Underutilisation is an aggregate measure of individuals within a workforce that have more capacity to work. As individuals move from being underutilised to working at full capacity, the industry they move into can provide insight into where there has been a historic success in attracting previously untapped capacity in the New Zealand labour market.
Women are shown to have higher underutilisation rates than men. As they move out of being underutilised, women are least likely to transition into construction (out of the sectors explored in this report), while for men, this is the sector that they are most likely to move into. This suggests that the construction industry is an attractive employment option for underutilised men, but the least attractive for women as women mostly transition into retail (from the sectors explored). In addition, younger age groups show higher underutilisation rates thus, confirming the need for youth investment initiatives. These conclusions are consistent across all regions in New Zealand.

Underutilisation is a measure of labour market efficiency capturing the proportion of the population that are not being fully utilised in the labour force. It considers not only unemployment and underemployment but the additional inefficiencies and inequalities in the labour market. This measure represents a useful way to understand employment in New Zealand and the untapped potential the labour force holds.

The workforce capabilities and gaps in New Zealand are explored in this report with a focus on gender, age and geographic location. The transition of individuals from underutilisation into the workforce is explored to draw out potential new sources for new workers in specific industries.

Underutilisation statistics are derived from the Household Labour Force Survey (HLFS) which can be found in Statistics New Zealand’s Integrated Data Infrastructure (IDI). The underutilised population is made up from those that are either unemployed, underemployed or in the potential labour force (available and unavailable job seekers). Below are the definitions of these four components:

• Unemployed: Those not in any form of formal employment. This would include NEETs (Not in Education, Employment or Training).
• Underemployed: This refers to persons who are employed but would prefer to work more hours. Note that in the Household Labour Force Survey underemployment does not capture skills related to under-employment. It only refers to hours-based under-employment. If for example, someone with a master’s degree was working as a receptionist, this form of under-employment would not be captured.
• Available job seekers: Those who are not employed and are not seeking work but may work if a job was offered to them.
• Unavailable job seekers: Persons who are not employed and are not seeking paid work but may start searching soon.

One of the focuses of this report is the underutilisation in the construction sector. To derive the underutilisation rates in the construction sector, individuals from the HLFS and their IRD number were combined to determine whether they will be employed in the construction sector within three years of being classed as underutilised.

Underutilisation rates can be broken down by age and gender, as shown in the chart below. After the 2008 financial crisis, a 5% increase in underutilisation rates can be observed across the whole population. The higher rates have maintained at these higher levels since with slight declines in the 20-34 age group. It can be observed that overall women have higher underutilisation rates than their male counterparts, which is consistent with every age group.

Age has also shown to have a negative correlation with underutilisation rates, meaning the older the age group the less underutilised they are. The age results may be slightly overestimated as they include individuals that are participating in education, hence working less or not at all. However, the results do suggest that there could be cause for concern for youth underutilisation. This issue is being addressed by the New Zealand Government with a $63m investment into youth investment initiatives.

The chart below represents the proportion of underutilised workers who will find employment in select industries within three years of becoming underutilised. The construction industry, as of 2017, is shown to be at the two extremes for males and females. Women are least likely to transition from an underutilised status into being employed in construction out of the industries explored. Men, on the other hand, from 2013 have been more likely to transition into the construction industry than into manufacturing, retail or agriculture. This suggests that employment in the construction industry is more attractive to males with females being drawn into alternative industries, such as retail.

The result of women showing a low transition rate into construction from underutilisation is surprising considering that female participation in the construction industry is growing. This trend may demonstrate that females moving into the construction industry are coming from alternative sources. Underutilised women could, therefore, be a fruitful alternative for attracting women into construction.

While the underutilisation and unemployment rates have been reported declining post the financial crash in 2007 - 2008 this has been led by a growth in New Zealand's labourforce, rather than a decline in the number of persons underutilised. We find that the number of persons in each underutilised category has remained fairly steady since 2009. Surprisingly there is a large number of New Zealander's who are not seeking work right now, but would take a job if offered to them.

The below chart breaks down the sectors of persons reported being underemployed. We apply an additional filter of tracking the sectors of underemployed workers who go on to find employment in destination industries from the ' Employment of underutilised people in construction' chart. We find that many of the underemployed workers who go on to find full time employment are already working in the same sector.

Hospitality, Retail, Health Care and Education sectors make the majority of underemployed workers.

The chart below demonstrates the spread of underutilisation rates of males and females across the regions in New Zealand. Across all regions, it can be observed that females remain above males in terms of underutilisation rates. Generally, male underutilisation sat 2-5% lower than females across the regions.

As of 2018, Manawatū-Wanganui is the region with the highest underutilisation rates. From 2008 to 2016 the region with the highest rates was Northland but has recently been surpassed by Manawatū-Wanganui. This may have been a result of the new investment package in the Northland region providing more employment opportunities. Urban centres, such as Auckland, Wellington and Canterbury, have lower underutilisation levels due to more employment opportunities.

The negative relationship between age and underutilisation rates is consistent across all regions. This shows that there is little relation between age and geographic location for underutilisation.