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Workers Switched Industries To Stay In Work And Earn More During COVID-19 - Analytical Note

The New Zealand labour market has been resilient and flexible during the COVID-19 pandemic, with workers switching industries to stay in work and earn more, according to an Analytical Note released today by the Reserve Bank of New Zealand – Te Pūtea Matua.

In New Zealand during 2020 and 2021, there were big increases in the number of jobs in the health and building industries (up about 15,950 and 17,650 respectively). On the other hand, employment in high-contact and tourism-related industries, such as hotels, restaurants and the arts, fell (down about 33,250) because of COVID-related restrictions and the closed border.

At the start of the pandemic in 2020, economists generally expected skill mismatches to increase and cause higher structural unemployment in New Zealand. This was seen as especially likely given that labour flows into the economy were restricted by stringent border controls.

According to research outlined in the Analytical Note, unlike past economic shocks, the COVID-19 pandemic saw high levels of workers moving between industries, especially since 2021. This churn in the labour market has coincided with growth in income, which has important implications for inflation dynamics. For example, the research shows there was a strong flow of workers into the health sector, coming especially from high-contact and tourism-related industries, as well as primary and secondary sectors (including the construction industry).

“This is a somewhat surprising finding, suggesting that skills are generally more transferable between industries than would have been assumed,” the authors Guanyu Zheng and Marea Sing say.

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“We confirm that these between-industry job-to-job transitions are positively correlated with income growth at the aggregate level,” they say.

These findings highlight how administrative tax data can be used to understand key relationships and developments in the New Zealand labour market, in order to meet both the inflation and employment objectives of our dual mandate.

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