From her COVID bed, MartinJenkins Partner Sarah Baddeley looked through the recent Budget announcements for measures aimed at attracting more of our young people into education and training.

Budget Day always holds a special place in my heart, and I make sure to set aside time to carefully examine the numbers. This year it became even more of a ceremonial occasion as I was confined to bed with COVID (another data point indicating an early winter spike), which allowed me to watch all the proceedings live.

I took notes hoping I’d be able to string them together with a modicum of coherence once the fog lifted – you’ll be able to tell me if I’ve been successful. 

Looking at the headlines

As a labour-market policy enthusiast, I found this year’s Budget lite in detail. The projected unemployment rate for 2025 of 4.9% is softer than the Half Year Update’s projected 5.2%, and pretty optimistic compared to the views of some commentators.

Analysing the summary of initiatives, it’s clear that the Government is focussed on discontinuing certain programmes and institutions, including COVEs, CAPES, WDCS, and Te Pūkenga.

However, they also introduced active labour-market measures aimed at retaining young people in the skills system. This includes free final-year education (as opposed to free first-year) starting in 2025, and increased funding for apprenticeships through the Apprenticeship Boost Scheme ($65 million).

How to attract young people into education and training

Yet I couldn’t identify any specific efforts to attract young people into the training and education system. This is critical, especially considering the number of young people who entered the paid workforce during the COVID period in response to the rising cost of living.

Pressure on household budgets has pushed younger family members into paid work, curtailing their high-school education, affecting their levels of achievement, and making it harder for them to transition into tertiary education or training. It's also part of the reason so many kids aren’t turning up to school.

My colleague Jo Smith wrote last year about Persistent Disadvantage in Aotearoa New Zealand, pointing out that although key poverty metrics have improved, there’s a cohort of people stuck in a state of multiple persistent disadvantages. This presents a potent policy-development cocktail. When it comes to improving outcomes for the young people in that cohort, transitions into new and higher levels of education and training are mission-critical. 

My favourite labour-market chart

I find it useful to look at a broader range of indicators when I think about labour-market responses. The success of young people in the labour market sits within the context of overall labour-market dynamics, so it’s good to have a feel for the larger picture.

My favourite labour-market chart is this heat map from the Reserve Bank (May 2024 Monetary Policy Statement, page 11). Covering a range of variables from Job Transitions and the Job Finding Rate to Regional Deviations, it gives a great feel for the overall state of the market beyond just employment figures, as much of the story at the moment is about participation and immigration inflows. 

Source: Reserve Bank of New Zealand, Monetary Policy Statement, May 2024

Finetuning our economic engines in different regions and sectors

So, as I sat surrounded by tissues, and pondered the challenges our young people and rangatahi face in our current labour market, I thought: What next?  Will we see further active labour-market policies during this period of economic contraction? 

Under the previous National Government, Ministers Anne Tolley, Paula Bennett (both Social Development), and Steven Joyce (Economic Development and Tertiary Education) closely monitored labour-market data at regional and sectoral levels. They spearheaded an almost insatiable demand for the high-quality data-rich A3, which became a key support tool for tailoring specific interventions and programmes to particular cohorts.

At that time, there was compelling evidence of a labour-market matching problem, particularly affecting young people, and those ministers spent a good deal of time tuning regional and sectoral engines to address that and other problems using the policy, programme, and funding levers they had.

This finetuning can also be owned more by the sectors that are labour-intensive, including the primary sector, hospitality, and tourism. Many of these sectors have been operating for years in a tight labour market. The tourism sector, for example, is coming out of a very challenging time.

We’re now heading into a phase where more people will be available for work, and the job of policymakers will be to ensure that we have the right people in place, that we’re investing in their skills, and that, where possible, we’re not losing the most talented ones to Australia.

Investing in our young people

Unfortunately, New Zealand has a poor track record when it comes to investing in our youth and getting them into jobs and further education and training, especially Māori and Pacific young people. People in the trade refer to the “NEETs rate” (for Not in Education, Employment, or Training), and here a high rate is not neat. It's another important metric to follow alongside the current depressing data on school attendance.

Our future productivity depends on our kids. And the growing cohort to watch is rangatahi Māori. The recent Census release has reconfirmed for me that, given the increasing numbers of young Māori, New Zealand’s future economic success requires and depends on their economic success.

Before the economic headwinds really start to howl, there is now a brief window for the new Government to focus a set of social-investment initiatives on our NEET young people, including through place-based measures. This should be high on the policy agenda as we face those headwinds in 2025 and 2026.

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