and the unlikelihood of the student gaining benefit from attending available schools. Parents are required to give details of training programmes or employment that their child would move on to but enrolment is not tracked to verify these alternative destinations. The use of these so-called “early leaving exemptions” has been so extensive that retention rates of 16-year olds decreased after 1993.

Mentoring/Tutoring

Mentoring is a one-to-one supportive relationship between a mentor and a mentee that can focus on the academic and/or work and social environment. Tutoring, also a one-to-one activity, provides academic support and addresses such needs as reading, writing or mathematics competencies. Many youth services providers in New Zealand argue that the more systematic practice of mentoring would be useful for disadvantaged youth. This holds in particular for Māori and Pasifika youth who often lack role models and support at home. Some mentoring initiatives have been developed at universities in New Zealand to improve retention and motivation among Māori and Pasifika students and early evaluations show positive results (Ministry of Education, 2006). In addition, a Parent Mentoring Initiative was carried out by the Ministry of Education between 2002 and 2005 to work with parents for the benefit of their children (Ministry of



Education, 2005). While it dealt with the issue from a different angle, the initiative recognised that parents are the key players in decisions affecting their child’s learning. For secondary school students, some mentoring initiatives have been introduced recently – e.g. parents mentoring classmates of their child – with positive results. Unfortunately, these examples of good practice are not presently collected or used to provide guidelines for other schools.

Teaching methods

Instructional strategies that expand teaching methods, accommodate a range of learning styles, include technological resources, and meet individual student needs all provide multiple benefits. This component is particularly relevant to New Zealand schools’ multi-ethnic classes. In addition, the relatively high within-school variation revealed by the PISA results highlights the need to revise teaching methods and objectives to reduce under-achievement tails while maintaining excellence among the best students. A study by Maloney (2004a) points to the need that teachers maintain motivation among all students, with particular attention paid to the most disadvantaged. The paper finds that young people from families that received social welfare benefits tend to revise downwards their expectations of educational attainment between the ages of 13 and 16 – i.e. over their secondary school years – while expectations of youth from better-off families tend to increase. In New Zealand, the Māori Mainstream Programme (MMP) includes a focus on formative assessment, i.e. frequent assessment of student understanding to identify individual learner needs and shape teaching and learning. The programme includes: setting learning goals and tracking student progress; the use of varied instruction methods; the use of varied approaches to assessing student understanding; feedback and adaptation of instruction; active involvement of students in the learning and assessment process; a focus on the development of the skills for learning-to-learn; and a classroom culture that encourage interaction and the use of assessment tools. Evaluations suggest that the programme has had positive outcomes in terms of improved Māori student’s educational achievement (see Bishop et al., 2003).

Alternative schooling

Alternative schooling provides potential drop-outs with a variety of options that can lead to graduation. These options may include: flexible scheduling, varied programme location and organisation, and technology and distance learning. In New Zealand, this model is applied systematically to Teen Parent Units while provision of good-quality alternative education for other difficult youth is not always ensured.

Examples of all 4 strategies mentioned above can be found in New Zealand but the extent to which they are being used to tackle early school-leaving varies. Overall, enrollment tracking is the policy tool on which the government is focusing efforts. A nationwide enrollment database has recently been created to help ensure that youth fulfill their compulsory schooling requirement. Monitoring and tutoring initiatives are still limited to some isolated pilots despite wide recognition of their important potential to assist at-risk youth, especially by social workers. The country has a much longer tradition of alternative schooling and some institutions – such as Teen Parent Units – have proved successful in providing early school drop-outs with a viable second-chance route. The MMP has highlighted the importance of teaching methods in improving Māori educational outcomes and is being used to drive changes in teaching methods.



A. Early and sustained intervention is key

Several studies have shown that high-quality Early Childhood Education and Care (ECEC) programmes have positive effects on participants’ school achievement and grade repetition, particularly for children from immigrant or disadvantaged backgrounds (see Box 2.2). In New Zealand, attendance at ECEC services has been increasing steadily, for children of all ages, over the past decade. In 2005, 94% of children starting school had received some early childhood education, up from 92% in 2002. However, about 10% of Māori and over 15% of Pasifika children had never participated in ECEC. Also, while participation rates of 3- to 4-year olds approached 100% in 2005, participation of younger children was still below 60%.

Box 2.2. The role of early childhood and pre-school programmes in reducing school difficulties of children from disadvantaged families

There is growing recognition that quality ECEC services provide young children, particularly from low-income and immigrant-background groups, with a good start in life. In particular, there is evidence that ECEC programmes can help reduce school failure and improve school performance (see OECD, 2001 and 2006a).

A large literature evaluating the performance of pre-school programmes has developed in the United States where state-run pre-school programmes have proliferated over the past two decades, inspired by the good outcomes of Head Start, a Federal-level pre-school programme first introduced in 1965. Barnett (1995) and Giliam and Zigler (2001) review evaluation studies of the long-term effects of pre-school programmes on children from low-income families. Both studies find evidence of sizeable long-term effects on school achievement and grade repeating, particularly when efforts are sustained beyond the pre-school period. The High/Scope Perry Preschool Study (Schweinhart et al., 2005) in the United States evaluated the effect of high-quality early care and education on low-income 3- and 4-year-olds. The study followed the individuals until age 40 and compared their socio-economic outcomes to those of a group who was randomly denied treatment. The major conclusion of the study was that the high-quality pre-school programme significantly improved the likelihood of graduating from high-school (65% versus 45% in the control group) as well as the likelihood of being employed at age 40 (76% versus 62%) and median earnings (USD 20 800 versus USD 15 300). The study also highlighted a number of positive social outcomes in the treatment group such as lower crime involvement.

For Europe, positive effects of pre-school education on school failure and grade repetition have been found in France, where pre-school is almost universal among 3 to 5-year olds (see Caille and Rosenwald, 2006). Finally, Boocock (1995) reviews childcare in Sweden and concludes that participation in pre-school has benefits in terms of cognitive development and school success, and that these are more positive for children of low-income families.

However, disappointing results in some other countries (see Lapointe et al., 2005 for Canada, and Boocok, 1995, for a survey of several international programmes) point to the importance of programme quality. The most effective programmes require considerable financing, well-trained ECEC personnel and diversified intervention actions (see OECD, 2006a on design issues).



It is important to note that the quality of ECEC and the extent to which efforts are sustained once children reach school age are key to the ability of ECEC to influence long-term educational outcomes of at-risk youth. In the case of New Zealand, targeting on Māori, Pasifika and at risk children is also crucial.

To lift the participation of targeted communities – Māori and Pasifika – in quality ECEC services, thus helping to reduce ethnically-related disparities, the New Zealand Ministry of Education started in 2002 the Promoting Early Childhood Education Participation Project (PPP). Between 2002 and 2004, four pilots were established and contracted to Māori and Pasifika partnerships. Unfortunately, rigorous evaluations of these pilots have not been conducted yet so it is not known whether the initiative raised attendance of Māori and Pasifika children in the affected communities in a sustained way.12

From July 2007, working parents of 3- and 4-year-olds have access to 20 hours of free qualified-teacher-led ECEC per week, funded by central government. This policy was introduced to support increased participation, and in particular more regular and intensive participation, among children preparing for school. Initially, private commercial providers were excluded from the scheme, and while they can now deliver the 20 hours entitlement (and receive the ECEC subsidy), about 25% of the enrolments in the 3-4 age group was not yet covered by the ECEC subsidy in September 2007, down from 30% in July 2007.

Many private providers have not signed up to the ECEC subsidy because they feel they cannot afford to provide quality services at the government set reimbursement rate (associated with rules on staff, number of teachers, etc.). In addition, among those that have signed up, may have increased fees for other groups, typically for 0-2-year olds or for hours outside the subsidized 20-hour band. It is still unclear whether the policy has been successful in reaching the children in low-income families.

12. An evaluation study completed in 2007 (Dixon et al., 2007) noted that data on

participation were in several instances incomplete: most providers reported that participation met the stipulated requirement of “consistent attendance for a minimum of nine hours per week over a three-month period” but did not report the degree to which participation was sustained.



B. A number of practices in secondary education establishments contribute to early school-leaving

Early-leaving exemptions

Introduced in 1989, early-leaving exemptions can be granted to 15-year olds on the basis of education problems and conduct and the belief that students will not benefit from attending school. Parents are required to give details about training programmes or employment that the student would move on to in the even of an exemption being granted.

The use of exemptions has been so extensive over the past decade that the increase in the age of compulsory schooling in 1993 has had no effect on the share of youth leaving school at 15. In fact, the incidence of exemptions has increased, from 6.4% in 2000 to 7.2% in 2005 on average (see Figure 2.7). The rise was stronger for Māori youth, but a slight increase was also observed among New Zealanders of European origin.

Figure 2.7. Early-leaving exemptions by ethnicity, 2000 and 2005a

Percentages

0

2

4

6

8

10

12

14

16

18

Māo

ri

Pas

ifik

a

Asi

an

NZ

Eu

rop

ean

To

tal

Māo

ri

Pas

ifik

a

Asi

an

NZ

Eu

rop

ean

To

tal

2000 20052000 2005

a) Percentage of youth aged 15 exempted from further school attendance. Source: New Zealand Ministry of Education, Education counts.

Since April 2007, the Ministry of Education has overhauled its early-leaving application and assessment process by: tightening administration of eligibility, supporting parents and students at the time of application to dissuade them from pursuing the exemption; encouraging offsite learning and work-experience as “deemed attendance”. In combination, these



measures have resulted in a significant reduction in the number of exemptions granted between January and September 2007 compared to previous years.

Support to students whose exemption applications are declined has also been introduced including improved advice and guidance to motivate the students and improve their engagement in school. Besides, efforts have intensified to ensure that exempted youth receive follow-up support through either Youth Transition Services or Work and Income – the two bodies responsible for activation and support of disengaged and unemployed youth, respectively.

Recently, there have been discussions about eliminating the early-leaving exemption and raising the school-leaving age further (possibly with a focus on retention until a qualification is obtained rather than on staying until a given age). It is worth noting that a change in this direction would require secondary education to be able to cater for a broader age range and provide diversified learning routes (see Box 2.3 on what the Dutch government is planning to do in this respect within the “Blits on dropouts” programme) as well as improved career guidance and advice. It would also require further additional public spending and the expected returns from this would need to be compared with those from expanding ECEC services along the lines discussed above.

Box 2.3. Blits on dropouts: a Dutch programme to tackle early school leaving

In 2002, the Dutch government committed to reduce the number of school drop-outs from 70 000 to 35 000 by 2010. In 2006, the government devised a package of measures to meet this target. Local authorities are provided with a series of guidelines to tackle the problem and good-practice examples developed by Dutch local communities. While implementation details are left to local communities, the main lines of action specified by the central government include the following:

• Tackle the problem at source: increase the number of bridging classes/summer schools; improve support advisory teams in secondary vocational education.

• Strengthen support for pupils with special needs at the start of secondary education: the aim is to ensure they continue to get the same intensive learning support that they are offered in primary education.

• Monitor school attendance: the compulsory age of school attendance is to be extended to include pupils under the age of 18 who do not yet have a basic qualification. At the same time, combining education with work will be made possible. Youth who register for a day-release scheme at the beginning of a school year, but have not found a suitable work experience by 31 December of that year, will fall under the budget of the Regional Training Centres (ROCs). This should encourage ROCs to make active efforts to find the necessary placements.



• More practical training at school, more practically-oriented teaching and more work placements: to achieve this objective, 20 000 extra placements will be provided for young people for whom it is difficult to find ordinary work placements.

For youth who do drop out of school without a qualification, the main central government recommendation is that they are individually assessed by one institution and receive the guidance they need in order to return to school, start work or combine school and work.

Suspensions, exclusions and expulsions are still widely used and contribute to disengagement from school

Behavioural problems and non-attendance have historically been tackled with suspensions from classes, often translating into expulsion if the misbehaviour is recurrent. Some of the expelled youth do to not re-enrol in school contributing to early school leaving.

Acknowledging the relationship between suspensions and ultimate withdrawal from education, particularly among Māori students, the New Zealand government started in 2001 the Suspension Reduction Initiative (SRI), with the aim of bringing Māori suspension rates in line with those of non-Māori by 2016 (see Box 2.4). Unfortunately, the substantial fall in suspension rates in the secondary schools involved with the SRI was accompanied by increases elsewhere,13 resulting in only a minor fall in suspension rates at the national level: between 2000 and 2006, the overall suspension rate only fell from 0.73% to 0.7%. And there has been a shift by schools towards less severe interventions – such as stand-downs – which allow more rapid re-integration into the learning environment. However, ethnic and gender disparities persist, with Māori students about three or more times as likely to be stood down as their European counterparts, and males twice as likely to be stood down as female students.

It is also noteworthy that suspension rates for Pasifika rose by 22% between 2000 and 2006, to reach over twice the rate for Pakeha students in 2006. This, as well as the rise in suspension rates in primary schools,14 suggests that earlier action extended to all students may be beneficial.

13. First, the incidence of suspension in primary schools – not involved in the SRI –

increased slightly over the same period, from 0.22% to 0.27%. Second, the suspension rate rose by 5% in non-SRI secondary schools between 2000 and 2006.

14. See footnote 13.



Box 2.4. The Suspension Reduction Initiative (SRI)

In 2001, the SRI was introduced to help reduce the high number of Māori student suspensions. Secondary schools with the highest rates of suspension among Māori students were invited to participate. This initiative has since been integrated into the Student Engagement Initiative (SEI), a programme designed to reduce truancy, early-leaving exemptions, as well as suspensions. The SRI initiative involved 63 secondary schools when it started and an additional 69 schools have become part of it since 2001.

Funding of NZD 1.8 million per year is available to these schools. Each school plans what activities it intends to put in place to reduce suspensions, and specifies expected results. Once this plan is agreed with the Ministry of Education, the school receives funding to support its initiatives.

Schools employ a wide range of initiatives to reduce suspensions, usually a combination of approaches rather than focusing on one. Initiatives range from providing academic support, to drug education programmes, and providing personal development for teachers. Processes to help the re-integration of suspended students in the school may also be used and mentoring programmes are often employed. Families as well as the community and external agencies can be involved.

The SRI has brought about a substantial decrease in the suspension rates of Māori students in the participating secondary schools. In the schools involved with SRI since 2001, suspension rates of Māori students fell from 3.5% in 2000 to 1.7% in 2006 compared with a slight increase among Māori students elsewhere. In addition, SRI secondary schools have also recorded a reduction in the number of suspensions for Pakeha students, indicating that the strategies being put in place are beneficial for other students than Māori. Overall, for secondary schools in SRI since 2001, the suspension rate fell from 1.6% to 1%, a reduction of 40% compared with a 5% rise in non-SRI schools. Also, SRI secondary schools experienced a slower rise in suspensions for Pasifika students than non-participating establishments: the suspension rate for Pasifika students in SRI secondary schools increased by 5% between 2000 and 2006 compared with a 22% increase for all Pasifika students over the same period. In light of this disappointing development for Pasifika students, the SRI initiative started to actively target Pasifika youth in mid-2006.

The tracking of enrolment in education is poor

The lack of a residential registration system in New Zealand makes it difficult to ensure that all youth aged 16 or younger are enrolled in education as required by law, particularly after moving or when supposedly changing school. Respect of the compulsory schooling requirement is key in preventing youth from dropping out of school without a qualification (see Box 2.1).

To better track enrolments, a new data collection service, called ENROL, was launched by the government in 2006. ENROL is an enrolment register for all school students, updated online by individual schools as students enter or leave the school system or change schools. It was introduced in most intermediate and secondary schools in 2006, and will be extended to all remaining schools in 2007.



Difficult students are often sent to alternative schools

In New Zealand, referral to so-called “alternative schools” is common practice to deal with difficult students below the age of 16. This is a varied category of education establishments, including Teen Parent Units, Activity Centres, correspondence education, specialised residential schools and alternative education. While some of these options represent examples of good practice, others are used as a parking slot for youth who have become alienated from the education system until they reach 16.

For instance, alternative education is often the destination of habitual truants or behaviourally challenging students who are consequently excluded from school and sent to an alternative learning provider. Despite smaller student rolls and the potential for more intense learning support, little teaching takes place in some of these alternative establishments where learning is often focused on health education and social skills.

On the other hand, examples of good practices exist and they should be used to improve the quality of education and support provided by other alternative establishments. Teen Parent Units (TPUs) – alternative schools for teenage parents – are one such example. TPUs offer high-quality childcare facilities on the school’s premises. Qualified teachers are employed by the schools and provide individualised support to students (see also Box 2.5). Work placements – through the same programmes as in ordinary schools – are also available. TPUs also act as a sort of one-stop shop and provide health services as well as family planning services.

A recent official report (Education Review Office, 2007) provides some elements of evaluation of TPUs outcomes. Although mostly based on qualitative evidence, the report finds that almost two-thirds of TPUs are providing high-quality education programmes that support student achievement and success. The report identifies the positive relationships between students and staff as a key strength in most TPUs. Many students reported that they felt supported by unit staff. They also commented that they would probably not be engaged in education without the school. However, in its conclusions, the Education Review Office was critical of some aspects of TPUs. First, it considered that schools spent too much time trying to meet the overall guidance needs of students in addition to providing education support.15 Second, the high cost of running TPUs was

15. Teachers justify this pastoral role by the fact that many of these students had

complex needs and required additional support to attend their unit. But, the government view is that it would be more appropriate for these units to seek additional support from government agencies and community groups for students than for teaching staff to undertake a mainly guidance role. Also, there is a



put forward. In this respect, it is worth noting that the long-term benefits of helping teenage mothers continue their education or enter the labour market are considerable. Without any help, these mothers would have a high probability of becoming benefit-dependant. As a result, acting early can bring about sizeable benefits and be cost-effective.

Box 2.5. He Huarahi Tamariki

Teenage parents, and especially teenage mothers, represent a relatively large group of youth at risk in New Zealand. The country’s teenage fertility rate in 2006 – about 3% – was the second highest in the OECD, behind the United States. It was almost four times the rate recorded in France, Japan, the Netherlands and Sweden. For these young mothers, mostly aged between 15 and 19, remaining in ordinary schools is difficult because of their childcare responsibilities and the stigma associated with early motherhood. Teen Parent Units (TPUs) have been created with the needs of teenage mothers in mind. There are currently 17 TPUs in New Zealand.

For example, He Huarahi Tamariki is a TPU in the Wellington region. The unit has a capacity of 40 students – currently all female – and is the only educational establishment available for teenage parents in the Wellington area which is far from sufficient to cover the needs in the community.

Most mothers possess very low skills when they arrive at the unit and, in most cases, they have no qualification at all; some of them have disengaged from education well before arriving. Few have stable relationships and many do not have their families’ support. They constitute a group at very high risk of social and labour market marginalization and one that is very difficult to motivate. The unit also acts as a second-chance institution for teenage mothers who have spent some time in the labour market and decide to return to education to improve their qualifications, and this group tends to be quite motivated.

The unit provides high-quality free childcare on its premises, making it easy for students to concentrate on studying while also ensuring that their children are well looked after. Students work with qualified tutors based on an individual study plan – adapted to their needs and more flexible than what they would get in ordinary schools.

Once a year, students also get a short work placement of between three days and one week, chosen to suit the student’s interest. Some young mothers are really motivated by this experience and decide to continue through the Gateway service available at the unit, allowing students to spend one day per week on a work placement during their final year of secondary education. However, as with regular schools, the lack of financial incentives for employers to take on students as trainees implies considerable public relation efforts – and a dedicated employee – to ensure a sufficient number of places is available every year and to keep good relationships with local employers. STAR funding – available for schools to spend on activities that improve transitions from school to work – is also used to provide some school-based vocational training.

The unit keeps track of labour market and educational outcomes of its students. Most students so far have found work after leaving the unit and some have returned to mainstream education and continued on to university.

growing belief that attempts should be made to keep teenage mothers in ordinary schools rather than put them in special units.



C. There is no formal vocational pathway within secondary education

In the 1980s, New Zealand abandoned the old system of technical education – whereby students aged 12/13 who were doing badly in general education were sent to technical schools – on equity grounds and introduced a new integrated curriculum. The government-managed apprenticeship system also fell into decline in the 1980s and was replaced with the business-driven Industry Training System in the early 1990s.

As a result, at present, no structured pathway exists for youth wanting to pursue vocational education, either school-based (mostly in a classroom environment) or work-based (through a work placement) in secondary school.16 Options for full-time work-based learning are only open to young people aged 16 or older, while in some OECD countries – notably the Czech Republic, Ireland, Luxembourg, Mexico and the Netherlands – it is possible for 12-year olds to engage in vocational education (Table 2.1).

In addition to starting relatively late, youth receive little help in the organisation of apprenticeship-type work-based learning. A legal framework to go on an apprenticeship exists but youth have to take the initiative of finding an employer willing to hire them as a trainee. This is often difficult and results in the exclusion of disadvantaged youth as they rarely have sufficient autonomy or networks to find and organise a work placement.

Also, the lack of a school-based component parallel to on-the-job training puts off most employers from hiring young people as trainees. In fact, under the present framework, youth hired as trainees would possess no prior knowledge of the work environment/tools and would have undergone no safety training.

16. An apprenticeships programme pilot for youth younger than 16 – Youth

Apprenticeship – was launched in ten schools in September 2007. The key aim of the pilot is to explore how schools can establish best practice processes to develop school-based pathways to apprenticeships and skilled employment in industry, and allow students to gain industry experience and skills while remaining in school.



Table 2.1. Age at which vocational education can start, OECD countriesa

Age of compulsory schooling

Age at which vocational

education can start

Czech Republic 15 12Ireland 15 12Luxembourg 15 12Mexico 15 12Netherlands 18 12Austria 15 14France 16 14Hungary 16 14Italy 15 14

United Statesb 17 14Belgium 18 15Greece 15 15Japan 15 15Korea 14 15Portugal 14 15Slovak Republic 16 15Switzerland 15 15Turkey 14 15

Australiab 15 16

Canadab 16 16Denmark 16 16Finland 16 16Germany 18 16Iceland 16 16New Zealand 16 16Norway 16 16Poland 16 16Spain 16 16Sweden 16 16United Kingdom 16 16

a) Countries are ranked by ascending order of age at which vocational education can start, then by alphabetical order.

b) Varies by states/provinces – value refers to what applied in a majority of states/provinces. Source: OECD (2006c), Education at a Glance, Paris.



STAR and Gateway as vocational education routes in secondary schools

Introducing a work-based module and some labour-market-oriented seminars/visits in general education may help retain students who are not academically inclined, as well as orient them towards vocational tertiary education. This is the route chosen by the New Zealand government with the Secondary Tertiary Alignment Resource (STAR) and the more recent Gateway programme (see Box 2.6).

Box 2.6. Vocational learning in New Zealand’s secondary schools: the Secondary Tertiary Alignment Resource and Gateway

Secondary Tertiary Alignment Resource (STAR)

STAR was established in 1996 to help secondary schools expand the learning opportunities they can make available to students in schooling years 11 to 13 (aged 15 to 18 years old) and that are likely to assist their transition to workplaces or further study. STAR funding enables secondary schools to offer students a wide range of non-conventional programmes that are sensitive to student interest, tertiary training opportunities, and local employment opportunities. Despite considerable emphasis on the programme, the resources made available for STAR in the 2006 school year were very limited: approximately NZD 25 million, equivalent to only 0.25% of total education expenditure.

The objectives of STAR are to enable schools to:

• facilitate transition to the workplace for students, particularly those intending to go straight into the workforce or those likely to leave school without any formal qualifications;

• provide or purchase tertiary-type courses which will better meet students’ needs, motivate them to achieve and facilitate their smooth transition to further education, training or employment; and

• help students explore career pathways and make informed decisions about their schooling and future work or study.

STAR programmes are delivered by almost all schools within New Zealand. The schools make extensive use of the flexibility to offer student-tailored and locally-relevant courses and to organise workplace visits and labour-market-related workshops. Among other things, STAR funding allows schools to offer students courses that it would traditionally be impractical for them to deliver. Among the most popular are the National Qualifications Framework domains of: Visitor Services, Cookery, Early Childhood Education, Core Health, and Food and Beverage Service. Such courses provide a mechanism to retain young people in formal and productive education in a structured setting, at a time when they are no longer required by law to attend school (age 16 and over) and may have decided not to pursue academic study.



Each year, approximately 6 500 courses are delivered through STAR funding to about 120 000 students nationwide. This is equivalent to about 15 courses per school and almost half of the total number of students enrolled each year in New Zealand.

A 2003 qualitative evaluation of STAR (Ministry of Education, 2003) found that the programme was effective in both retaining students and facilitating their transition beyond school. An interesting finding was that, as well as providing students with vocational skills and basic life skills, over a third of STAR coordinators who were interviewed stated that the schools in which they worked also used STAR to meet the academic needs of students.

Gateway

The Gateway programme is designed to strengthen the pathway for senior students (schooling years 11 to 13) from state and integrated secondary schools to workplace learning and post-secondary education and training. Gateway students pursue individual learning plans to gain new skills and knowledge in a workplace in their local community.

Gateway began as a pilot in 2001 in 24 secondary schools and, after a positive evaluation (Tertiary Education Commission, 2003), the coverage has gradually extended. In implementing Gateway, priority has been given to lower-decile schools*. In 2007 the programme was operating in 303 schools (56% of schools in the country) and placing nearly 9 000 students from these schools into workplace experiences – representing about 4% of youth enrolled in secondary school. Coverage of all schools across the country is planned by 2008. Among participants, 52% were female and ethnic minorities were well represented with shares of 31% and 10% for Māori and Pasifika youth respectively.

Unlike STAR courses, which are largely conducted within secondary schools, Gateway integrates general education with workplace learning and assessment. Participating schools are funded to coordinate work placements for senior secondary school students where the students can be assessed in the workplace for both industry-specific qualifications and unit and achievement standards which contribute to National Certificate of Education Achievement (NCEA) qualifications. The learning is thus not only hands-on and practical, but often transferable across industries. There are now over 50 industries and hundreds of individual businesses providing structured workplace learning and employment experience to Gateway students, in areas such as hospitality, automotive, retail, tourism, engineering and construction.

In the 2005 educational year, over half of Gateway students (57%) were retained in secondary education or moved into study at the tertiary level. A further quarter (27%) moved directly from secondary school into employment, and approximately 6% of these students were also accepted into the Modern Apprenticeships programme to continue their formal training. Interestingly, of this 6%, 11.5% were female which compares with just under 9% female participation rate in the Modern Apprenticeship programme overall.

Benefits of the Gateway programme have been recognised by both students and employers. For students, Gateway provides the opportunity to gain specific vocational skills and to make significant progress towards (tertiary-level) trade and industry qualifications, while still receiving the advice and guidance associated with being in secondary school. Credit achievement is another benefit associated with Gateway participation and it has improved considerably over time, from 8.5 credits per student on average during the pilot to 15 on average in 2006. Employers benefit from the public profile of the programme and the ability to improve their recruitment efficiency.



The evaluation conducted by the Tertiary Education Commission (2003) on the pilot sites found a continued, consistent and positive response to Gateway from participating schools, students and employers. The report contained some qualitative indication that Gateway increased student motivation and attendance. However, a more rigorous evaluation is needed to determine whether and to what extent Gateway enabled schools to be more effective in retaining students at risk of withdrawing from education, particularly Māori and Pasifika students.

The New Zealand Budget in 2006 provided additional funding over four years to continue expansion of Gateway. By 2009, it is expected that the programme will reach 403 schools (three-quarters of the country’s schools).

* A school’s decile indicates the extent to which it draws its students from low socio-economic communities. Decile 1 schools are the 10% of schools with the highest proportion of students from low socio-economic communities. Decile 10 schools are the 10% of schools with the lowest proportion of these students. The decile system was introduced in 2001 and will be reassessed after each Census to take account of the latest Census information. Each year, schools can also request a review of their decile ranking. Reviews are examined on a case-by-case basis. They are successful where a school can show either significant change in the area since the 2001 Census or that the sample of addresses used did not fairly represent the catchment area of the school.

The STAR programme consists of funding provided by the Ministry of Education to help secondary schools expand opportunities for work experience or further study among youth older than 15. Provided the funding is used to fulfil this objective, schools are free to use it as they think most appropriate. On the other hand, funding for the Gateway programme is provided by the body responsible for tertiary education spending – the Tertiary Education Commission – and must be used by schools to organise short work placements for students aged 15-18.

Both programmes have the potential to improve school retention and transitions to tertiary vocational education among secondary school students. However, rigorous evaluations have not been conducted yet and a number of weaknesses can be highlighted.

First, the fact that the organisation of the Gateway programme is left to the initiative of individual schools has also translated into some deviation from the model of one-day per week placements for an entire school year. In practice, both the frequency and overall duration of Gateway placements varies significantly. Among students participating in Gateway at pilot schools in 2003, only 7% spent the full academic year (about 30 weeks) in the programme while almost 30% of participants were only enrolled for one week. As far as frequency is concerned, while about 46% of students were placed for one full day a week throughout their placement duration, 17% spent only half a day a week in work, another 20% spent 2-3 days per week in work and for the remaining students work placements were organised in one or two week-blocks, including over weekends and school holidays.



Second, while Gateway provides an opportunity for work experience as part of the school curriculum, its ability to improve retention of students who lack interest in academic learning and are at risk of disengagement from school is less clear. In fact, schools tend to select work-ready students for Gateway placements and it seems that youth at risk of dropping out of school seldom fall within this category. This is partly because, except for the fact that the student receives no pay during the placement, employers have little incentive to take on a trainee. In fact, students’ productivity is generally very limited to start with and the cost of the training effort is hardly rewarded by the programme (only the cost of a workplace supervisor/evaluator is covered by the Gateway programme). As a result, schools are very careful to send only the best pupils so as not to jeopardize their relationships with employers. Besides, Gateway is an additional activity to the ordinary secondary school classes and students who participate are selected on the basis that they will be able to cope with the work placement in addition to the academic curriculum.

To increase participation rates of at-risk students in Gateway, some schools use STAR funding to organise classes in preparation for the work placements. Preparation includes mostly work-related soft skills – i.e. work attitudes, health and safety at work, first-aid care, interviewing and CV writing. While this is a welcome initiative, it tends to cause some degree of duplication, as STAR funding is intended to benefit all students rather than just prospective Gateway trainees.

Overall, aside from a motivational effect – with some students working harder so that they can participate in Gateway – there is little robust evidence that Gateway has helped retain students who would have dropped out of school otherwise. When STAR funding is used properly, it has the potential to profit less work-ready students to a greater extent than Gateway, since all students in the participating school can attend classes or workplace visits organised within the programme.

The Youth Apprenticeship pilot may prove an effective way of broadening secondary provision but it is too early to say

An apprenticeships programme pilot for youth younger than 16 – Youth Apprenticeship – was launched in ten schools in September 2007. The key aim of the pilot is to explore how schools can establish best practice processes to develop school-based pathways to apprenticeships and skilled employment in industry, and allow students to gain industry experience and skills while remaining in school.



Vocational education has a bad image and career advice is limited

Despite the positive contributions made by Gateway and STAR in promoting work-based learning among youth in their last years of secondary school, the choice of vocational education is still often motivated by failure in the academic route. This is despite the fact that shortages in most craft occupations guarantee successful labour market outcomes to those youth who pursue vocational education after finishing secondary education.

In this context, career advice and guidance provided to secondary students by schools are key to ensure that youth and their families can make an informed choice. In addition, guidance and advice are likely to become increasingly important as the options available to secondary school students are broadened.

Recognizing the need to improve guidance in secondary schools, the Ministry of Education in cooperation with Career Services – an independent body providing advice on work and education options to job seekers and school leavers – has developed the Creating Pathways and Building Lives (CPaBL) programme, assisting schools in the development of effective careers advice. CPaBL helps participating schools – 100 across the country – to incorporate career education into school policy and strategic plans with the aim of assisting students to make a smooth transition from school to further training and employment.

Better Tertiary and Trade Training Decision-Making project is another initiative launched in 2006 to transform Career Services into a one-stop shop for young people making tertiary and trade training decisions. The project is aimed at enhancing and further integrating various delivery options, such as phone, web-based and face-to-face services. Three pilot programmes – texting, outbound calling and phone guidance – have been run to explore flexible ways of interacting with youth and user feedback was encouraging.

3. The challenges faced by the tertiary education system

Participation in tertiary education17 in New Zealand has increased considerably over the past decade and has contributed to a better educated workforce. However, several challenges remain and need to be addressed.

17. It is worth noting that tertiary education in New Zealand includes what other

countries classify as upper secondary schooling – i.e. tertiary qualifications at the so-called “levels 1-3” in New Zealand are equivalent to upper secondary education in other OECD countries. As a result, in international comparisons, levels greater than three in the International Standard Classification of



First, average participation rates hide significant variation across ethnic groups and fields of study. Second, the labour market relevance and quality of some tertiary courses has been questioned. Drop-out rates from tertiary education are among the highest in the OECD. And returns to tertiary versus secondary education, in terms of earnings and employment prospects, have decreased considerably over the past five years – a further indication that the labour market relevance of tertiary education needs to be raised.

The recent reform of tertiary education contains several measures designed to address some of these challenges, with the key focus of increasing the labour market relevance of tertiary education and improving guidance to better inform youths’ tertiary education choices. The body responsible for spending decisions in line with priorities set by the government in its strategy for tertiary education is the Tertiary Education Commission (TEC).

A. Average participation rates to tertiary education hide significant variation across groups and fields of study

Differences across demographic groups are marked

New Zealand has historically had significant ethnic disparities in tertiary education, with Māori and Pasifika peoples having low participation rates. However, this has changed considerably over the past five years. The rate of participation in tertiary education of Māori youth aged 18-24 rose by almost 10 percentage points between 1999 and 2005. It presently stands at 35%, still 5 percentage points below the participation rate of youth of European origin. Participation by Pasifika youth also increased significantly over the same period and stood at 33% in 2005.

In addition, Māori and Pasifika students tend to concentrate at the lower levels of the qualifications framework. As Figure 2.8 shows, once these levels are excluded, disparities are significant. Only 10% Māori youth aged 18-24 enrolled in Bachelors degrees in 2005, which is half the incidence among youth of European origin.

Education (ISCED) are used to define tertiary education. On the other hand, when New Zealand data alone is presented, the term “tertiary education” is used in the broader sense adopted in the country.



Figure 2.8. Participation in tertiary education programmes by ethnicity, youth aged 18-24, 2005

Percentages

0

5

10

15

20

25

30

35

40

45

NZ European Māori Pasifika Asian

Upper secondary equivalent Certificate (Level 4)

Diploma Bachelor

Higher Total

Source: New Zealand Ministry of Education, education counts.

Figure 2.9. University graduation rates by duration of programmes, selected OECD countries, 2005a

Percentage of university graduates to the population at the typical age of graduation

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Austra

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3-5 years 5-6 years >6 years3-5 yearsb

c c d

a) In Denmark, Finland and France, the year of reference is 2003. b) In the Netherlands and Hungary, three- to less than five-year programmes include five- to more than six-year programmes. c) In the Slovak Republic and in the Czech Republic, the gross graduation rate may include some double counting. d) Unweighted average of countries shown. Source: OECD (2007d), Education at a Glance, Paris.



Advanced research programmes attract few New Zealand youth

Research attracts few youth in New Zealand. Among those who graduate from university, the very large majority attends courses between three and five years and very few continue to more research-oriented studies (Figure 2.9). While short courses are generally better suited to labour market requirements and tend to facilitate labour market entry, increasing the engagement of young people in research degrees could help achieve higher productivity (Guellac and van Pottelsberghe, 2001).

B. The quality and relevance of tertiary education have been questioned

The old funding system privileged “bums on seats”

Until a few years ago, New Zealand tertiary education policy focused on increasing participation, particularly of youth in under-represented groups such as those with low socio-economic background and of Māori and Pasifika ethnicity. By tying funding to the numbers of students enrolled, the system provided a strong incentive for tertiary education institutions to attract and retain students. This encouraged them to develop programmes that suited the needs of both existing and new groups of students. As Figure 2.10 shows, over half of the rise in enrolments between 1999 and 2005 was accounted for by mixed-field programmes, management and commerce and society and culture programmes, two fields of study with very poor completion rates and relatively disappointing rates of return.

Many students abandon tertiary education

Survival rates in tertiary education in New Zealand are among the lowest in the OECD, with just about half of those who enrol completing the course (Figure 2.11). In addition, retention rates18 vary significantly by ethnicity. While 52% of all New Zealand Europeans who enrolled in a Bachelor degree in 2001 were still enrolled in 2005 or had completed the course, for Māori and Pasifika students this retention rate was approximately 41%.

It is also noteworthy that Society and Culture and Management and Commerce, which accounted together for over a third of the rise in enrolment rates between 1999 and 2005 and for almost half of student loan borrowers, have low retention rates – approaching 40% – compared to other fields of study (Scott and Smart, 2005).

18. This retention rate is defined as the percentage of domestic students (including

adults) starting a qualification at a public provider in 2001 who are still enrolled or have completed by the end of 2005. Note, all tertiary education levels are included.



Figure 2.10. Breakdown of growth in tertiarya enrolments by field of study, New Zealand, 1999-2005

Percentages

-4

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8

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24

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progr

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a) Only tertiary levels beyond three are considered. Source: New Zealand Ministry of Education, education counts.

Figure 2.11. Survival rates in tertiary education, selected OECD countries, 2004a Percentages

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Slovak R

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University Other tertiary

OECDb : UniversityOECDc : Other tertiary

a) Number of graduates divided by the number of new entrants in the typical year of entrance to the specified programme. The rates are adjusted by the actual average time needed to complete a course of study, thus are not affected by cross-country differences in the share of part-time students in tertiary education. b) Unweighted average of survival rates in “university” for countries shown. c) Unweighted average of survival rates in “other tertiary” for countries shown. Source: OECD (2006c), Education at a Glance, Paris.



These low survival rates may be the reflection of a number of factors. First, the buoyant labour market may lure some students away from tertiary education. Second, the low quality of some courses may discourage students from continuing. Finally, tertiary funding based on students intake has in many instances lowered entry requirements and some of the newly enrolled students may soon realise that they do not have the skills needed to complete the course.

Tertiary providers can set their own admission criteria

In New Zealand, tertiary education providers may establish their own regulations for the admission of students. The requirements they set may include education completed, minimum entry requirements specific to qualifications and the recognition of prior learning (i.e. learning on the job). Tertiary providers may also use open-entry policies if they wish, except in the case of qualifications with admission criteria set by an external agency.19

Overall, however, the fact that until recently funding was related to students’ intake resulted in many of the courses created over the past decade – notably those that do not lead to a qualification – having relatively lax entry criteria.

Returns to tertiary education are relatively low in New Zealand

The returns to tertiary education are among the lowest in the OECD. This is likely to be partly the reflection of the limited labour market relevance of some tertiary education courses.

The earnings advantage of a tertiary-educated graduate relative to someone holding an upper secondary education qualification is very low by international standards (Table 2.2). A man holding a tertiary-education qualification earns 23% more than someone educated up to upper secondary education only. This compares with an earning advantage of over 50% for the OECD on average. For a New Zealand woman, the return from attending tertiary education is just 12%, less than a quarter of the average earnings premium of women across OECD countries.20

19. Notably, there may be set entry requirements for some industry-related

qualifications and there is a special subcommittee that sets minimum standards for university entrance.

20. In an income-based model of human capital, the earnings employees can command in the labour market reflect the value that those employees create for the firms that employ them. A firm will continue to employ someone only as long as the value that person creates for the firm exceeds the cost of their employment. In



Table 2.2. Earnings advantage of tertiary over upper secondary education,a 25-64, selected OECD countries, 2005b

Percentages

Male Female Total

New Zealand 123 112 116

Denmark 133 126 126

Sweden 135 127 127

Australia 136 146 131

Spain 132 141 132

Belgium 137 137 134

Norway 140 142 136

Canada 140 146 138

Korea 127 176 141

Turkey 139 164 141

France 152 142 144

Luxembourg 149 131 145

Netherlands 143 155 148

Finland 161 146 149

Austria 149 156 152

United Kingdom 142 180 155

Switzerland 140 149 156

Germany 151 151 156

Italy 183 134 160

Poland 179 151 163

Ireland 157 170 164

United States 183 167 175

Portugal 182 177 179

Czech Republic 190 161 181

Hungary 253 188 215

OECD mean 154 151 151 a) Data are expressed as an index, with the average earnings of a person with an upper secondary

qualification equal to 100. b) Data for New Zealand refers to 2006; for Belgium, Canada, Denmark, Finland, Korea, Norway,

Sweden to 2003; for Ireland, Italy, Luxembourg and the Netherlands to 2002; for Australia to 2001.

Source: OECD (2007d), Education at a Glance, Paris.

Nair (2006) estimates returns to tertiary education three years after graduation using data on Student Loan Scheme borrowers by field of study. The author provides returns by field of study and concludes that youth graduating from Mixed-field programmes and Society and Culture courses commanded some of the lowest earnings in the labour market, keeping all

other words, differences in earnings among different groups are a proxy measure for differences in the human capital they possess.



other factors influencing earnings constant. The same report finds much lower returns for youth attending ITPs than universities. Another study (Hyatt and Smyth, 2006) finds differences in the persistence of the premium across qualification levels after graduation. The premium for bachelor degrees is similar five and three years after graduation while for lower-level degrees the premium disappears over time.21

Returns to tertiary education in terms of better employment prospects are also limited in New Zealand (Figure 2.12). The country ranks the lowest in terms of the difference in employment rates between tertiary graduates and those with only upper secondary education. Unemployment rates by educational attainment also show very little advantage for those holding tertiary education qualifications. For both these indicators of labour market performance, the situation has worsened since the early 1990s. While the buoyant labour market has certainly improved prospects for less skilled youth and reduced the advantage of the most educated, these limited returns may also reflect the deteriorating quality of some tertiary courses that has accompanied the increase in attendance over the past several years.

Some of the best students emigrate to work in countries where wages are higher

However, no discussion of human capital in New Zealand can neglect the role of international migration. New Zealand has a long tradition of both emigration and immigration, and concerns about both a possible brain drain of some of its most talented youth to other countries and the need to select immigrants to match existing and projected skill shortages.

Data on migration flows by skill levels are limited and of poor quality, making it difficult to determine the size of the brain-drain phenomenon and its implications for the New Zealand economy. The only comprehensive study available (Glass and Choy, 2001) argues that, while the high skilled are over-represented relative to their share in the New Zealand population in emigration flows, they are also over-represented among immigrants. In addition, net long-term migration22 suggests that over the past

21. From this finding, the authors infer that, in occupations largely filled by those who

have studied at lower levels – a large majority in New Zealand – the labour market values experience to a significant extent. In other words, having a qualification gives those entering the workforce at that level something of a “jump-start” in their careers. However, over time that advantage is somewhat eroded as those with no qualifications gain experience (see also Nair, 2007).

22. Long-term migration is estimated using arrival and departure cards at New Zealand airports.



40-year periods of net outflows have been compensated by periods where net inflows were prevalent – i.e. in the long term, New Zealand continues to gain population through migration.

Figure 2.12. Employment and unemployment gaps between tertiary and secondary graduates, 15-64, OECD countries, 1991-2005a

Percentages

B. Unemployment rates: difference between upper secondary and post secondary non-tertiary graduates and tertiary graduates

A. Employment rates: difference between tertiary educated graduates and those educated up to upper secondary and post secondary non-tertiary level

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a) 1995 and 2005 for the Czech Republic, Greece, Poland, Portugal (unemployment rate only), Mexico and the Slovak Republic; 1998 and 2005 for Hungary, Iceland and Japan; 1999 and 2005 for Luxembourg. b) Unweighted average of employment rates for OECD countries and years shown above. c) Unweighted average of unemployment rates for selected OECD countries and years shown above. Source: OECD Education database.



The study also shows that New Zealand immigrants are on average higher skilled than emigrants (or than the existing population).23 Thus, it is more appropriate to talk to about a brain exchange than a brain drain.24 However, emigrants tend to be younger than immigrants. More research is required to draw conclusions on wage formation and implications for labour productivity and welfare.25

C. The tertiary education reform

Reforms to the New Zealand tertiary education system in the early 2000s have helped the sector solve some of its long-term problems. Since then, various tertiary policy reviews have been undertaken (among these, OECD, 2007e). These evaluations have pointed to the need for further action. Consequently, the government has decided to:

• Enhance quality assurance and monitoring so that tertiary education meets high-quality standards and is relevant to labour market needs;

• Shift funding from low-quality courses to courses that are relevant to labour market needs, are of high quality and achieve national goals (including the promotion of social and economic equity);

• Focus more on apprenticeships and industry training, and also on foundation-skills education such as literacy and numeracy for adults.

Consultations between the TEC, the New Zealand Qualifications Authority, the Ministry of Education and employers about possible reforms started in April 2006. They culminated in a new Tertiary Education Strategy for 2007-2012 that the TEC will be responsible for implementing from 2008.

23. This is the case for all host countries with the exception of Australia. The skill

structure of people moving to Australia reflects exactly the skill structure of the New Zealand population, suggesting that the flow is more the result of the single labour market between the two countries than of brain drain.

24. One could still argue that high-skilled immigrants may not work in high-skilled jobs, at least to start with. As a result, wages for native-born workers may be driven down by immigrant workers, thus creating further incentives for high-skilled New Zealanders to find jobs abroad.

25. Note that the impact of a brain drain on the source country’s welfare is theoretically ambiguous and depends on several assumptions. Positive effects on welfare may arise if those leaving return after acquiring skills elsewhere or if the prospect of leaving the country increases human capital acquisition, thus inducing up-skilling.



The core changes on the supply-side relate to the funding system of tertiary education and to the need for a stronger focus on regional labour market requirements. However, the government is also planning to act on the demand for education to improve labour market outcomes of tertiary students. To this end, the role of Studylink – a body in charge of providing prospective students with advice on funding of tertiary education (students’ allowances and loans) – has been broadened to include more guidance on the choice of courses.

New funding system

In the new system, tertiary education providers will be responsible for responding to the directions set by the government and to the needs of their own communities and stakeholders – notably employers – through developing and agreeing an investment plan with the TEC. The new system should shift the focus from student demand to employers’ needs. The first investment plans will be prepared by most tertiary education institutions in 2008 with the support of the TEC. Overall, while new courses will only be approved after considering their quality and relevance, it is still unclear whether the TEC will have the power to discontinue existing courses of low quality, or courses for which there is excessive provision given labour market needs.

The government has also set up a system of performance monitoring called “Quality Assurance and Monitoring”. The system will include both self-assessment by tertiary providers and external review but the indicators that will be used to measure quality have not been defined yet.

Redefining the role of Institutes of Technology and Polytechnics: regional facilitation

The original role of Institutes of Technology and Polytechnics (ITPs) in the New Zealand tertiary education system was to provide school-based vocational education and training. ITPs served youth coming from secondary education and choosing to continue to tertiary vocational education as full-time students. They also provided block courses – lasting a few weeks only – for employees sent by their firm to acquire specific skills or qualifications. Over time, however, their role has broadened to cover areas that go beyond vocational education and tend to overlap with university education. In addition, encouraged by the old funding system, the creation of new courses has been dictated by students’ demand rather than relevance for the labour market, with the result that courses in areas that do not lead to national qualifications have often been created. While this has applied to other tertiary providers as well, it is even more of a concern for



ITPs that were supposed to prepare workers for specific professions and trades. Finally, ITPs have been quite costly for the public purse, because of the focus on class-based vocational education that requires considerable investment in specialised equipment.26

In the new framework, ITPs will be subject to the new funding rules with emphasis on quality and relevance of the courses, as is the case with other tertiary providers. However, with the plans to re-establish an apprenticeship-type vocational education system through Industry Training Organisations (ITOs), the role of school-based vocational learning may need redefining. While employers have expressed satisfaction with the re-establishment of apprenticeship programmes, they have been very critical on the educational outcomes of ITPs (Business New Zealand, 2004 and 2006b).

Another OECD country that has successfully reformed its vocational tertiary education system is Finland (see Box 2.7). Similarly to New Zealand, Finland has recently approved a new Polytechnics Act (2003) providing the basis for further developing ITPs in connection with the world of work, particularly at the regional level. However, in addition to close co-operation with regional businesses, the combination of class-based and work-based learning has been crucial to the success of Finnish Polytechnics.

Finally, in the new system, ITPs have also been attributed the role of regional facilitators, working side by side with ITOs to determine tertiary education needs and gaps at the regional level.

Supporting relevance and quality on the demand side: the role of Studylink

The government has recently strengthened the role of Studylink – the body managing student loans and allowances – to include a mandate to provide guidance to youth applying for a loan or an allowance. This is important as several studies have highlighted the lack of a clear career strategy among New Zealand youth (see Higgins and Alfeld, 2006; and Higgins and Nairn, 2006). In particular, Studylink can inform youth of vocational tertiary choices and the labour market opportunities they offer, which tend to be less known than university courses. However, its sanctioning power is limited – StudyLink cannot refuse a study loan on the basis that the course offers little labour market opportunities after completion provided the course has been approved by the TEC.

26. Polytechnics receive at present about three times as much funding as the ITOs in

charge of organising apprenticeships. This seems rather excessive for tertiary institutions that are providing vocational education perceived as having little relevance to labour market needs.



4. Between school and work

The main barrier faced by young people looking for their first job is their lack of labour market experience. One way of removing this barrier is to encourage students – particularly those in tertiary education – to work, possibly in areas that are related to their field of study as this has sometimes been found to improve post-education labour market outcomes (see Box 2.7).

Box 2.7. Polytechnic education in Finland: a successful reform of tertiary education

In Finland, higher education enrolment rates doubled between 1990 and 2000 following the introduction of a new polytechnic tertiary education sector. Compared with other tertiary courses, polytechnics provide courses of relatively short duration and more technically oriented. The governance structure involves more inputs from employers and local authorities, with the latter particularly involved in financing polytechnics and providing facilities.

The polytechnic sector is mostly dedicated to the conduct of professionally-oriented higher education and applied research supporting regional development and adult education, principally in engineering, business and health care. A big feature is work practice as part of the undergraduate and post-graduate degrees. Practical training placements and diploma projects are key components of the close relationship between polytechnics and the regional business community.

Polytechnics have successfully established their place as the second pillar of the Finnish tertiary education system, alongside university. There are at present 29 polytechnics in the country and 20 universities.* Among youth aged 25-34, 17% have a polytechnic qualification and 23% have a university one, compared with 9% and 20% respectively on average in OECD countries (OECD, 2006d).

The labour market effects of the Polytechnic Education Reform have been evaluated in a number of studies. The most recent (Böckerman et al., 2007) compares employment levels and earnings of post-reform graduates with those of pre-reform graduates from the same schools. The authors find substantial positive effects on both outcome variables after controlling for school fixed effects, business-cycle fluctuations as well as potential changes in student composition induced by the reform. However, they underline that the effects of the polytechnic reform differ greatly across the three largest fields of study. While in the field of business and administration the effects of the reform are overwhelmingly positive, no statistically significant effects were found in either technology and transport or social and health care.

* Finland has recently decided on the further development of polytechnic education, through the enhancement of contacts with working life. Special attention will be paid to curricula, credit-transfer practices, guidance and advisory services and the development of post-graduate polytechnic degrees. The new legislation also emphasizes the autonomy of polytechnics and focuses on enhancing their regional impact.



A. More students work in New Zealand than in many other OECD countries

According to household labour force survey data, about 43% of 15-24-year-old students in New Zealand had a job in 2006 compared to just 23% in the OECD on average (Figure 2.13). Other surveys suggest an even higher incidence of student work.27 Among older students – aged 19-21 – part-time work for 12 hours a week was the average in 2004, rewarded at about NZD 12 per hour – well above the minimum wage for adults (Maloney, 2004b).

Figure 2.13. Students aged 15/16-24a who work, selected OECD countries, 2004b

Percentages of students

0

10

20

30

40

50

60

Denmar

k

Nether

land

s

Switzer

land

Austra

lia

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nd

United K

ingd

om

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Norway

United S

tate

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Germ

any

Austri

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Ireland

Finlan

d

Sweden

Mex

ico

Franc

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galIta

ly

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Hungar

y

Luxe

mbo

urg

Gre

ece

Slova

k Rep

ublic

Czech

Rep

ublic

OECDb = 23.7

a) Students aged 16-24 for Iceland, Norway, Spain, Sweden, the United Kingdom and the United States; and 15-24 for all other countries. b) 2006 for New Zealand. Source: Statistics New Zealand, Household Labour Force Survey; and OECD Education database for all other countries. 27. Using the Christchurch Child Development Study, Maloney (2004b) finds that

22% of 13-year-olds – there is no minimum age for paid work in New Zealand – carry out some paid work for an average of five hours per week. Maloney also calculates that 40% of 16-year-olds work for an average of 7 hours per week. Tertiary education students tend to work more, with over 90% of 16-18-years-old students and two-thirds of 19-21-year olds having a job. The number of hours worked also rises to 12 per week on average for tertiary students.



Similarly to student in other OECD countries, young New Zealanders tend to work in low-skilled jobs that are unrelated to their field of study. Higgins and Alfeld (2006) find that most students tend to have an after-school job that bears very little relation to the profession they envisage for their adult life. The study finds that students are strongly concentrated in sales and service occupations. Even at the tertiary level, more structured internship schemes providing opportunities to practice in the students’ fields of study are rarely available.

Maloney (2004b) finds that students with weaker scholastic abilities and from more disadvantaged backgrounds are slightly more likely to work or to work longer hours per week, suggesting that student work may be partly motivated by financial need. The regression analyses conducted in the paper find no statistical evidence to support the claims that in-school work experience either hinders academic achievement or smoothes later labour market transitions for New Zealand youth. This is at odds with international consensus around the positive effects that working half-time or less tends to have on post-education labour market outcomes (Box 2.8). This may be partly due to the fact that New Zealand students tend to work in jobs that are unrelated to their field of study, although only a few studies have concluded that this relationship may matter.28

B. Cost of tertiary education is high by international standards

Combining study and work, particularly during tertiary education, is partly a necessity in New Zealand as student fees have gone up considerably to rank among the highest in the OECD, after Australia, the United States, Japan, Korea and Canada. A survey conducted by the New Zealand University Students’ Association (2003a) found that the level of fees influenced the choice of institution and courses of study. Among students interviewed, 47% said that fees influenced their decision of where to study and 40% said tuition fees influenced their choice of length of course. Research conducted by the New Zealand Vice-Chancellors’ Committee in 1998 also found that employment had prevented 38% of students surveyed from attending a class and that 56% of students surveyed thought they would have been more successful in their studies if they had not had to work (New Zealand University Students’ Association, 2003b).

28. Even jobs that bear little relevance in terms of accumulating experience should

have some positive effect on labour market outcomes as they allow students to accumulate the so-called “soft skills” needed in work. This does not seem to be the case in New Zealand where employers complain youth lack not only professional skills but also soft ones (see Chapter 3 of this report).



Box 2.8. The impact of students’ work on future labour market performance: evidence from other OECD countries

The impact of working while in school on future labour market outcomes has been the object of a rich international literature. The number of hours worked is recognised in most analyses as being key, with positive returns most likely if the employment is half-time or less.

In Europe, emphasis is also put on the relation between work content and the student’s field of study for tertiary education students. Evidence from France and Switzerland (see Béduwé and Giret, 2005; Chagny and Passet, 2006; and Murier, 2006) shows that work experience acquired while studying has a positive effect on future labour market outcomes if the job is related to the student’s field of study. When this is the case, students’ work is found to: i) reduce the probability of being unemployed a year after the end of schooling; ii) reduce the time needed to find the first job; and iii) increase post-education wages. On the other hand, work experience in an area not related to the student’s field of study is found to have no impact.

For the United States, Molitor et al. (2005) find positive earnings returns to in-school work experience. Another study conducted on Australian high-school attendees (Vickers et al., 2003) finds positive returns of students’ part-time work. The authors find that, although having a job in high school is associated with a reduced likelihood of completing education (statistically significant only for young men), it does yield substantial and lasting labour market benefits once young people leave school. More precisely, part-time work in high school increases by 65% the probability that a young person enters an apprenticeship or traineeship rather than being unemployed in the transition out of school. Part-time work while in school also increases by 46% the probability that a young person enters full-time employment rather than being unemployed. These results are shown to be robust across several specifications and after controlling for social and academic background, ethnicity, gender, region and school type. It is also noteworthy that this study does not find that these results are dependent on the fact that jobs held by students are related to their study. In fact, another study conducted on Australian students (Green and Smith, 2003) finds that structured work placements – i.e. organised by the school and generally strongly related to course content – do no better than other types of paid work experience. In both cases, positive returns of students’ work on school-to-work transitions are found.

Overall, most analyses provide evidence that working a moderate number of hours helps youth in post-school labour market outcomes without compromising school achievement (De Simone, 2006; Salomonson and Andrew, 2006; and Dundes and Marx, 2006). Some analyses – not all – also show that a close relationship between the job held and the field of study is essential for positive labour market returns when working students are attending tertiary education.

Two different schemes provide financial assistance directly to students to help them cover the costs of participating in tertiary education. First, students can borrow to pay their fees and to cover their living expenses.29

29. Open access to the student-loan scheme, coupled with its income-contingent

repayment features, has reduced the financial obstacles to tertiary education and lowered the risk to students and their families of investing in tertiary study. Between 1994 (two years after the scheme began) and 2004, the number of



Second, for those from lower socio-economic backgrounds, means-tested student allowances are also available.30 In practice, however, because of means-testing, most youth only have the option of borrowing for their living costs.31 Indeed, about a third of student loan borrowing serves to pay for living costs.

To alleviate the debt burden on students, in 2006, the government eliminated interest on student loans for all borrowers, irrespective of whether they have graduated with a qualification, provided they are living in New Zealand.32 It is not clear yet whether this measure will have an impact on students’ work but for the time being no impact has been observed on the number of students borrowing for their tertiary studies.

On the other hand, the elimination of interest on student loans has been criticised by educational experts as it reduces resources available to improve the quality of tertiary education (OECD, 2007e). Experts have called instead for the introduction of means-testing in fees and for setting a limit to the number of years for which one can borrow.

New Zealanders formally enrolled in tertiary education rose by 82% while the number of borrowers increased by 98%. Māori and Pasifika were fairly well represented among borrowers – in 2004 the share of borrowers in these two groups was similar to their shares in the overall student population.

30. The scheme provides a weekly payment from the government. For students under 25, access to the scheme depends firstly on parental income. The full amount is available to those whose parents together earn less than a specified threshold, and then abates as parental income rises above the threshold. Students also loose access to the scheme if their personal income is above a fixed threshold. Students aged 25 or over are not subject to the parental income test, although they receive a lower allowance if they continue to live with their parents. Those who receive student allowances may also take up student loans, with (as mentioned above) the living-costs borrowing entitlement under the loan scheme being abated by the amount of the allowance.

31. The number of students under 25 years of age receiving a student allowance has been lower than expected. The current period of low unemployment may also have had the effect of lifting incomes of some families, resulting in lower allowances for their children.

32. For those going abroad after tertiary education, interest continues to accrue. The aim is to provide incentives for borrowers to remain in New Zealand (thus avoiding brain drain), or return home sooner, and so contribute to New Zealand’s economy and society.



5. Work-based learning in New Zealand

In New Zealand, work-based learning is organised through ITOs. At present, there are 40 ITOs in New Zealand representing all industries with the exceptions of education, health and banking. ITOs set standards and design qualifications within the national qualification framework, facilitate and manage training arrangements – but do not directly provide training – and define the skills and training needs for the industries they represent. They are mostly funded by the TEC but receive approximately 30% of their budget from businesses in the industry they represent, which helps ensure that their objectives are constantly in line with business needs.

ITOs offer two pathways for qualification attainment: employees can sign-up as industry trainees or, since 2001, they may become Modern Apprentices. Industry training is open to all employees – including youth – wanting to develop specific skills. There is no specific structure to these placements, the only legal requirement being that the trainee is paid at least a training wage equivalent to 80% of the minimum wage. However, participation of young people in industry training has been historically low – only 3.2% of 15-19-year olds were industry trainees in 2005 – mostly because employers have been reluctant in hiring youth with no experience and limited class-based knowledge of the working environment. To deal with this gap, in 2001 the government introduced the so-called Modern Apprenticeships (MAs) programme targeted exclusively on youth and on industries where youth were under-represented.

A. Modern Apprenticeships: a successful programme for a selected few

The MAs programme began as a small pilot in July 2000 and was launched nationally in 2001. It is a work-based education initiative available to young people aged 16-21 and employed within the industry (or able to take up employment immediately within the industry once accepted onto the programme). Candidates must also have achieved a basic qualification level and must be prepared to work towards a higher-level qualification while on the apprenticeship. This requirement of having attained a minimum qualification has restricted the number of young people who can participate in the programme and has reinforced the view that MAs is a prestige pathway.33

33. Unlike in other countries with a long tradition of apprenticeship learning,

e.g. Denmark, Germany and the Netherlands, unions have played a relatively passive role in the MA programme/industry training.



Talking to a programme co-ordinator should be the first step for a young person who wants to start an apprenticeship. Institutionally, the role of the co-ordinator – often a representative of the relevant ITO – is to help interested youth find a placement and set up a training agreement with a firm, and to provide support throughout the 3-4 years of work and training until completion of the apprenticeship. The co-ordinator should also ensure that groups disadvantaged in the labour market, for example women, people with disabilities and Māori and Pasifika youth are aware of the programme and should promote increased representation of these groups in industries where representation has been historically low. Coordinators should also make managing the MAs process easier for employers.

Similarly to the other apprenticeships run by ITOs, 70% of the costs related to the programme (the services of the co-ordinator and other administrative costs) are financed by the TEC while the remaining 30% is covered by either employers or the apprentice. Apprenticeship pay is subject to the same minimum as trainees – i.e. 80% of the minimum wage. Although anecdotal evidence suggests that many apprentices are paid more than this wage floor, a lower minimum may be necessary to encourage employers to offer more training places and to increase the intake of disadvantaged youth: a training wage equivalent to the minimum wage applicable to youth in jobs without a formalised training component may be too high once due account is taken of the employer’s cost of providing training and the trainee’s productivity.

At the end of 2006, MAs were offered in 30 industries covering manufacturing and services, with a mix of both traditional (e.g. carpentry and horticulture) and new (e.g. electrotechnology) sectors. However, engineering and construction account for about one-third of youth in the programme and service occupations employed together less than 6% of total Modern Apprentices. Growth within the scheme has been considerable since its creation. The 2000 initial apprentices had grown to almost 9 400 in 2006 and the current participation target is to have 14 000 Modern Apprentices by the end of 2008. However, the overall scale remains quite limited: in 2006, Modern Apprentices made up only 2.5% of youth aged 16-21 (Figure 2.14) and 6% of employed youth in this age group.

Some strengths and weaknesses of the programme have emerged from a study recently conducted by the TEC (Tertiary Education Commission, 2006). The study addressed two key questions: first, whether the MAs programme had any effect on employers’ practices regarding hiring and training young people in the trades; and second, whether the



co-ordinator role added value to the experience by helping young people to participate in and complete the programme.34

Figure 2.14. Share of young workers aged 16-21 in Modern Apprenticeships, 2000-2006

Percentages of youth aged 16-21

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000 2001 2002 2003 2004 2005 2006

Source: Tertiary Education Commission, New Zealand.

Overall, the study found that the MAs programme has encouraged participating employers to hire and train more young people in the trades. Modern Apprentices, employers, and ITOs attributed this trend to the programme's structured and supportive framework that relieves the employer from managing the Modern Apprentice's progress towards the qualification. ITOs also noted the strengthening of training culture in industries without a tradition of apprenticeships or formal training – some ITOs representatives even stated that MAs had brought young people back into their industry where there had previously been none. Among employers, 95% would recommend the programme to young staff and 94% would suggest it to another employer. Also, 95% of Modern Apprentices would recommend the programme to other youth.

34. The study included in-depth but mostly qualitative interviews and shorter survey

interviews of around 3 000 people. Interviewed groups included current Modern Apprentices, completed Modern Apprentices, Modern Apprentices who had withdrawn from the programme, current Industry Trainees (16-21-year olds), employers of these groups and ITO representatives. Unfortunately, no attempt was made to rigorously evaluate returns to MAs in terms of earnings and employment prospects of participants.



Some ITOs also reported that they had adopted some of the features of MAs into their training agreements and support arrangements for industry trainees – especially in industries where formal training networks were not clearly established. Finally, the findings indicated that linkages with schools are strengthening and schools are increasingly becoming an important source of Modern Apprentices.

On the other hand, the failure of coordinators to help youth find a placement was one of the weaknesses emerging from the TEC study. In 2006, only 18% of Modern Apprentices had found their apprenticeship place through the co-ordinator while almost 40% went through a normal application process and 11% found the placement through family or personal connections. Also, the study found that only 5% of participants heard of MAs from their school. The majority was informed by their employers (40%) or family and friends (20%), making it difficult for youth from a disadvantaged background and who are not already employed to enter the scheme.

Coordinators also failed in their role to ensure that women and Māori and Pasifika youth are sufficiently represented. In 2006, only 9% of MAs participants were female and only 3% were Pasifika. Māori were also under-represented – at 15% – given their population share, although less than Pasifika. The gender imbalance is likely to reflect the characteristics of the occupations for which MAs are presently offered, mostly perceived as being typically male trades and the limited number of MAs places in service occupations. On the other hand, the lower participation of Māori and Pasifika youth may reflect several factors: limited vocational culture in these communities – particularly in the Pasifika community – and high entry requirements in terms of qualification.

On the other hand, employers have evaluated rather positively the presence of a co-ordinator to help resolve some administrative issues and have been demanding the same set-up for other industry training initiatives. However, 22% of employers still considered the increased paperwork and administration as a major drawback in the MAs programme, suggesting there may be room for some administrative simplification and for further improvement in the coordinator’s role.

B. Initiatives to promote life-long learning within the firm

Life-long learning is very much at the centre of New Zealand policy makers’ concerns, particularly in terms of the role it could play in increasing labour productivity.



In this respect, a considerable amount of training seems to take place within the firm without the intervention of ITOs. A study conducted for the Department of Labour in 2003 found that 59% of the employees of respondent firms had undergone some training over the previous 12 months and that the average number of days of training provided per employee was 4.4 per year. Unfortunately, no breakdown by age group was available in the study.

The Department of Labour study also found that cost was the most common reason cited by employers for their failure to provide training, or provide less than might otherwise be desirable. A proposal for a Skills Training Tax Credit for the provision of training leading to a national qualification has recently been put forward– but has not gone through – by the New Zealand government (see Industry Training Federation, 2006).

6. Key points

New Zealand’s education system is performing quite well in international comparison. According to the OECD PISA survey, the country’s 15-year-olds perform well above the OECD average. In addition, the current generation is much better educated than its older counterparts. However, some problems remain and need to be addressed. First, 11.5% of youth aged 15-24 had left school without a qualification in 2005. Second, several indicators put into question the labour market relevance and quality of some tertiary education options.

Addressing early school-leaving at an early stage is crucial. In New Zealand, attendance at early childhood education and care services has been increasing steadily over the past decade for children of all ages. But participation rates remain low for the youngest – below three-years old – and Māori and Pasifika children.

The growing practice of exemptions from the last year of compulsory schooling for 15-year olds and limited control over enrolments contribute to youth dropping out before the minimum school-leaving age of 16. In addition, difficult students who have not yet completed compulsory schooling are often sent to alternative schools where – with only a few exceptions – education content is limited.

Disengagement from school may partly be due to the lack of practical learning alternatives to the general academic curriculum in New Zealand secondary education. The Gateway programme, which will be rolled out to all schools in 2008, aims at filling this gap but its provision is still too uneven across schools. In addition, little guidance is available to inform students of the vocational education options available after the end of



compulsory schooling – something that would help greatly disadvantaged youth who receive little decision-making help from their families.

Participation in tertiary education has increased considerably since the late 1990s thanks to a deliberate effort to remove the barriers to continuing study. However, the tertiary funding policy based on student intake that prevailed over the past decade has had some drawbacks. Drop-out rates in tertiary education are among the highest in the OECD and few students continue beyond the university diploma level. The quality of some of the courses created has also been questioned, with considerable growth in enrolments in areas that bear little relevance to labour market needs. Partly as a reflection of this, returns to tertiary education, both in terms of earnings and employment/unemployment rates, are among the lowest in the OECD. The recent reforms in tertiary education promise considerable change in terms of assuring more relevance of tertiary education to local and regional business needs, particularly through better quality tertiary vocational education.

The government has managed to revitalise work-based learning among young people through the introduction of the Modern Apprenticeship programme. Qualitative evaluations of this scheme suggest that it has been successful in bringing youth back to some trade professions. However, Modern Apprenticeships have established themselves as a prestige programme mostly attended by young males of European origin. Extension of the programme would require: i) overcoming employers’ resistance to the hiring of young people as apprentices, particularly in the service sector where MA places are still very few; and ii) simplifying further administrative procedures. Coordinators also appear to have failed in their role of helping youth find an apprenticeship place and of ensuring the programme’s ethnic and gender balance.

CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS – 109


CHAPTER 3

REMOVING DEMAND-SIDE BARRIERS

At present, the tight New Zealand labour market ensures that even the least skilled among youth find a job easily and that apprentices are sought after and often paid more than the wage floor set by law. However, slower economic growth forecast for the coming years could make some latent demand barriers more binding than they have up to now. Hiring of young workers could be hampered by the limited labour market experience they possess. High legal and/or collectively bargained minimum wages or apprenticeship pay could also make it too costly for employers to hire and train low-educated young people. Finally, some aspects of labour legislation may also represent a disincentive for firms to hire inexperienced workers on full-time permanent jobs. This chapter will look at these three potential demand-side barriers. It will also explore the factors behind skill shortages in some sectors that attract few young people.

1. Employers’ views of youth labour market readiness

A. Employers are not happy with graduates’ skills

Lately, New Zealand employers have been expressing concerns regarding the preparedness of graduates for the labour market. In particular, employers have been vocal concerning the low quality of tertiary education in the country and its limited relevance to their requirements. A survey of 1 100 businesses conducted in 2005 revealed a low rate of satisfaction with the overall skills of graduates from a range of institutions – most notably universities and ITPs (Business New Zealand, 2006a and 2006c).

While overall the tertiary education reform has been endorsed by business, a number of aspects have been criticised by employers’ representatives. First, the regional focus in the new funding framework is considered to be too strong. While specific regional issues have their place, employers consider that the need for greater geographic mobility of people

110 – CHAPTER 3. REMOVING DEMAND-SIDE BARRIERS


and skills means they are generally a second-order concern. Thus, they argue that the primary thinking should be done at an industry/sectoral level responding to some clear national (and potentially international) imperatives. Second, employers claim that their voice is still too little heard by the tertiary institutions when they design new courses and curricula. Finally, businesses consider the next step in tertiary education reform should be the move towards a more equitable repartition of funding between academic and vocational routes.

B. Employers call for better literacy/numeracy and soft skills for school leavers

Employers also claim that secondary school leavers should be better prepared for the labour market. For that, they argue three sets of skills need more focus in the school system: i) essential skills such as literacy, numeracy and language skills; ii) technical skills, such as academic, vocational and professional skills required in a particular field; and iii) interpersonal skills, i.e. the more generic personal skills needed for youth to be job-ready.

In particular, New Zealand employers find that young people not only lack professional skills but also soft ones (Business New Zealand, 2006b). This is surprising as combining work and study is relatively frequent among New Zealand youth. Even jobs that bear little relevance in terms of accumulating professional experience – frequently the case for students’ jobs in New Zealand – should have some positive impact on the acquisition of those soft skills needed in work.

2. Wages and labour costs

Over the past decade, average real wage growth in New Zealand has been modest, probably due to the presence of both upward and downward pressures on wages. On the one hand, the buoyant labour market and the appearance of skill shortages has exerted an upward pressure. On the other hand, a series of economic reforms in the early 1990s – including the Employment Contracts Act (ECA) in 1991 through which New Zealand moved away from collectively bargained wages to the more frequent use of bilateral wage agreements – have increased flexibility in the labour market, thus generating downward wage pressures. The high levels of skilled immigration in recent years have also served to offset wage pressures.



A. Wages of youth have increased over the past decade

Hourly wages of young New Zealanders relative to overall average wages remained roughly unchanged over the past decade. In 2006, teenagers earned 54% of the average hourly wage – the same as in 1997 – and youth aged 20-24 earned 77% of the average – also constant over the same period. Only youth aged 25-29 saw their average hourly wage fall slightly relative to the overall average, from 96% in 1997 to 93% in 2006.

On the other hand, average weekly wages tell a different story. Teenagers’ average weekly earnings grew from 31% of the average across all age groups in 1998 to 36% in 2006, while youth in the other two age groups experienced a fall in relative weekly earnings – by 7 percentage points for youth aged 25-29. At constant hourly wages, this suggests more hours worked by teenagers and fewer by youth aged 20-29.

The sluggishness of average hourly wages of young people in New Zealand is confirmed by Figure 3.1. The age-earning curve for young men relative to 30-34-year olds has remained almost unchanged between 1998 and 2006 (Figure 3.1, Panel A). On the other hand, the wage profile for women shows a drop for many age groups relative to 30-34-year olds –notably for those aged 15-29 relative to 30-34-year-old women.

The wage profile for full-time workers is flatter in New Zealand vis-à-vis other countries, and the average wages of teenagers and young adults relative to that of 30-34-year olds are higher in New Zealand than in Canada and the Netherlands for both sexes. Things change after the age of 39 when the wage profile relative to 30-34-year olds is lower in New Zealand than in the other three counties. This may reflect a somewhat bumpier transition process for youth in Canada and the Netherlands relative to New Zealand where school-to-work transitions are smoother (see Figure 3.1, Panel B). On the other hand, the wage profiles for full-time workers in New Zealand and Australia are very close, probably reflecting similar school-to-work transition patterns and the common labour market.

Wage profiles by educational level show limited earnings advantage of youth holding secondary school qualifications over tertiary education graduates (Figure 3.1, Panel C). This is in line with the evidence presented in Chapter 2.

Relative to adults aged 30 or over, the position of young Māori has worsened more than the average for youth. In particular, this is the case for youth aged 25-29, for whom the gap between Māori and the total has widened. The improvement for Māori aged 15-19 has also been more modest than for the total of youth in that age group (Table 3.1).



Figure 3.1. Wage profiles of full-time workers by gender, New Zealand and selected OECD countries, 1998-2006

Average hourly earnings of workers aged 30-34 = 100

Panel C. By educational level

Panel B. International comparison

Panel A. Time profile

Men

40

60

80

100

120

15-1920-24

25-2930-34

35-3940-44

45-4945-54

55-5960-64

1998 2006

Women

40

60

80

100

120

15-1920-24

25-2930-34

35-3940-44

45-4945-54

55-5960-64

Men

40

60

80

100

120

15-1920-24

25-2930-34

35-3940-44

45-4945-54

55-5960-64

Secondary Tertiary

Women

40

60

80

100

120

15-1920-24

25-2930-34

35-3940-44

45-4945-54

55-5960-64

Men

30

50

70

90

110

130

150

15-1920-24

25-2930-34

35-3940-44

45-4950-54

55-5960-64

New Zealand Netherlands Canada Australia

Women

30

50

70

90

110

130

150

15-1920-24

25-2930-34

35-3940-44

45-4950-54

55-5960-64

Source: Statistics New Zealand, New Zealand Income Survey; Central Bureau of Statistics, Nationale Loonstructuuronderzoeken (LSO) 2002 for the Netherlands; and labour force surveys for Australia and Canada.



Table 3.1. Young Māori’s relative wages, 1998-2006

Average hourly wages of youth relative to adults aged 30 and over

Māori Total youth

2006

15-19 52.4 53.0

20-24 67.0 71.5

25-29 75.7 83.4

1998

15-19 50.5 49.7

20-24 67.1 71.0

25-29 80.7 86.0 Source: Statistics New Zealand, New Zealand Income Survey.

B. The youth sub-minimum wage

Starting 1 April 2008, the adult minimum wage will be extended to 16-17-year olds with at least 200 hours or three months of work experience, whichever is shorter. A so-called “new-entrant wage” equivalent to 80% of the minimum wage will apply to those 16-17-year olds who have less than the required work experience. A rate equivalent to 80% of the adult rate will continue to apply to trainees (training wage) – i.e. everybody 16 or older who is undertaking at least 60 credits a year of a registered industry training programme.35

This move comes at the end of a number of significant rises in the sub-minimum wage for youth over the past decade. Since its introduction in 1994, the rate for 16-17-year olds has more than doubled, while the rate for adults has risen by about 60%. In addition, until 2000, the youth sub-minimum applied to youth aged 16-19. Since then, young people aged 18 and 19 were included in the adult category, resulting in a rise from a sub-minimum of NZD 4.55 to the full adult rate of 7.70 – an increase of almost 70%. The latest rise, in April 2007, brought the youth rate to NZD 9 and the adult rate to NZD 11.25. Youth aged 16-17 now face the prospect of an increase by 25% in April 2008. In addition, the government is also planning to raise the new single-rate minimum wage to NZD 12 by the end of 2008.

35. Also, youth under 16 will continue to be exempted from minimum-wage

legislation. Maloney (2004b) suggests that about 25% of 13-15-year olds work and study in New Zealand for an average of four hours per week.



In 2006, an estimated 5.5% of 16-17-year olds was being paid the youth sub-minimum wage. The April 2007 increase is expected to triple the share to 16% (Department of Labour, 2006a). The rise in the adult rate at the same date is expected to benefit 27% of workers aged 18 and 19 and 13% of workers aged 20-24. At present, the abolition of the sub-minimum rate for youth is expected to affect over half of 16-17-year-old youth.36

Potential effects of the abolition of the youth sub-minimum wage in New Zealand

The potential effects of minimum wages on youth employment and unemployment rates have been examined in a number of international studies (see Box 3.1). The balance of this international empirical evidence suggests that too-high minimum wages have a negative impact on youth employment.

For New Zealand, the most recent and rigorous study is the one conducted by Hyslop and Stillman (2007). The authors examine the impact of the large increases in youth minimum wages for teenage workers – both 16-17 and 18-19-year olds – that occurred in New Zealand in the early 2000s. They find no consistent and robust evidence of any adverse effects of the changes on teenage employment. On the contrary, they find compelling evidence that 16-17 increased their hours worked by 10-15% following the minimum-wage hikes of 19% and 6% respectively, in 2002 and 2003. Interestingly, the authors also find an increase in the fraction of teenage workers reporting sub-minimum wages following the minimum-wage reforms, pointing to higher real or apparent – i.e. due to measurement error – non-compliance. Despite finding no negative employment effects of the youth sub-minimum wage, the authors argue that the youth minimum wage level was low relative to the adult wage during the period covered by the study and further increases might have some negative impact on the employment prospects of teenagers.37

36. The new rate of NZD 11.25 per hour (the current adult rate) is higher than the

median wage of NZD 10.5 earned by 15-19-year-old youth in 2006 (median wages of 16-17-year olds are not available, but they are very likely to be lower than those of 15-19-year olds).

37. Although Hyslop and Stillman (2007) provide the most recent account of the effect of changes in minimum wages on youth employment, a number of earlier studies have looked at the issue in New Zealand. The earliest work was conducted by Maloney (1995 and 1997) who found evidence of a negative effect of minimum wages on young adults’ employment rates. A later study by Chapple



Box 3.1. The minimum wage and youth employment: international evidence

The impact of minimum-wage legislation on youth employment is theoretically ambiguous. While a high minimum wage may increase the rate of school dropouts and therefore labour force participation, it can also drive a wedge between youth labour costs and their expected productivity, thereby raising unemployment and discouraging some youth from entering the labour market. Target-efficiency considerations reinforce these theoretical arguments for establishing a youth sub-minimum (Neumark and Wascher, 2004; Pabilonia, 2002), because the association between holding a minimum-wage job and poverty – the main argument for a minimum wage is to minimize working poverty – is especially weak for the very young (who often live with their parents). On the other hand, Manning (2005) shows that, in a situation where employers have significant market (or monopsony) power over their workers, a well-chosen minimum wage can actually raise youth employment.

The balance of international empirical evidence suggests that too-high minimum wages have a negative impact on youth employment, especially if combined with high non-wage labour costs (e.g. Abowd et al., 1997; OECD, 1998; Neumark and Wascher, 1998 and 1999; Kramarz and Philippon, 2001; Pabilonia, 2002).* The “appropriate” level cannot be determined on a priori grounds since it depends on the profile of the earnings/labour costs distribution which, in turn, differs from country to country.

Finally, arguments in favour of a sub-minimum wage for youth and other disadvantaged groups also emerge when minimum-wage policy is seen in the context of other labour market measures. In fact, the introduction of employment-conditional benefits combined with an appropriately-set wage floor would ensure that work is attractive to unemployed youth while avoiding downward pressure on wages. This is in fact the option chosen by the United Kingdom, which introduced a statutory minimum wage just as its tax-credit policy was being extended (European Commission, 2000). Various evaluations consider this to be a sound option, stressing its beneficial impact on low wages with no apparent negative repercussions on employment (UK Low Pay Commission, 2001). An alternative to avoid a sub-minimum wage would be to offer employers a reduction in non-wage labour costs for those youth employed at or around the minimum wage. * However, it should be added that analysts are not unanimous on this issue and some studies have failed to find significant negative employment effects (e.g. Card and Krueger, 1995; Stewart, 2003; Hyslop et al., 2004).

Most importantly, the recent abolition of the youth sub-minimum may also run counter to the government efforts to prioritise education over work for very young people as youth may chose to enter the labour market in response to the higher minimum wage over continuing their studies – this could be a particular risk for Māori and Pasifika youth for whom school disengagement is already a serious issue. In this respect, Hyslop and Stillman (2007) found evidence of a decline in educational enrolment following the early 2000s hikes in the youth minimum wage, although the results were sensitive to the specification chosen.

Finally, it is also possible that employers may choose to cut costs in different ways than by reducing hiring of youths in response to the rise in the wage floor applicable to youth – notably, reducing supervisory time or

(1997) concluded that Maloney’s findings were non-robust and found no negative effects when using a longer time series.



training efforts for young employees. If this is the case, increasing further the minimum wage could compromise young people’s long-run labour market outcomes (Neumark and Nizalova, 2007).

C. Non-wage labour costs on low-wage earners are very low

In New Zealand, the tax-wedge – the difference between what employers pay out in wages and social security charges and what employees take home after tax, social security deductions and cash benefits have been taken into account – is among the lowest in the OECD (see Table 3.2).

Table 3.2. Tax wedge including employers’ social security contributions in OECD countries, 2000 and 2006

Percentages Tax wedge on

average earnerb

2000 2006 2006

Mexico 11.0 10.6 15.0Korea 14.9 16.0 18.1New Zealand 18.5 19.0 20.9Ireland 18.1 16.3 23.1Australia 25.4 24.4 28.1Iceland 19.7 23.6 28.6Japan 23.4 27.5 28.8United States 27.2 26.4 28.9Switzerland 27.3 26.9 29.7Canada 27.8 27.6 32.1United Kingdom 28.3 30.4 33.9Portugal 33.2 31.7 36.3Luxembourg 32.5 30.6 36.5Norway 35.1 34.3 37.3Slovak Republic 40.6 35.6 38.5Spain 34.7 35.9 39.1Greece 35.5 35.4 41.2Denmark 41.2 39.3 41.3Czech Republic 41.4 40.1 42.6Turkey 39.1 42.0 42.8Poland 42.2 42.5 43.7Finland 43.0 38.9 44.1Netherlands 42.0 40.6 44.4Italy 43.1 41.5 45.2Sweden 48.6 46.0 47.9Austria 43.2 43.5 48.1France 47.4 44.5 50.2Hungary 48.5 42.9 51.0Germany 48.6 47.4 52.5Belgium 51.3 49.1 55.4

Tax wedge on low-wage

earnera

Countries are ranked by ascending tax wedge on average earner. a) Tax wedge including employers’ mandatory social security contributions for a single worker with

no children earning 67% of the average wage. b) Tax wedge including employers’ mandatory social security contributions for a single worker with

no children earning the average wage. Source: OECD Taxing Wages database.



This is partly because no employers’ social security contributions exist in New Zealand and non-wage labour costs only include: annual leave and statutory holidays, superannuation, the employer premium to the accident compensation corporation (ACC) and medical insurance. While in principle, all these costs should make up the same proportion of the wage for youth as for adults, in fact young people are rarely entitled to all these benefits.

The main component of non-wage labour costs affecting young workers is annual leave.38 This payment was equivalent to 8.7% of the hourly wage rate in 2007 – up from 6.2% in 2006. The increase was due to the coming into effect in April 2007 of the Holiday Act which raised the number of weeks of annual leave from three to four.

3. Skill shortages and working conditions

Over the past several years, the rapid growth in demand for labour and skills has been a defining feature of the New Zealand labour market. This has resulted in a sharp fall in unemployment and an associated rise in skill and labour shortages. In 2005/2006, skill shortages existed for all major occupational groups but were particularly severe39 for trades workers and – to a lesser extent – for some professionals, technicians and associate professionals.40

In particular, the number of young people entering the trades dropped sharply in the 1990s, as is illustrated by the changing age profile of trades workers measured in the 1991, 1996 and 2001 New Zealand population censuses. For instance, the number of fitters and turners between the age of 20 and 24 declined from nearly 1 150 in 1991 to slightly over 200 in 2001.

38. All workers with contracted jobs are entitled to annual leave.

39. Occupations are regarded as being in severe shortage by the New Zealand Department of Labour if vacancies have a fill-rate – i.e. the share of advertised vacancies filled within ten weeks of advertising – between 40% and 59%.

40. In its yearly exercise, the Department of Labour identified 14 trade occupations where shortages were severe in 2005 and 2006: Auto Electricians, Boat Builders, Bricklayers, Cabinetmakers, Carpenters, Chefs, Diesel Mechanics, Electricians, Fitters and Turners, Heating, Ventilation, Air Conditioning and Refrigeration Mechanics, Line Mechanics, Plumbers, Printing Machinists and Sheet Metal Workers. Among professional occupations, shortages were extreme – a fill-rate of less than 40% – for Architects, Engineers and related professionals, and severe for Health professionals, Computing professionals, and Social and related science professionals. Finally, similarly to their professional counterparts, Physical Science and Engineering associate professionals and Health associate professionals were also found to be in severe shortage.



Several factors are behind the shortages in the trades. First, in a survey conducted yearly by the Department of Labour (2006b)41 employers maintain that changes to the apprenticeship system in the 1990s impacted negatively on training and this process has only started to reverse with recent introduction of the MAs programme which has attracted some youth back to the trade professions. Another factor behind skill shortages is the lack of attractiveness of some occupations to young people. Surveyed employers mentioned that trade occupations were out of vogue, discouraging young people from entering them.

While skill shortages are expected to persist in the short term, the outlook is improving. First, the New Zealand selective immigration policy has contributed to an improved flow of workers in the professions in shortage and the Department of Labour expects net migration to contribute further in the years to come. Second, the professions in shortage experienced an average growth in wages of 5.6% between 2004 and 2005, exceeding the increase in the cost of living of 2.8% and the growth in wages across all occupations (4.4%) over the same period.

Third, the government has intensified efforts to improve the so-called training rate – the number of people achieving the benchmark National Certificate Level 4 qualification as a percentage of the number of people employed in the occupations in shortage.42 The introduction of Modern Apprenticeships for several trades and service occupations and initiatives to increase interest in vocational education in secondary schools, such as STAR and Gateway, partly respond to the need to improve the training rate. And some results are already visible. For instance, the total number of trainees enrolled for qualifications related to trade occupations has increased considerably – for instance, for the 14 trade occupations identified as facing skill shortages in 2005, the number of trainees doubled from slightly less than 8 000 in 2001 to almost 16 000 in 2005. This has helped raise the trade training rate from 2.0% in 2001 to 3.3% in 2005.

These three factors, together with a slow-down in demand due to weaker economic growth, are likely to help ease shortages in the coming years. However, the upward trajectory in the training rate needs to be maintained in the coming years for the long-term outlook in terms of skill shortages to

41. The SERA – Survey of Employers who have Recently Advertised.

42. This measure of the annual growth in the supply of workers through training is conceptually comparable with the growth in demand (as measured by the growth in employment).



improve. Action on working conditions is also imperative to attract young people to the trades.43

4. The strictness of employment protection legislation in New Zealand

Many aspects of labour legislation in New Zealand have been subject to reforms over the past two decades. The most recent change – the adoption of the Employment Relations Act (ERA) in 2000 – represented a considerable departure from the existing industrial relations context (see Box 3.2). Overall, however, employment protection legislation in New Zealand is among the least strict in the OECD, despite the slight increase caused by the introduction of the ERA (OECD, 2004 and Figure 3.2). As such, it is unlikely to constitute a high barrier to the hiring of youth on permanent contracts. Figure 3.2. Overall strictness of employment protection legislation and

its three main components, selected OECD countries, 2003

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

3.2

3.6

United S

tate

s

United K

ingd

om

Canada

New Zea

land

Irelan

d

Austra

lia

Switzer

land

Slovak R

epub

lic

Hungar

y

Japa

n

Denmar

k

Czech

Rep

ublic

Korea

Finlan

d

Polan

d

Austri

a

Nether

lands

Italy

Germ

any

Belgium

Norway

Sweden

Franc

e

Greec

eSpa

in

Mex

ico

Portu

gal

Turke

y

2003(scale 0-6)

Regulation on temporary forms of employment

Specific requirements for collective dismissal

Protection of regular workers against (individual) dismissal

Countries are ranked from left to right in ascending order of the overall summary index. Source: OECD (2004), Employment Outlook, Chapter 2, Chart 2.1, Paris. 43. Two of the 14 occupations identified as facing skill shortages in 2005 – Chef and

Cabinetmaker – are also experiencing recruitment and retention difficulties. This occurs when there is a considerable supply of individuals with the required skills in the potential labour market but they are unwilling to take up or remain in employment at current levels of remuneration and conditions of employment. Low relative wages were identified as contributors to recruitment and retention difficulties in both occupations. The average wage rates of chefs (NZD 14.62 per hour) and cabinetmakers (NZD 16.40) were 26% and 17% lower than the average wage rate for all trade occupations (NZD 19.81), respectively. Working conditions also contributed to recruitment and retention difficulties. Employers of chefs spoke of long, unsociable hours and the stressful kitchen environment, while employers of cabinetmakers mentioned dirty working conditions as an issue.



Box 3.2. An historical overview of industrial relations in New Zealand

In the 1980s and 1990s, New Zealand employers campaigned vigorously to deregulate the industrial relations system (Cameron and Brosnan, 1998) and provide management with greater flexibility in recognition of changing market conditions. Decentralisation and the deregulation of the industrial relations system were preferred so that hours of work, pay and conditions of employment, amongst others, could be determined at the workplace level. Partly in response to this, New Zealand pursued a radical policy of labour market deregulation and the arbitration system was abolished and replaced by a system of individual and collective contracts in the 1990s. The Employment Contracts Act (ECA) was introduced in 1991 – conciliation and arbitration were abolished, the monopoly bargaining rights and blanket coverage of unions were removed and freedom of association was introduced in the workplace. Focus shifted from the relationship between employer and union to one between the employer and individual employee or a collection of employees at the enterprise level. The ECA remained controversial with many predicting that the Act would increase disadvantage between groups in the labour market whilst others claimed that wage levels were rising and more people were employed.

In 2000, the New Zealand government took a step backwards with the Employment Relations Act (ERA), which marked a significant departure from ECA in that it reverted to promoting collective bargaining as a positive basis for employment relationships (Foster and McAndrew, 2003). The ERA requires that the parties bargain in “good faith” on the basis of a Code of Good Faith. It also requires mediation as a first step in the event of disputes. The principle of good faith means that before employers can dismiss an employee, they must give trade unions and/or the employee in question explicit, reasonable notification of the reasons as well as reasonable notice. But the ERA does not state clearly what “reasonable” means in this context. In addition, all employment agreements must set out, in plain language, the procedure for resolving employment relationship problems, which may include a notification procedure.

The ERA has also tended to limit the use of fixed-term contracts, by requiring genuine reasons based on reasonable grounds to employ a worker under such a contract. Here again, it does not state explicitly what genuine reasons based on reasonable grounds are. Instead, the ERA provides that excluding or limiting the rights of employees under the Act, or establishing the suitability of the employee for a permanent contract, are not genuine reasons for using a fixed-term contract.

5. Key points

In the context of the strong economic growth of the past decade, demand-side barriers to the hiring of young people are limited in New Zealand. In particular, wages and labour costs do not appear to be, per se, a barrier to the hiring of New Zealand youth. There is general agreement that the youth sub-minimum wage applying to 16-17-year olds is not binding, thus explaining why its recent successive increases have had little or no impact on teenage employment. However, the currently discussed abolition of this sub-minimum rate would raise wages significantly for a large share of youth aged 16-17 and could affect their employment prospects, especially in light of the projected economic slow-down over the



coming years. In addition, it may induce some to leave education for the labour market attracted by higher hourly wages.

On the other hand, skill mismatches appear to be a serious problem, with employers claiming recruitment and retention difficulties in some professions. Employers have also expressed worries about the lack of literacy and numeracy skills among youth leaving secondary education and on limited work-readiness in general.

At present, skill shortages – particularly in trade occupations – are the main barrier to further expansion of many businesses in New Zealand. A number of issues need to be addressed to reduce shortages – notably, limited opportunities for apprenticeship training, poor guidance in secondary school resulting in many youth embarking in tertiary academic study and poor working and pay conditions in the occupations where shortages exist.

The strictness of employment protection legislation in New Zealand is among the lowest in the OECD, thus is unlikely to cause temporary work traps for youth.

CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK – 123


CHAPTER 4

PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK

In many OECD countries, the first steps on the labour market are characterised for youth by the experience, sometimes repeated, of unemployment interspersed with spells of inactivity. Thus, it is important that young people have sufficient incentives and means to return to work. For instance, jobless youth often lack the job-search and interview skills needed for a smooth return to work and, for them, good-quality guidance and support by the Public Employment Services (PES) play a crucial role. The provision of these services should ideally follow a “mutual obligations” principle by which youth must actively seek work in exchange for targeted actions to help them find a job. In this respect, there is increasing recognition of the importance of effective activation strategies for promoting employment prospects of unemployed youth.

The strong growth performance of the New Zealand economy, a flexible labour market and effective activation programmes for unemployed youth have brought about a considerable fall in youth unemployment over the past five years. As a result, those youth who are unemployed or inactive and not involved in education or training represent a hard core of hard-to-place youth. To complicate matters, most of these young people at high risk of social exclusion are unknown to the PES as they are under the age of benefit entitlement.

This chapter outlines the passive and active labour market programmes (ALMPs) available for unemployed youth in New Zealand. It also reviews the initiatives directed at 15-17-year-old youth who are at high risk of inactivity and not necessarily in receipt of welfare benefits.

124 – CHAPTER 4. PASSIVE AND ACTIVE LABOUR MARKET POLICIES TO MOBILISE YOUNG PEOPLE INTO WORK


1. The role of passive labour market measures for youth

In New Zealand, welfare benefits and activation programmes – for both unemployed and social assistance recipients – are administered through Work and Income. A wide range of welfare benefits is available to young persons – notably Unemployment Benefits, Sickness Benefits, and Domestic Purposes Benefit (for single parents). For most benefits, eligibility is not contingent on previous employment or contributions to a scheme, which facilitates access for younger persons.44 At the same time, welfare benefits, as well as assistance with finding jobs or job referrals, do not distinguish significantly between younger and older workers.

A. Youth without work experience are entitled to unemployment benefits under mutual obligation rules

Unemployment Assistance (UA) is the main form of income support for people who are looking for work or training for work. It is a “work-tested” benefit, meaning the recipient must undertake certain job-seeking activities in order to qualify for the benefit. In theory, the benefit can be of indefinite duration.

To receive UA, a person must be 18 years or older, or be 16 or older and be married or in a civil union and have at least one dependent child. He/she must not be working full-time, but be actively looking for a full-time job and be able to start work immediately.

A single person aged 18-24 with no children can receive up to NZD 170 a week. In 2006, this payment was equivalent to about 30% of the average weekly income of 20-24-year olds in paid employment45 or 20% of the average weekly income for all age groups. A single recipient with no children who is 25 or over receives a higher payment (approximately NZD 200). Gross earnings of up to NZD 80 a week do not affect the amount of the benefit, but the payment is reduced by 70 cents for each dollar earned beyond this amount.

In addition to their UA payments, recipients may be eligible for other benefits. The main one is an accommodation supplement, the amount of

44. To receive a benefit of any type, young people need to register at Work and

Income but this does not need to be in writing and a verbal application is possible. In addition, the application does not have to name a particular benefit – an application for assistance is an application for all forms of assistance that meet the particular need or purpose.

45. Data on average weekly earnings are not available for the 18-24 age group.



which depends on the place of residence and on whether or not the recipient has children. The maximum amount payable for this benefit to a single person in 2006 was NZD 145 a week.

International comparisons of adult UA net replacement rates46 show that the New Zealand system is not very generous. However, it is rare that youth without a contributory history are entitled to UA for an unlimited duration. Only Australia, Belgium, Finland, Ireland and the United Kingdom have a similar regime and, among these countries, New Zealand pays out the second most generous benefit – 20% relative to average wages – after Ireland (OECD, 2007f).

Although in New Zealand UA is available for an unlimited duration, entitlement is subject to a work test, i.e. recipients must be available and actively search for work and must accept any offer of suitable employment, whether full-time or part-time,47 temporary or seasonal. Meetings with Work and Income officials are compulsory and recipients must attend all job interviews to which they have been referred to. Recipients are also required – within two weeks of receiving benefits – to cooperate in the development of a Job-Seeker Agreement (JSA). The JSA outlines the obligations and responsibilities of the recipient, including job-search activities such as preparing a CV, participating in work experience or training, attending job interviews and so forth. It also outlines how Work and Income will help the UA recipient to obtain employment or improve employment prospects and specifies the sanctions that may be imposed if the recipient fails to comply with its content.

Sanctions applied in the case of non-compliance with the JSA can include suspension of benefit payments. A recipient is given five working days notice in writing before the sanction is imposed. The nature of the sanction imposed depends on how often the recipient has failed to comply with the JSA obligations over the previous year. A first or second work-test failure results in the suspension of the benefit until compliance is reestablished. If the work-test failure is the recipient’s third, the benefit is cancelled for 13 weeks.

46. The net replacement rate is an indicator that compares income from work to

benefit income and is adjusted for the effects of taxation.

47. Full-time work-test obligations apply to all UA recipients with no dependent children under the age of 14. Part-time work-test obligations apply to recipients with their youngest child aged 6-13 years.



B. The share of youth receiving unemployment assistance has fallen considerably over the past decade

The share of youth aged 18-24 on UA has fallen substantially over the past decade (Figure 4.1) from 13% in 1996 to 3.5% in 2005, and the fall in UA recipiency among 25-29-year olds has been equally significant. Differences across ethnicity were smaller in 2006 than ten years earlier, but 25-29-year-old Māori were still considerably more likely than average to be on UA – 6% of them against an average of just above 2.6%.

Figure 4.1. Beneficiaries of main welfare benefits by ethnicity and age, 1996-2005

Percentages of the population in each groupa

Sickness benefit

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Unemployment assistance

0

5

10

15

20

25

30

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Māori 18-24 Māori 25-29 Māori 30-64Total 18-24 Total 25-29 Total 30-64

Domestic purposes benefit

2

4

6

8

10

12

14

16

18

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Main benefits

10

15

20

25

30

35

40

45

50

55

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

b

a) Although 16-17-year olds are entitled to unemployment benefits and other forms of welfare support in special circumstances, very few of them are benefit recipients. As a result, including them would artificially reduce the share of the population receiving benefits. b) Main benefits include unemployment assistance, domestic purposes benefit, sickness benefit as well as other minor (in terms of number of young recipients) benefits such as emergency benefit, invalidity benefit, independent youth benefit, unemployment benefit student hardship. There is no double counting in the main benefit category. Source: Statistics New Zealand.



Aside for UA, Work and Income administers a number of benefits coming under the heading of Main Benefits, most of which are available irrespective of age. After UA, the two most relevant benefits for youth are the Domestic Purposes Benefit (DPB) and Sickness Benefit (SB). The work test is weaker for the DPB than for UA and it does not apply for the SB (see Box 4.1). As a result, part of the fall in the share of youth on UA can be explained by a rise in those claiming other benefits (Figure 4.1). However, this phenomenon is of small magnitude. It is also noteworthy that Māori youth are considerably more likely than average to be in receipt of the DPB.

Box 4.1. The Domestic Purposes Benefit and the Sickness Benefit in New Zealand

The Domestic Purposes Benefit (DPB) and the Sickness Benefit (SB) are administered by Work and Income and, after UA, are the two forms of assistance with the most significant share of young persons among recipients.

The DPB provides income support for sole parents with one or more dependent children or for youth aged 16 or older caring for someone ill. In 2006, a recipient could receive NZD 310 a week (before tax) – an amount equivalent to about 54% of the average weekly income of those aged 20-24 in paid employment, and 38% of total average weekly income.

Although the DPB is not subject to the same work test as UA, recipients are required to participate in a Personal Development and Employment Planning process. This planning process generally includes attending an interview aimed at assessing the recipient’s readiness for work and setting goals to assist recipients to move towards employment. The plan is reviewed annually to be adjusted to changes in circumstances. Sanctions are applied in case of non-participation to the planning process.*

The SB is reserved for those people who cannot work due to sickness, injury, disability or pregnancy. Recipients must be 18 years or older or be 16 years or older, be married or in a civil union and have at least one dependent child. They must have limited capacity or an inability to work for a period of time because of a temporary medical condition, be unable to work for an indefinite period of time due to a medical condition, or have reduced earnings while in employment because of sickness or injury. A medical certificate is required as proof. Payment rates for the SB are the same as those for the Since September 2007, people on SB are supported to return to work, if this is appropriate. SB recipients are now required to meet a case manager to discuss their future and ways in which Work and Income can help. If they choose to develop a plan – although this is not compulsory – they may be required to: i) undertake work-related activities or programmes included in the plan; ii) review their plan; iii) show commitment to their plan. However, action affecting SB entitlement is rare.

* Only in some exceptional circumstances are recipients exempted from the obligation of preparing a plan – notably in the event of bereavement, mental health issues or birth of a new baby. As a result, single parents are often exempted from this obligation.



2. Activation of unemployed youth

There is increasing recognition across OECD countries of the importance of activation strategies based on the so-called “mutual obligations” principle for promoting employment prospects of unemployed youth. Radical changes of labour market policy towards ensuring the application of a mutual obligations approach in New Zealand were implemented in 1998 with the integration of benefit administration and employment services under the responsibility of Work and Income.48 At present, the mutual obligations principle is applied to all unemployed in receipt of benefits through the JSA described above.

Two features of activation policy for young people in the New Zealand context – notably in terms of objectives set and management – are noteworthy:

• While New Zealand activation policy does not distinguish in principle between younger and mature workers, since 2000 emphasis in the practice for these two age groups has been on different outcomes. For unemployed youth, training or education are considered a priority. For mature workers, employment is. This approach results from the recognition that benefit eligibility rules in New Zealand may have a detrimental effect on young people’s incentives to invest in skill formation.

• New Zealand policy pro-actively targets early young and low-skilled persons registered as unemployed. This is in line with recommendations emerging from the literature on ALMP effectiveness (Box 4.2). It is also consistent with the objectives of decreasing long-term welfare dependence and encouraging successful movements to employment and training that have informed labour market policies in New Zealand since the millennium.

48. This reform did not go smoothly at first and in 1998/99, placements were far

below target. However, by 2000/01 placements had doubled to well above target and total unemployment began to decline by about 10% per year. The new organisation’s “can-do” philosophy had an increasingly positive influence as the results-oriented management approach stabilized, and the decline in unemployment accelerated with the introduction of a package of activation programmes in 2003 (OECD, 2005).



Box 4.2. Active Labour Market Policies for youth

Over the past decade, several countries have come to realise that, for those youth who are already out of the education system – particularly youth leaving school without an upper secondary qualification – effective active labour market policies, as opposed to passive ones, constitute the best option. However, while there is general agreement that focusing on activation and mutual obligation policies is the way forward (see OECD, 2006e), many of the programmes targeted to youth, especially those most at-risk, have produced disappointing outcomes. Evaluation of existing programmes is thus fundamental in highlighting what works and what does not and in setting guidelines for future action.

Trying to sum up what works and what does not for disadvantaged youth is an arduous task but drawing on the several evaluations of existing programmes, successful programmes appear to share some characteristics (see Martin and Grubb, 2001; and Betcherman et al., 2004):

• Early action is particularly important for young people as those without work experience are generally not entitled to unemployment benefits or other welfare transfers. A number of OECD countries already have major programmes for youths that come into play early, often before or at six months of unemployment, e.g. Australia, Belgium, Denmark, New Zealand, Norway and the United Kingdom. Sweden uses a shorter period (90 days), and youth activation in Finland, for those without a vocational qualification, starts immediately.

• In terms of content, job-search assistance programmes are often found to be the most cost-effective for youth, providing positive returns to both earnings and employment. On the other hand, some wage and employment subsidy programmes do yield positive returns, but they generally tend to perform poorly in terms of their net impact on the future employment prospects of participants.

• Training programmes should be designed in close connection with local or national labour market needs. In this respect, mobilizing and involving the private sector and communities to assess local or national demand for skills and community needs is most important to project design.

• Good targeting of the programmes is also crucial. For instance, there is a need to distinguish between teenagers and young adults and to focus on school drop-outs. Specifically, the most desirable solution to the employment problems of teenagers is to help them to remain in school and acquire educational qualifications, whereas for young adults, help to acquire work experience is more important.

• Tight work-search requirements, backed by the threat of moderate benefit sanctions where applicable, tend to encourage early exit from unemployment, as much for youths as for adults. Indeed, in Australia, when “mutual obligation” requirements were applied to youths who had been unemployed for six months, an increase in the rates of exit from unemployment was observed (see QED, 2003).



• Programmes that integrate and combine services and offer a comprehensive “package” seem to be more successful. An example of comprehensive programme introduced over the past decade is the New Deal for Young People in the United Kingdom. The programme offers long-term unemployed youth a period of intensive job-search support followed by a number of work/re-training options. However, it is noteworthy that the most successful option is the subsidised employment one.

• Greater involvement of the social partners, as well as the public authorities at all levels, can help enhance the effectiveness of programmes. A tightly controlled system of certification to ensure the quality and relevance of training programmes may also contribute to the same goal (OECD, 1996; and O’Higgins, 1997).

• Residential programmes may yield positive returns for disadvantaged youth. Job Corps in the United States is a well-known example of such a programme. It consists in taking disadvantaged youth out of their regular locality, giving them mentoring, work experience and remedial education.

Another prominent feature of activation policy in New Zealand is the fact that most of the services are contracted out to private providers and non-governmental organisations (NGOs). Providers are selected through a tendering process and granted three-year contracts after which a new tender is issued. Since 1998, providers are evaluated based on internal targets for placements into stable work (defined as work lasting more than six months).

Two recent studies (Dixon and Crichton, 2006; and Hyslop et al., 2004) have looked at the overall effectiveness of welfare-to-work policies in New Zealand. Hyslop et al. examine employment effects during an 18-month period following exit from a benefit, while Dixon and Crichton follow welfare recipients for five years after benefit exit. Both studies show positive outcomes beyond the short term. Dixon and Crichton find that 72% of those moving from welfare to work in 2001-2002 remained employed for at least a year and 61% did so up to two years. However, observed earnings remained modest and more than half of those transiting from welfare to work needed earnings top-ups at some point over the first two years of exiting the welfare rolls. Both studies found that younger workers were more likely to experience positive outcomes.

A. New Zealand spends more than a fourth of its ALMP budget on young people

In New Zealand, the share of ALMPs expenditure devoted to youth programmes is relatively large by international standards. Furthermore, this share has more than doubled since 1995 (Table 4.1) and in 2002, 28% of the



total ALMPs budget was spent on youth.49 In percentage of GDP, in 2002 New Zealand devoted to the young unemployed, 50% more than the OECD average.

Table 4.1. Public spending on youth labour market programmes, selected OECD countries, 1995 and 2002a, b

1995 2002 1995 2002

Italy 0.16 0.20 .. ..Hungary 0.00 0.00 0.0 0.0Mexico 0.00 0.00 0.0 0.0Poland 0.07 0.07 18.4 0.0Belgium 0.07 0.01 5.2 0.6Norway 0.08 0.01 6.2 1.3Switzerland 0.00 0.01 0.0 1.7Sweden 0.02 0.02 0.7 1.8Japan 0.00 0.01 0.1 1.8Netherlands 0.10 0.04 7.0 2.4Slovak Republic 0.00 0.01 0.4 2.4Canada 0.02 0.02 3.3 4.4Austria 0.01 0.02 2.3 4.7Denmark 0.14 0.10 7.7 6.2Korea 0.02 0.02 .. 6.3Spain 0.08 0.06 15.7 6.5Germany 0.06 0.10 4.2 8.6Czech Republic 0.01 0.02 6.1 8.9Ireland 0.24 0.18 15.0 15.8Australia 0.06 0.08 7.5 16.9Finland 0.15 0.17 9.9 17.2United States 0.03 0.02 14.8 17.2New Zealand 0.09 0.15 12.6 28.2France 0.27 0.40 20.8 32.2Portugal 0.33 0.22 42.3 35.6United Kingdom 0.12 0.13 25.9 35.8

OECDc0.08 0.08 9.4 10.3

Percentage of GDPPercentage of total expenditure

on active labour market programmes

.. Data not available. a) For Denmark and Portugal, data refer to 2000 instead of 2002; for Ireland, to 2001 instead of 2002;

and for Italy, to 1996 instead of 1995. b) Data on spending on youth ALMPs are not available after 2002 because of a major change in the

classification of ALMPs introduced by both Eurostat and the OECD. c) Unweighted average of countries shown. Source: OECD database on Labour Market Programmes. 49. This is lower than the proportion of youth among the unemployed – 45% – but

above the share of youth among long-term unemployed on whom activation often concentrates – 18% (data refer to 2002).



B. Training actions are frequent among unemployment youth

The emphasis on skill acquisition for young unemployed people is illustrated by the high share of youth entering unemployment who participate in training actions with Work and Income. More than one in five young people who became unemployed in 2005/2006 went through some training action, roughly unchanged from 1998/1999.50 Indeed, youth made up two-thirds of all participants in training in 2006, up from 60% in 1999 (Table 4.2). Most youth participating in training were unskilled – about 60% of them had not attained an upper secondary education qualification. Subsidised employment was the second largest active measure for unemployed youth although it affected only 4% of new entrants in 1998/1999 and just 2.5% in 2005/2006. This reflects the limited use of employment subsidies in general. In fact, youth accounted for about 42% of the unemployed who got a Job Plus subsidy in 2005/2006. On the other hand, direct job creation declined sharply since the late 1990s as a tool to improve the employability of unemployed youth in line with the finding in the evaluation literature that such schemes do not work.

Table 4.2. Distribution of youth across labour market programmes,a New Zealand, 1999-2006

Percentages

Share of

youth 15-24c

Share of

school drop-outsd

1998/99 2005/06 2005/06 2005/06

2. Training 22.0 22.9 66.8 60.92.1. Institutional training (of which): 9.2 8.5 98.0 59.6

Youth training (7.4) (8.1) (100.0) (60.7)2.2. Workplace training 0.2 0.3 57.1 31.92.3. Integrated training (of which): 12.6 14.1 56.3 62.8

Gateway - (4.1) (99.9) (89.3)Training Opportunities Programmes (TOPs) (5.0) (4.9) (41.7) (44.4)Training Benefits (7.4) (4.0) (61.6) -

4. Employment incentives 3.9 2.5 41.5 43.4

6. Direct job creation 4.3 0.1 13.5 50.4

Share of inflows into

unemploymentb

- Not applicable or missing value. a) Only main programmes are listed in each category. b) Proportion of young participants in total youth annual inflows into unemployment. c) Share of youth aged 15-24 over total participants. d) Share of young participants with less than upper secondary qualification. Source: Statistics New Zealand 50. Note that the Gateway programme is counted as an ALMP despite the fact that it

directed to young people still in secondary school.



C. The major training programmes have been successful in helping unemployed youth improve their employment chances

Among the training programmes available for unemployed young people, Youth Training (YT) and Training Opportunities (TOP) are the two major ones in terms of participation. These two programmes are designed primarily to assist the unemployed with low skills by providing vocational and/or industrial training.

More specifically, TOP offers youths aged over 18 with low qualifications the chance to gain industry or vocational skills that will help them to get a job. A person is eligible for TOP if he/she has been unemployed for 26 weeks, or is assessed as having low qualifications51 and at risk of becoming long-term unemployed,52 or is a refugee registered with Work and Income.

Training is full-time and classroom-based53 and can be either job-specific (offering the skills required for carpentry, horticulture or hairdressing, for example) or more general, focusing on skills essential in any workplace (reading, numeracy, office and computer skills). Courses have a variable duration (2-40 weeks) and class sizes are small so that learners can receive individual attention.

YT is a programme of educational support that focuses on assisting young people under the age of 18 with little or no qualifications to gain skills from levels 1 to 3 of the National Qualifications Framework. YT is designed as a “stepping-stone” programme to prepare its clients for further education or training or, where appropriate, for employment.

While the use of TOP to improve employability of unemployed youth has remained roughly constant since the end of the 1990s, the proportion of unemployed youth entering YT was slightly higher in 2005/2006 than in 1998/1999 (see Table 4.2). About 60% of participants in YT had left education without an upper secondary education qualification but it is noteworthy that the remaining 40% with an upper secondary qualification was still considered unprepared for the labour market. This was even more

51. Low qualifications are specifically identified in terms of NCEA credits, school

certificates and qualifications possessed.

52. Criteria used to determine the risk of long-term unemployment include: disability; numeracy, literacy and/or language barrier to employment; DPB and Widow Benefits recipients for one year or more; youth aged 16-18 in receipt of the Independent Youth Benefit – i.e. youth who have lost support from their parents.

53. The lack of a work place element is a down-side.



marked in TOP: only 44% of participants were unemployed school drop-outs while the remaining 56% held an upper secondary qualification or better.

Private training establishments contracted by the government to carry out TOP and YT are bound by contract to attain at least 60% successful outcomes – either job placement or further education and training – for their training graduates. Long-term failure to meet this target makes future government training contracts unlikely. There is some indication that this clause is having a positive effect on employment outcomes of unemployed persons in training programmes: most providers meet the target and a number achieve higher-than-minimum required job-placement outcomes for participants (see Box 4.3).

Box 4.3. Training provision in New Zealand

An important feature of New Zealand’s training policy for the unemployed is that the majority of the training is delivered by private training establishments under the responsibility of the Tertiary Education Commission. Since the shift in policy towards training of the unemployed who lack basic skills in the early 1990s, bids by private training establishments are regularly invited and evaluated by the government. Providers must prove local need for their offered courses in the bidding process, a feature that shifts the costs of providing information on regional training needs to private providers.

Training providers must be accredited by the New Zealand Qualifications Authority (NZQA) and are required to identify charters of achievement goals as well as detailed course content and operating plans for which they seek or receive funding.

Courses must be full-time and include both general foundation courses and/or industry-related skills; training providers may choose to focus on either or both types of courses. Training content is often tailored to the level of skill of participants and some courses take place in a workshop environment. Payment of training providers is in the form of a subsidy of a fixed amount per full-time equivalent client. In 2007, the training subsidy was set at NZD 265 per client per week (approximately 45% of the average weekly earnings of 18-24-year olds).

A training provider’s continued eligibility for receiving the training subsidy is contingent on the requirement that a minimum of 60% of clients achieve positive outcomes per year. Positive outcomes are defined as either successful job placements or further education or training enrolment after the completion of a training course. Further training enrolment can be at either the same or another institution. Client outcome measurement is carried out two months after leaving the training course (either because of completion or if the client drops out of the course). To ensure that targets are met, most training institutions provide job-placement services for their clients after the completion of the course.

Many providers strive for significantly higher-than-minimum rates of positive outcomes to reduce the risk of outcomes below the minimum target. Achieving periodically lower outcome rates by small fractions (3%) is tolerated but greater differences in outcomes lead to part payment of subsidies and repeated below-minimum outcomes lead to total withdrawal of the subsidy unless substantial changes in course offerings are undertaken.



These accountability requirements have created incentives for training providers to undertake on-going market research to ensure that their graduates can be placed in employment with high success rates – a key factor which increases the effectiveness of training provision as part of active labour market policies in New Zealand.

For their part, clients are free to choose the provider of their preference to comply with the requirements of the JSA signed with Work and Income. This creates further competition among providers that advertise their courses at Work and Income offices. Coupled with rather low unemployment rates in New Zealand over the past decade, this leaves little space for creaming – i.e. providers choosing the easiest clients to place.

Overall, this setup for training provision to the unemployed has a number of positive features that are potentially replicable in other countries. In particular, it provides a flexible route to give the unemployed a second chance to acquire numeracy, literacy and general skills combined with vocational training. Furthermore, the system is built around the recognition of the need for greater stepping of training courses – i.e. gradual skill building through training becoming progressively more specific to a profession – leading to greater client learning success.

The main challenge faced by the system is related to its continuous fine-tuning to ensure course quality and high success rates. Frequent changes in the way outcomes are measured and in the timing of measurement make the business of private training providers quite volatile – providers in this industry have had higher-than-average exit rates – and compromises continuity in training courses availability. Overall, evidence on ALMP effectiveness suggests that outcome measurement should: i) be on a longer-term basis, i.e. one, two to five years after training; and ii) give some weight to earnings, i.e. career progression. In addition, while in principle training participants receive high-school-level credit components which give them the opportunity to go back to formal channels of higher education, in practice this rarely happens. In fact, most qualifications gained through TOP, and YT are at low levels (Registration of National Qualification at levels 1 and 2), and thus are not sufficient for entry into tertiary education. Since most qualifications are at low levels, they tend to trap participants into low-wage jobs.

Several evaluation studies of TOP have been conducted and some use rigorous methodologies to assess the impact of training initiatives on post-welfare labour market outcomes. Evidence on the overall effectiveness of TOP is mixed, but the programme has been found to improve employment and education outcomes for some groups of participants – among which unemployed youth under 20 (see Box 4.4). Rigorous evaluations of YT are not available but descriptive evidence shows that 65% of YT participants achieve a positive outcome – 43% moved into employment and 22% into further education or training (see Ministry of Education, 2001 and 2002).



Box 4.4. Evidence on the effectiveness of Training Opportunities Programmes for the unemployed in New Zealand

Descriptive statistics show positive short-term post-training outcomes for 62% of TOP participants – 51% of trainees obtained employment and 11% continued onto further education (Ministry of Education, 2001 and 2002). However, following participants for twelve months after completion reveals that some placements are not stable. A study by Nielsen (1999) found that only about 20% went straight into employment and remained there for the entire year and another 20% entered tertiary education and were still engaged in it after 12 months. On the other hand, 40% of learners experienced a number of transitions over the year following TOP completion (including obtaining work, but losing jobs through redundancy or dismissal), 10% left the labour force to have children, and 7% remained unemployed and were not actively searching for work (some of these had part-time work).

More rigorous evaluations (de Boer, 2003a and the synthesis by Johri et al., 2004) show that the programme has been more effective for young people than other sub-groups. In particular, de Boer compared outcomes for participants in TOP and a comparison group, using data from all participants in TOPs between 1996 and 2001. TOP was found to have a modest overall effect on independence from Work and Income three years after participation in TOP. The impact ratio – the ratio between the share of positive outcomes for participants and that for the comparison group – was 1.06. The analysis also revealed that locking-in effects – which occur when training reduces the time available to seek employment – reduced the overall impact of TOP. Post-participation effects were found to be short-lived, lasting between 3-12 months. However, TOP was found to be more successful than average for youth (under 20 years) and long-term unemployed (over 26 weeks), but unsuccessful for mature job seekers with no qualifications.* Unfortunately, the study sheds no light on whether TOP has been effective in helping the most disadvantaged youth or Māori and Pasifika youth in particular.

* The lack of stable outcomes for mature workers with no qualifications is also underlined in Perry and Maloney, 2006.

WI also administers Training Incentive Allowances (TIA) which provide financial assistance to DPB recipients to undertake training. The allowances can be used to pay for things like fees, textbooks and childcare during training hours. The course must meet certain standards and be work-related such as a university, polytechnic or business course providing skills needed for work. The allowance amount depends on course costs and its length and does not need to be paid back. Johri et al. (2004), in their synthesis of ALMP evaluations in New Zealand, report positive effects of TIA on labour market outcomes of DPB recipients. Adamson et al. (2003) and Adamson (2004) use rigorous evaluation techniques to estimate the impact of TIA on the likelihood to move into part-time or full-time work. They find that DPB recipients who use TIA are significantly more likely to become independent of Work and Income assistance. In addition, the authors estimate that participating in the TIA increases the probability of moving into part-time employment for those individuals who remain dependent on Work and Income assistance.



C. Subsidised work in the private sector has shown positive outcomes

Job Plus (JP) is a wage subsidy designed to assist job seekers who without government assistance are unlikely to secure employment. The subsidy duration and its amount are negotiated by a JP broker based on the skill level of the job seeker and on how long he/she has been out of work. However, the overall payment cannot exceed NZD 214 per person per week for up to 52 weeks (approximately 25% of average weekly earnings in 2006, and about 50% of the equivalent weekly full-time adult minimum wage).

The subsidy is available for placements arranged by Work and Income and for employers who hire an eligible applicant independently of a Work and Income initiative. Eligible job seekers include youth aged 16-20 who have been unemployed for at least 13 weeks, as well as long-term unemployed adults54 and those who are at risk of long-term unemployment.55 The job for which eligible unemployed are hired has to be an on-going position which continues after the subsidy is finished, has to involve at least 30 hours a week although part-time job subsidies are possible, and has to pay the going rate for the job. In addition, employers have to show that they have not dismissed anyone else to employ the subsidised worker.

In addition to the main JP subsidy, a number of other subsidies are available with more specific conditions. Job Plus Training can help pay for training that gives job-seekers the special skills they require to work with an employer who has agreed to hire them. The training should be job-specific and if it is for four weeks or longer, it has to be linked to the National Qualification Framework. Training can take place either before the person is employed (pre-employment) or once they start work (on-the-job). Other subsidies include Job Plus Māori Assets – specifically designed to assist Māori groups, organisations and businesses working to improve Māori communities, assets and services – and subsidies for people with disabilities (Modification Grants) and to support short-term community and environmental projects (Taskforce Green).

The use of JP subsidies has decreased since the end of the 1990s. In 2005/2006, only 2.5% of youth entering unemployment went on a subsidised job, down from about 4% in 1998/99. More than half of young participants had an upper secondary education qualification and the remaining participants were unemployed school drop-outs (see Table 4.2).

54. Unemployed for at least 26 weeks.

55. See footnote 39.



Evaluations of the Job Plus schemes suggest that a majority of participants achieved positive outcomes after receiving the subsidy: 59% were independent of Work and Income assistance after six months, increasing to 66% after five years (de Boer, 2003b). De Boer also compared outcomes of participants with those of a group of non-participants with similar characteristics and found that the programme had a significant and lasting impact on independence from Work and Income support. After five years, the estimated impact ratio was 1.14. Although this was smaller than its value after six months, the study noted that the decrease in the impact ratio over time was due to improved outcomes for the comparison group rather than to the worsening status of participants. Unfortunately, no specific conclusions were drawn for young participants and it is impossible to estimate what the impact ratio for them was.

3. The community approach to activating inactive youth

The active and passive labour market measures described above are directed at young people who are unemployed or in receipt of other types of income support. As a result, they tend to exclude – with few exceptions – youth under 18. While unemployment was still a serious issue in the first half of the 1990s, at the beginning of the 2000s it became clear that the main focus of policy had to shift from tackling mass youth unemployment to activating a small group of very disadvantaged youth, many of whom have little or no contact with Work and Income.

Reflecting this government objective, the Mayor Task Force for Jobs – a nationwide network of mayors working on the issues of youth work and livelihood in their communities – was created in 2000. The task force has grown in size since them – from just seven mayors to a membership of 71 mayors (97% of all mayors in New Zealand). The task force focuses on youth employment and engagement in local communities and its goals reflect those of the 1994 Prime Ministerial Task Force on Employment, and include the goal that all 15-19-year olds are in employment, or engaged in education or training or other appropriate activities by the end of 2007. On its side, the task force is concentrating efforts on achieving the same goal for the broader group of 15-24-year olds.

The task force is at the heart of the new community-based approach to fighting inactivity among young people. This involvement is first justified by the fact that the 2002 reform has widened local government responsibilities, previously limited to infrastructure building, to include social and employment policies. Secondly, mayors know their communities and are well placed to provide positive messages, inform central government



and lobby collectively for policies and projects which will succeed at the local level.

The main intervention tool to support young people to make successful transitions from school to work, education or training has been the Youth Transition Services (YTS) programme. YTS participation is free and voluntary. While the programme was initiated by the central government, the Mayor Task Force has been involved with communities to set up YTS across the country, mostly by undertaking the community consultation and driving strategic implementation groups.

With YTS, the government is hoping to be able to prevent youth inactivity rather than cure the undesirable outcomes of poor school-to-work/education/training transitions. As a result, while special referral routes are set up for youth who have been identified as being at high risk of social and labour market exclusion, the services provided by YTS are available to all young people.

YTS have been progressively rolled out, with five “Stage 1” sites established in early 2005, a further five “Stage 2” sites in late 2005, and four more “Stage 3” sites in the first half of 2007, bringing the total to 14. Priority has been given to those regions that have both a high number of inactive young people and high socio-economic deprivation, as well as the community capability to deliver the service and a lack of existing government-funded youth transition-type services.

Nationally, by late October 2007 approximately 14 300 young people had accessed the Stage 1 and 2 YTS. Over the same period, YTS have assisted nearly 1 500 young people into employment and 3 300 into further education or training. Many of these young people continue to be supported by YTS. Approximately 6 000 young people are being managed within the programme at any time.

Four major challenges are faced by the government and the task force in ensuring the effectiveness of YTS. First, the early identification of the factors that contribute to disadvantage is key to prevent it (Box 4.5). Second, services offered need to be effective. Third, youth who are not (yet) known to Work and Income are difficult to get in touch with, thus hard to activate. Finally, the right balance between allowing flexibility at the local level and ensuring that all communities have equal access to effective services needs to be struck.



Box 4.5. How is youth disadvantage defined?

The New Zealand government has used a number of sources to identify possible factors that increase the likelihood that a young person makes an unsuccessful transition from school to work or further education. First, background work for the Designing Careers programme in the early 2000s – a pilot exercise to improve guidance in schools which has now been replaced by the CPaBL pilot (see Chapter 2) – identified factors that would alert schools to identify at-risk students. Second, work conducted on the NEET category – used as a proxy for the group of youth who have made unsuccessful transitions – using the Household Labour Force Survey has identified the socio-demographic characteristics most common among members of this group. Combining these two sources highlighted the following risk factors:

• Disengagement from education, with a history of under-achievement, behavioural issues at school and absenteeism;

• Making an unplanned exit from school, for example not returning after a suspension or after school holidays;

• Leaving school with low or no qualifications;

• Poor health, including mental health and behavioural problems;

• Experiencing or having experienced significant and/or multiple traumatic events;

• Having limited or no access to current and accurate information about employment, education and training opportunities, having disconnected from family and/or wider community and relevant services;

• Being a teen parent.

In addition, for those who are already inactive, early intervention is as crucial as it is with youth unemployment. Maloney (2004c) provides key evidence on this topic using the Christchurch Health and Development Study. He shows that economic inactivity is path-dependant for youth – prolonged inactivity experienced at an early age (16-21) increases the risk of inactivity at age 25, all else being equal. While intervention on 18-21-year olds is made feasible by their eligibility for benefits, 16-17-year olds are a more problematic group as they are difficult for Work and Income to reach given their lack of benefit receipt.

A. How does YTS work?

YTS were established in 2004 as part of a Government package on youth transitions. They are designed to assist young people as they transit from school to further education, training, work or other activities that contribute to their long-term economic independence and wellbeing.

The Youth Transition Services are delivered by one or more lead providers in each area who:



• Engage with school leavers and young people who are not in work, education or training by developing referral processes with the help of schools, families, Work and Income, police, social and health service providers;

• Provide customised support and career planning for young people at high risk of prolonged disengagement from work, training or education;

• Liaise with local employers, training and education providers to identify and support the development of appropriate opportunities for young people, and facilitate their young clients’ transition into new roles.

Most providers have put the accent on creating a one-to-one relationship with youth at risk. According to providers, having a single reference person for a number of services – training plans, job placements, help with tertiary education applications, etc. – prevents young people from getting lost in the system. The lack of role models is often one factor increasing the risk of labour market and social exclusion and, in this context, the mentoring/coaching process becomes key to re-engaging youth in education and work.

At the local level, some councils have created steering committees including representatives of all concerned groups – notably Māori and Pasifika representatives – to identify the needs of the community that YTS should respond to. Nationwide, YTS and their contracts are coordinated by Work and Income. Three-year contracts with providers are allocated through a competitive tender process and no preference is foreseen for past providers in new tenders.56 In contrast with the situation with providers of services for the unemployed, no outcome measure is included in the contract and funding is based on the estimated number of youths to be assisted in each area.

No follow-up of youth who have benefited from YTS is set in the contract between providers and Work and Income, which may bias incentives to find stable and long-lasting placements. On their own initiative, some providers – notably, YTS providers in the Porirua area (The Learning Shop and Partners Porirua) – have put in place follow-up systems, generally over six months, of those young persons making a first positive transition through their services. This is in recognition of the fact that only sustained help has a durable impact on disadvantaged youth – i.e. the young

56. The first contracts are expiring at present and the government is in the process of

redefining the rules so that providers who have performed well over the first contract period can have their contract renewed without going through a new tendering process.



person needs to be assisted in every transition included in their individualised plan rather than just the first one. However, even a six-month follow-up is too short given the high job turnover in the youth labour market in New Zealand.

For the time being, evaluations are limited and left to the individual provider’s initiative and, once they are carried out, there is no mechanism that facilitates the sharing of information about good or bad practices with other providers across the country. However, a national evaluation of YTS outcomes is underway and due to report in the middle of 2008.

In addition to YTS-branded services, the Ministry of Social Development provides funding to a number of providers who supply similar programmes under different banners. It also contracts with a wide range of community sector providers to deliver Youth Development Programmes (YDPs) throughout New Zealand. Partly overlapping in scope with YTS, YDPs are more focused on youth overall well-being than on just transition from school to work or further learning. In addition, YDPs are funded differently through the Services for Young People Fund at the Ministry of Youth Development.

There are three YDPs administered by the Ministry: New Zealand Conservation Corps; Youth Services Corps; Specialist Youth Services Corps (for youth justice clients). There are subtle differences across the aims and content of each of these programmes. However, they share the general aims of building the confidence and self-esteem of young people by involving them in practical educational activities of benefit to themselves and to their communities, and improving their ongoing movement into further employment training and education. During the financial year 2005/06, approximately 1 500 young people (15-24 years) participated in these programmes, many of whom made a positive exit to employment or education/training pathways. Nationwide, there are 55 programmes running at any one time and each programme runs for six months.

C. Making contact and keeping in touch with youth at risk

Some of the youth targeted by YTS are difficult to approach. In fact, most non-employed youth aged 15-17 who are at risk of unsuccessful transitions are not known to Work and Income and cannot be referred to YTS providers as is done with young unemployed adults. It is within this framework that the community focus of YTS becomes key.

Because providers of YTS have often been operating in the community for a number of years, youth may contact them spontaneously. In fact, word-of-mouth is one of the best ways of making YTS known to youth and



attracting those who are sufficiently conscious of their own difficulties to seek help. For the same reason, particularly in small communities, providers may know disadvantaged youth individually and may be able to contact them directly.

For those who are eligible for benefits,57 referrals to YTS providers can come from Work and Income. However, a majority of programme participants are referred by their families,58 their schools, services dealing with turbulent family situations, the police or the justice department as cumulative disadvantage often includes unlawful activities or – albeit less frequently – more serious gang behaviour.

A number of providers are involved in setting up stronger links with schools. Obtaining a list of 14-year-olds enrolled in school and their contact details is one initiative of the Porirua area providers in cooperation with the council. However, systematic school referrals of this kind are not easy and have encountered several problems, particularly in terms of their compatibility with privacy laws. As a result, many providers are calling for the intervention of the Ministry of Education and the Ministry of Social Development – i.e. introducing a clause in school registration forms whereby tacit approval of possible future contacts by YTS is given unless otherwise specified – to make sure that disengagement can be prevented from the appearance of the first signs of risk, such as failure to return to school after a suspension.

Some YTS are also functioning as one-stop shops with several services provided in the same physical location. Health services are often associated with YTS and this tends to attract youth as medical consultations and check-ups are offered free of charge and in a friendly environment.59 Although this is not a format followed in all communities, it has proved

57. 16- and 17-year olds married or in a civil union and with at least one dependent child.

58. Some providers also attract young people by providing services to their parents – such as literacy and numeracy courses. This is often the case with those working closely with the Māori and Pasifika communities.

59. A survey conducted in 2001 by the University of Auckland for the Youth 2000 organisation (Adolescent Health Research Group, 2003) found that around half of New Zealand adolescents had some problems in getting healthcare. The report identified the cost of consultations as a barrier to getting health care for both female and male adolescents. Young women also cited the fear that the consultation outcome would not be kept private (17%), not feeling comfortable with the GP (20%) and being scared (18%) as barriers to getting appropriate medical assistance.



successful in the Hutt Valley area with Vibe – an NGO focused on improving youth’s health outcomes – joining forces with YTS.

Programme providers can also be proactive in getting in touch with youth at risk. A number of them have social workers located in schools –particularly in schools located in low-decile areas and in those schools which request it – and can identify youth at risk of making unsuccessful transitions at an early stage. This is the case for instance for COMET, an alternative provider of youth transition-type services in the outer Auckland area. COMET social workers often contact families of students they identify as being at risk and present them with the range of available options for their children. Providers also often participate in youth fairs and other youth events.

After referral or first contact with youth at risk, keeping in touch with them can be challenging. The work of YTS includes calls and visits at home but providers report young people changing telephone numbers very frequently in order not to be tracked down. Because no financial incentive exists for youth attending YTS, it is hard to enforce a mutual-obligation principle that would ensure more engagement of youth. To solve a similar problem, the United Kingdom is piloting an “activity agreement”, whereby a small allowance is paid to NEET youth against job/employment/training search, as specified in a written agreement.

Overall, the extent to which YTS captures the most disadvantaged youth depends on the providers’ initiative and there are no general guidelines on channels to get in contact with young people. This has the advantage of each organisation using the methods that are most in line with the services they provide – i.e. not all YTS provide guidance on tertiary choices so that the social workers’ presence in school cannot always be justified. On the other hand, collecting examples of good practices among those providers that have been successful in reaching at-risk youth and maintaining contact with them could benefit other providers.

D. Striking the balance between flexibility and equal treatment across communities

The YTS have the potential to prevent youth inactivity by ensuring successful transitions from secondary school to employment or further education and training. At the same time, the system may need some fine-tuning. Its flexibility allows providers to devise strategies that are specific and adapted to their community. On the other hand, a clearer overarching strategy – providing guidelines, conducting evaluations and collecting examples of good and bad practice – is likely to improve YTS performance.



More co-operation between providers at the community level is also necessary and providers themselves are seeing it as a key element to ensure success with the most difficult youth. Because contracts are attributed through a tendering process – i.e. providers compete against each other for funding – the environment is more competitive than it is co-operative. Also, evaluations and surveys conducted at the provider level often resemble case studies as they involve a very small number of youth.

E. Ideas for the enhancement and the expansion of YTS

The Ministry of Social Development is currently examining policy options for the enhancement and expansion of YTS and implementation work is expected to begin in late 2007/early 2008. This work is likely to involve:

• Promoting greater linkages between YTS providers and the education system, acknowledging that the most successful YTS are those that have strong relationships with local schools and other education providers;

• Introducing greater regional variation into YTS contracting arrangements, allowing procedures and targets to be developed that are responsive to local need;

• Making better use of performance information and examples of good practice, through the development of a YTS database, workshops, and promoting information-sharing arrangements between providers. No plans have been made yet to establish a national register of potential

YTS clients including individual and family characteristics. Without such a register, it is difficult to envisage more prominence of outcome measures in providers’ contracts.

Furthermore, while all the planned improvements will likely contribute to enhance the effectiveness of YTS, it must be kept in mind that even the best-performing programmes, when evaluated, often fail to help youth at very high risk of labour market and social exclusion. What has emerged from evaluation of several programmes is that the neediest youth must be identified as early as possible and provided with specific attention and focused – as far as possible, personalised – help. This hard-core group of at-risk youth is likely to include those youth who are very difficult to mobilise and for whom ad hoc strategies should be devised. Among programmes targeted specifically to disadvantaged youth, there is evidence that residential programmes may yield positive private and social returns once allowance is made for impacts on adverse social behaviours (crime, drug-taking, poor parenting), as well as labour market outcomes. An example of these programmes, the Job Corps in the United States, is presented in Box 4.6.



The US programme also provides a good example of how outreach activities – i.e. reaching inactive youth – can be structured. The country has chosen to set clear national guidelines on this activity to ensure that Jobs Corps reaches the most disadvantaged youth. While the agencies operate with a fair margin of flexibility, they have to submit an outreach plan in which each activity is detailed in its content and frequency and they must prepare monthly activity reports. They are accountable for carrying out the activity mentioned in the plan.

Box 4.6. The US Job Corps programme

Job Corps has been a central part of the Federal government’s efforts in the United States for several decades to provide employment assistance to disadvantaged youth between the ages of 16 and 24. The programme is designed to help disadvantaged youth to become “more responsible, employable and productive citizens.” Job Corps services are delivered at 119 centers nationwide in the United States, and serve about 60 000 new enrollees annually.

Programme components include academic education, health education, health care, vocational training, job placement, and counselling services. Additionally, most youth participate in a dormitory-style residential living component – approximately 85% of students are residential – while the remaining students commute to their centers daily.

Job Corps is an expensive programme given its design. As a result, it has been evaluated several times during its history, most recently via experimental (i.e. random-assignment) methods (Schochet et al., 2000 and 2001). The latter found rather positive effects of Job Corps on participants’ employability and earnings and high social rates of return. However, a follow-up analysis based on administrative data on earnings rather than survey-based data (Schochet et al., 2003) found less positive benefits for teenagers but continues high social returns for young adults (the 20-24 age group). The residential component of the programme appears to work better than the non-residential option.

The outreach activity is more formalised than in New Zealand YTS. Section R1 of the US Department of Labor Jobs Corps Policy and Requirements Handbook sets out terms and conditions for the process of getting in touch with youth and selecting participants: “In accordance with procedures issued by the Job Corps Director: a) The Regional Director, as contracting officer, shall contract with screening agencies, which shall perform Job Corps outreach and screening functions; b) Screening agencies shall develop outreach and referral sources, actively seek out potential applicants, conduct personal interviews with all applicants, and determine who are interested and likely Job Corps participants.”

Each Job Corp entity has to prepare a so-called Admission Counselors’ Outreach Plan where outreach activities are listed – such as referral channels and promptness of follow up, mail-outs, posters and brochure distribution, presentations and agencies liaisons. A monitoring system of the effectiveness of outreach activities also needs to be put in place at each Job Corp entity. This is generally done through monthly activity reports by outreach agencies to the regional director.



4. Key points

New Zealand has been quite successful in switching from the management of passive unemployment benefits to an activation policy. The main activation strategy towards unemployed youth has been to improve their employability through training. Evaluations of programmes designed to achieve this goal have been relatively positive so far. In addition, the buoyant labour market has helped reduce unemployment figures to an historical low. However, there is a residual group of disadvantaged youth with complex needs who are very difficult to place and are often unknown to Work and Income.

As a result, the New Zealand government has devised a strategy to prevent and tackle youth inactivity as well as unemployment, particularly among the very young – 15-17-year olds – who are not entitled to benefits and are thus unknown to Work and Income. The YTS, which were created to put this strategy into practice, have been operating for over three years in communities with the highest concentration of youth at risk of inactivity. The main strength of the system is its flexibility to provide services that are adapted to community needs. On the other hand, more co-operation of providers operating in each community, more co-ordination with schools for referrals, more rigorous evaluations, and the collection and wide dissemination of good-practice examples at the national level would likely improve outcomes. New Zealand may also look at residential programmes as an example of good practice from the United States to provide intensive help to the hardest-to-place young people.

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Jobs for Youth

NEW ZEALANDDes emplois pour les jeunes

-:HSTCQE=UYV]ZV:

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ISBN 978-92-64-04185-1 81 2008 03 1 P

Jobs for Youth

NEW ZEALANDImproving the performance of youth on the labour market is a crucial challenge in OECD countries facing persistent youth unemployment. As labour markets become more and more selective, a lack of relevant skills brings a higher risk of unemployment. Whatever the level of qualification, first experiences on the labour market have a profound influence on later working life. Getting off to a good start facilitates integration and lays the foundation for a good career, while a failure can be difficult to make up.

Ensuring a good start will require co-ordinated policies to bring the education system closer to the labour market, to help disadvantaged young people to find a job or participate in a training course and to facilitate the hiring of young people by firms.

OECD has launched a series of reports on the school-to-work transition process in sixteen countries including New Zealand. Each report contains a survey of the main barriers to employment for young people, an assessment of the adequacy and effectiveness of existing measures to improve the transition from school-to-work, and a set of policy recommendations for further action by the public authorities and social partners.

This report is based on the proceedings of a seminar and is published in English only. However, a French translation of the summary and main recommendations has been included in this volume.

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