The New Zealand Institute of Economic Research (NZIER) has warned that youth unemployment has reached crisis levels, with rates significantly higher than the overall unemployment rate. Unemployment among 15 to 19-year-olds has surged to 25.3 percent, while for 20 to 24-year-olds, it stands at 12 percent. Despite the overall unemployment rate remaining stable, young people face unique challenges, including underutilization and being not in employment, education, or training.
Senior economist David Hamill and principal economist Sarah Hogan attributed the situation to policy decisions made during and after the Covid pandemic. They noted that the current government's focus on fiscal restraint over support has overlooked the shortage of job opportunities. The push to move young people off benefits and into work is unlikely to succeed without creating more job openings, they said.
The rise of artificial intelligence (AI) and technological changes has added another layer of uncertainty. Employers may be hesitant to hire young people due to the potential for AI to replace certain roles. Meanwhile, young people are questioning the value of investing in education and training, given the rapid pace of technological advancements. The education sector's slow adaptation to these changes exacerbates the problem.
Additionally, the share of migrants filling low-skill jobs has increased, further displacing young New Zealanders. Sectors like construction, retail, food, and accommodation have shifted their workforce composition to favor migrants on temporary work visas. Hamill and Hogan described this as a 'perfect storm' for young people, combining cyclical and structural risks, including business uncertainty and accelerating technological change.
The Reserve Bank is also monitoring the impact of AI on youth unemployment rates. The NZIER emphasized the need for greater support for young people currently in the labor market and a workforce strategy that prepares for future technological changes.