A brave new world CDANZ 9 May 2018 Shamubeel Eaqub, CFA 021 573 218 @Seaqub fb.me/seaqub shamubeel@sense.partners
A brave new world A rapidly changing world Economy, jobs Demographics Why it matters: Careers more volatile We crave stability in working and retired life What to do: Lifelong learning; financial resilience; retirement planning; wage negotiation; geographic/industry/occupation nuance. 2
Labour market state The world has changed, but we haven t changed our ways 3
Ebbs and flows Unemployment rate Real wages & GDP per capita % of labour force 12 9 6 3 Great Depression 2017$/hour 35 30 25 20 Real wage level, left Wage fixing begins GDP per capita, right Economic crisis escalates Economic reforms 65 55 45 35 25 15 2016$000/person 0 1921 1941 1961 1981 2001 15 1936 1956 1976 1996 2016 5 Source: Statistics New Zealand & Lattimore & Eaqub (2011), The NZ Economy: An Introduction, AUP 4
Persistent inequalities Unemployment rate by selected aspect, March 2018 year U-rate by region U-rate by age U-rate by ethnicity& sex Northland Waikato East cape Manawatu - W. Upper NI Otago 15-24 25-34 35-44 45-54 55-65 65+ European Maori Pacific Peoples Asian Male Female 0 Total= 4.6 0Total= 4.6 9.2 0 Total= 4.6 9.2 Source: Statistics New Zealand 5
Changing nature of work 6
Change is constant, but accelerating 80% Employment by sector Primary Goods producing Services Share of total 60% 40% 20% 0% 1891 1906 1921 1936 1951 1966 1981 1996 2013 Census year Source: Statistics NZ 7
Technology; AI & Robots still to come Smartphone Technology adoption pace Internet Home computer Telephone Source: Asymco 0 10 20 30 40 50 60 Years to reach 50% of US households 8
Urbanisation 4 Population distribution Rural Urban 3 Number, m 2 1 0 1881 1896 1911 1926 1941 1956 1971 1986 2001 Source: Statistics NZ 9
Globalisation not just trade 10
Ageing 5% 4% Population growth by age Under 40 40-64 65+ Annual % change 3% 2% 1% 0% -1% 1993 1996 1999 2002 2005 2008 2011 2014 2017 Source: Statistics NZ 11
Catalysts Reality bites 12
What is a career? Getting a job, keeping a job Decent income that gives: dignity in working life progression & growth provide for whanau in money & time dignity in retired life. 13
Every region is not the same Human capital per capita (2006, $000) 500 450 400 350 300 250 Southland Hawke's Bay Marlborough West Coast Gisborne Waikato Northland Economic complexity & human capital Wellington Auckland Otago Canterbury Taranaki BoP Manawatu-Wanganui Nelson-Tasman 0 1 2 3 4 Economic complexity index (rising compexity --->) Source: Eaqub (2014), Growing Apart: Regional Prosperity in New Zealand, BWB Texts 14
This shows in performance Northland Auckland Waikato Bay of Plenty Gisborne Hawke's Bay Taranaki Manawatu-Wanganui Wellington Tasman Nelson Marlborough West Coast Canterbury Otago Southland Industry outperfromance by region Source: Statistics NZ -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% %pa, 2000-2017 15
Skills not the same everywhere 16
But education is not enough 150 130 Trends in relative earnings Below upper secondary Tertiary % of total 110 90 70 50 1997 2002 2007 2012 2017 Source: OECD, Statistics NZ 17
Education will be disrupted 7 Government education spend 6 5 % of GDP 4 3 2 1 0 1900 1925 1950 1975 2000 Source: Statistics NZ, Treasury 18
Jobs less secure & reskilling more often Number of years 14 12 10 8 Median tenure length (45-54 year old male, USA) % of all jobs 25% 20% 15% 10% 5% Part time employment 6 1951 1961 1971 1981 1991 2001 2011 Source: EBRI, BLS 0% 1956 1966 1976 1986 1996 2006 2016 Source: Statistics New Zealand, Lattimore & Eaqub (2011), The NZ Economy: An Introduction, AUP 19
Jobs worth less Income Inequality Lifetime incomes based on cohort Gini Coefficient 0.60 0.55 0.50 0.45 0.40 0.35 1935 1950 1965 1980 1995 2010 Lifetime income 2018$, 000s 450 425 400 375 350 1950 1955 (year of birth) 1960 1965 1970 1975 1980 19 19 19 20 Source: Creedy J.Gemmell N, Nguyen L (2017), Income inequality in New Zealand, 1935-2014, VUW Working Papers in Public Finance Perry B. (2017), Household incomes in NewZealand: Trends in indicators of inequality and hardship, 1982-2016, MSD Source: Sense Partners calculations from Statistics NZ Census age cohort income data 20
Generation rent: insecure in retirement 80% NZ home ownership rate, 1936-2013 Share of households 75% 70% 65% 60% 55% 50% 1936 1946 1956 1966 1976 1986 1996 2006 Sources: Statistics Eaqub & NZ Eaqub (2015) Generation Rent BWB Texts 21
and not enough to meet all needs Household income (2017) Taranaki Southland Wellington Canterbury Otago Upper SI Waikato East Coast NZ Manawatu-W. Bay of Plenty Northland Auckland After housing income Housing cost $- $20,000 $40,000 $60,000 $80,000 $100,000 Source: REINZ, RBNZ, Statistics NZ (*Housing cost = cost to service average house mortgage on standard terms) 22
Mortgage slavery or insecure Years to save & pay off 60 50 mortgage 40 30 20 10 0 Years to buy a house Deposit Repayment Total 38 25 12 10 18 22 10 13 1992 2002 2005 2017 Source: Sense Partners *Using basic assumptions of saving 5% of income for deposit and repayments at 33% of income. Using spot prices for floating mortgage rate, gross annual household income and median house price with a 20% deposit. 23
Casualisation & concentration Part time employment Labour market concentration 25% 110 20% 100 % of employment 15% 10% Index, 2000=100 90 80 70 Employment by fewer employers 5% 60 0% 50 1956 1966 1976 1986 1996 2006 2016 2000 2005 2010 2015 Source: Statistics NZ Source: Statistics NZ Source: Sense Partners calculations from Statistics NZ data 24
Negotiating power Phillips Curve Union membership 10% 1960-1980 1980 50 Real wage inflation 8% 6% 4% 2% 0% -2% -4% -6% 1980-1990 1990 1990-2000 2000-now % of employed 40 30 20 10-8% 0% 5% 10% 15% Unemployment rate 0 1901 1926 1951 1976 2001 Source: Sense Partners calculations from Statistics NZ & Lattimore & Eaqub (2011), The NZ Economy: An Introduction, AUP Source: Statistics NZ 25
Consequences & strategies 26
Consequences for you Changing nature of work Less security and stability Different speeds of change by region, industry, occupation Personal resilience Financial resilience Negotiating 27
Ideas Prepare clients for change To reskill through life Be proactive in understanding local/industry/occupation specifics Need financial resilience for change and prepare for retirement Through savings and negotiating true worth Will need career coaching through life, not a one off 28
A brave new world A rapidly changing world Economy, jobs Demographics Why it matters: Careers more volatile We crave stability in working and retired life What to do: Lifelong learning; financial resilience; retirement planning; wage negotiation; geographic nuance 29
Thank You