How educational attainment and labour market outcomes compare between foreign-born and New Zealand-born New Zealanders Publications
Publication Details
Over half of all adults in New Zealand with a tertiary diploma or higher-level qualification were born overseas. Targeted skilled migration policies have helped attract a high level of skills into the country. Yet, as in many OECD countries, qualified immigrants often don’t do as well in the labour market as equivalently educated New Zealand-born peers.
This paper looks at this difference using recent OECD data[1] on educational attainment, employment and earnings, and shows how the difference in New Zealand compares with that in other OECD countries.
While differences can be due to a range of natural factors, such as age, occupation, field of study, and work experience differences, they may also be pointers to wider issues around equity, bias and discrimination, skills supply, and mismatch issues. Differences may also highlight issues around migrant adjustment and integration, and the need for better migrant support. This paper doesn’t look to explore these factors but does aim to provide a simple descriptive picture of the recent OECD data. This may be instructive for further analysis.
Author(s): Asaad Ali and David Scott, Tertiary System Performance Analysis, Ministry of Education
Date Published: July 2023
Summary
New Zealand has one of the largest shares of foreign-born population in the OECD.
- Over one in three (35 percent) New Zealanders aged 25 to 64 were born overseas, the third highest share among OECD countries, and more than twice the OECD average.
Foreign-born New Zealanders are, on average, more educated than New Zealand-born New Zealanders.
- Fifty-three percent of foreign-born New Zealanders aged 25 to 64 have a tertiary diploma or higher qualification compared with 33 percent of New Zealand-born adults. This difference is the largest amongst all OECD countries. Over 90 percent have the equivalent of NCEA Level 2 or higher qualification, compared with 76 percent of New Zealand-born.
Foreign-born New Zealanders with a tertiary diploma or higher-level qualification have slightly lower employment than equivalent educated New Zealand-born.
- Across all adults aged 25 to 64, foreign-born New Zealanders with a tertiary diploma or higher qualification are, on average, three percentage points less likely to be employed than New Zealand-born with a similar qualification. This difference holds both for 25 to 44 year-olds and 45 to 64 year-olds.
- However, for adults aged 25 to 44 with less than a tertiary diploma, employment rates for equivalently educated foreign-born and New Zealand-born are similar.
- While for older ages (45 to 64), foreign-born with less than a tertiary diploma-level education are five to six percentage points less likely to be employed than equivalently educated New Zealand-born.
Earnings for foreign-born are lower than those of equivalently educated New Zealand-born.
- Foreign-born New Zealanders with a tertiary diploma or higher qualification, on average earn 15 percent less than New Zealand-born with similar levels of education, while foreign-born with less than the equivalent of an NCEA level 2 qualification on average earn 12 percent less than similarly educated New Zealand-born.
Those who arrived in the country when they were children or teenagers do better, but still not as well as New Zealand-born.[2]
- Those who arrived in New Zealand before the age of 16 have higher employment rates than similarly aged and educated immigrants who arrived as adults. Employment rates are similar to, or slightly lower than, their similarly aged and educated New Zealand-born peers.
Foreign-born in most OECD countries have lower employment and earnings than equivalently educated domestic-born. In New Zealand, this disadvantage is much smaller when it comes to employment but is larger when it comes to earnings.
- On average, foreign-born New Zealanders with a tertiary diploma or higher qualification have a seven percentage points higher employment rate than foreign-born in other OECD countries (the highest of any OECD country). The difference in employment rates between foreign-born and domestic-born adults in New Zealand is one of the smallest in the OECD. However, their 15 percent earnings difference relative to what similarly educated New Zealand born earn is much larger than that experienced by similarly educated foreign-born in other OECD countries.
Background
There are many factors other than education that can negatively influence labour market outcomes for migrants. Employment and earnings vary significantly by occupation and industry, as well as the field and level of study migrants are qualified in. Where you live can also have a big impact on employment prospects. For some foreign-born New Zealanders (especially those that arrived in the country recently) English language proficiency and a smaller network of social connections, as well as the lower understanding of cultural norms and competence including the te ao Māori context, can be significant factors. Potential discrimination and bias can also be faced by some foreign born. The length of time a person has been in a country and been able to unlock their social and human capital skills, can also affect how much they are rewarded for their skills.
Differences in education systems, and the nature of qualifications gained, can also be significant factors. Age, gender, and family situation also have a large influence. Inherent biases can also limit employment opportunities for otherwise qualified foreign-born job applicants.
Difficulties in finding well-paid employment relevant to their skills can lead to higher levels of over-qualified foreign-born New Zealand workers. This can negatively affect the growth of the economy as skill mismatches lower labour productivity growth, increase labour costs, and slow the adoption of new technology.[3]
Demographic differences between the foreign-born and New Zealand-born populations can also influence labour market comparisons. The gender distribution of foreign-born is similar to that of New Zealand-born so that is unlikely to be an influential factor. The age profile of foreign-born is slightly younger than that of New Zealand-born. Given that age is a factor in employment, and especially earnings, the slightly younger profile of foreign-born is likely to be a factor in comparing employment and earnings differences. Assuming all other factors were equal, this would act to slightly favour foreign-born in employment rate comparisons, and slightly favour New Zealand-born in earnings comparisons. While we haven’t statistically adjusted overall 25 to 64 year-old comparisons for this, separate results for different age groups are shown and discussed in this paper where data was available.
This paper doesn’t look to explore the range of factors that can and do influence employment and earnings but it does aim to provide a simple descriptive picture of the recent OECD data, that may be suggestive for further analysis. References to some existing research on migrants in education and workforce can be found in the notes section.[4]
New Zealand’s immigration policy settings can also influence employment prospects differently than those in other countries. Countries with selective “skilled migrant” programmes like New Zealand, Australia, and Canada, will favour a foreign-born population that is better educated, resulting in better labour market outcomes, than those countries with relatively higher levels of “unskilled” immigration.
Following the OECD source data, this paper covers the 25 to 64-year-old age group. This covers the population who are likely to have completed their initial school and tertiary education and who are less likely to have retired.
Educational Attainment
New Zealand has a high proportion of foreign-born population; a significant percentage (53 percent) have a tertiary qualification at diploma level or higher, compared with 33 percent for the New Zealand-born population.
- New Zealand has the third highest percentage (35 percent) of foreign-born adults among OECD countries, more than double the OECD average (17 percent).
- A high proportion (53 percent) of foreign-born New Zealanders have a tertiary qualification at diploma level or higher. This compares with 33 percent for New Zealand-born adults. Our foreign-born population is one of the most educated of any foreign-born population in OECD countries.[5]
- Just 10 percent of foreign-born have less than the equivalent of an NCEA Level 2 school qualification. This compares with 24 percent for New Zealand-born. Again, this is one of the lowest rates in the OECD, where on average 22 percent of foreign-born have less than an upper-secondary education.
- Among all 25 to 64 year-olds, foreign-born are slightly younger than New Zealand-born adults (51 percent of foreign-born are under the age of 44, compared with 38 percent of NZ-born).
Figure 1: Educational attainment of New Zealand and foreign-born 25 to 64-year-olds by age group (2020)
- Those who arrived in the country as children or teenagers, and therefore are more likely to have had some education in New Zealand, have on average slightly lower educational attainment than those who arrived as adults. For example, 86 percent of foreign-born 25-64 year-olds who arrived in the country aged under 16 have at least an upper secondary qualification compared with 91 percent of those who arrived aged 16 or older.
- Similarly, 50 percent of those who arrived in New Zealand before they were 16 had a tertiary qualification at diploma level or higher compared with 54 percent who arrived aged 16 or older.
Figure 2: Share of foreign-born adults among all 25 to 64-year-olds, by level of educational attainment (2020)
Note: Countries are ranked in descending order of the share of foreign-born adults among all 25 to 64-year-olds with diploma or higher attainment.
Employment
New Zealand’s foreign-born population has slightly lower employment rates compared to their equivalently educated New Zealand-born peers. However, when compared with foreign-born in other OECD countries, New Zealand’s tertiary-qualified foreign-born population has one of the highest employment rates of any OECD country.
- New Zealand-born adults with a diploma or higher-level tertiary qualification have, on average, a slightly higher employment rate than similarly educated foreign-born New Zealanders (89 percent and 86 percent respectively).
- For adults with less than NCEA Level 2 or equivalent qualification, older foreign-born (those aged 45 to 64) have a noticeably lower employment rate compared with that of similarly educated New Zealand-born (62 percent compared with 73 percent).
- For younger adults (those aged 25 to 44), there is statistically very little or no difference in employment rates for those with less than tertiary diploma.
Figure 3: Employment rates of New Zealand and foreign-born 25 to 64-year-olds by educational attainment and age group (2020)
- Those who arrived in the country as children or teenagers, and therefore more likely to have had some education in New Zealand, have on average slightly higher employment rates than those with the same level of education who arrived as adults. For example, for foreign-born 25–64-year-olds with a tertiary diploma or higher: the employment rate for those who arrived in the country aged under 16 was 88 percent compared with 86 percent for those who arrived aged 16 or older.
- For foreign-born 25 to 64-year-olds with less than the equivalent of NCEA Level 2: the employment rate for those who arrived in the country aged under 16 was 71 percent compared with just 64 percent for those who arrived aged 16 or older (and 72 percent for all New Zealand-born adults).
Figure 4 : Employment rates of foreign- and domestic-born 25 to 64-year-olds with diploma-level or higher attainment, by age at arrival in the country (2020)
Note: Countries are ranked in descending order of the employment rate of tertiary-educated domestic-born adults.
- Foreign-born New Zealanders with a tertiary diploma or higher qualification have amongst the highest employment rates of any equivalently educated foreign-born population in any other OECD country (86 percent compared with an OECD average of 79 percent). The difference in employment rates between New Zealand-born and foreign-born at this level of education is also one of the smallest in the OECD (3 percentage points compared with an OECD average of 7 percentage points).
- The employment rate for foreign-born New Zealanders with at least the equivalent of NCEA Level 2 qualification but below a tertiary diploma is also amongst the top five rates for equivalently educated foreign-born population in other OECD countries (79 percent compared with an OECD average of 72 percent). The difference in employment rate between New Zealand-born and foreign-born adults with this level of education is four percentage points.
- Foreign-born New Zealanders with less than the equivalent of NCEA Level 2 qualification have relatively high employment rates compared with equivalently educated foreign-born in other OECD countries (66 percent compared with an OECD average of 61 percent). However, their difference in employment rate with equivalently educated New Zealand-born is one of the largest of any OECD country. In fact, in around half of OECD countries, foreign-born at this level of education have higher employment rates than equivalently educated domestic-born.
- Across most OECD countries, including New Zealand, foreign-born who migrate to a country before they are 16 years old (and so, are likely to have had education in their destination country) generally have higher employment rates than those who arrived at older ages, but these typically remain lower than those of domestic-born. These differences reduce, and in some countries disappear, at lower levels of education. In New Zealand, the differences in employment rates between New Zealand-born and foreign-born who arrived in New Zealand before they were 16 years old are small (around 1 percentage point).
Earnings
Note: All earnings comparisons in this section relate to full-time full-year workers as used in the source OECD data.
New Zealand’s foreign-born workers earn less, on average, than equivalently educated New Zealand-born workers.
- The earnings for foreign-born with a tertiary diploma or higher are, on average, 15 percentage points less than that of New Zealand-born. This difference is larger for younger adults (18 percent) and smaller for older adults (seven percent).
- New Zealand-born workers with less than the equivalent of NCEA Level 2 or higher earn 12 percent more, on average, than foreign-born. However, for 35 to 44-year-olds there is little difference in average earnings between foreign-born and New Zealand-born workers.
- For older immigrants (55 to 64-year olds) with NCEA level 2 or higher qualification, the gap lowers to five percentage points, but still persists.
Figure 5: Foreign-born workers' earnings as a percentage of NZ-born workers' earnings, by educational attainment and age group (2019)
Note: The age groups presented here reflect those available in the source OECD data.
- In most, but not all OECD countries, foreign-born workers earn less than equivalently educated domestic-born workers. The difference in New Zealand is about the same as the OECD average for those with less than a tertiary diploma. However, the difference in earnings between foreign-born New Zealanders with a tertiary diploma or higher and equivalently educated New Zealand-born is larger than that in the other OECD countries.
Figure 6: Earnings of foreign-born workers as a percentage of earnings of domestic-born workers, by educational attainment (2019)
Notes: These are 25 to 64-year-old full-time full-year workers. Countries are ranked in descending order of the earnings of tertiary-educated foreign-born workers as a percentage of the earnings of tertiary-educated domestic-born workers.
- New Zealand’s foreign-born adults have a relatively better employment outcomes compared to the foreign-born in other OECD countries, but they have relatively poorer earnings outcomes than foreign-born in other OECD countries.
Figure 7: How New Zealand’s labour market disadvantage for foreign-born compares with that in other OECD countries (2019) – for adults aged 25 to 64 with a tertiary diploma or higher
Notes: Relative employment = the employment rate of foreign-born divided by the employment rate for domestic-born. 100 means no difference, values < 100 mean lower employment rates for foreign-born. Values > 100 mean higher rates. Similarly for earnings. The graph is centred on the OECD average.
Notes and References
- The source for this paper is OECD’s Education at a Glance 2021, Tables A1.3, A3.4, A4.4; Figures A1.5, A3.3, A4.5 and the OECD. Stat Database, http://stats.oecd.org. It also draws from the related OECD report How Do the Educational Attainment and Labour Market Outcomes of Foreign-born adults Compare to Their Native-born Peers? The data relates to 2019 and 2020 Data for New Zealand are estimates based on data from New Zealand’s Household Labour Force Survey (HLFS). There are limitations in the data used as there is no ability to identify what countries our foreign-born workers came from. Most official surveys are designed to produce national estimates. Where estimates are made for sub-populations, sampling errors may seriously limit the use of that information. The estimates for the sub-populations used in this report has been assessed as generally reliable for the purposes of this report. Non-statistically significant differences, however, can still be suggestive of genuine differences, especially where they follow a pattern that is consistently repeated over time.
- For foreign-born New Zealanders, there is no information on which country immigrants came from or whether the education was attained in New Zealand or overseas. Data is available by whether foreign-born arrived in the country before the age of 16, or not, and this is sometimes used to make inferences about whether immigrants are likely to have received some education in New Zealand or not, in particular for tertiary qualified.
- OECD (2016), Getting Skills Right: Assessing and Anticipating Changing Skill Needs, Getting Skills Right, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264252073-en.
- ERO (2023). Education For All Our Children: Embracing Diverse Ethnicities. Learners from ethnic communities are more likely to achieve well at NCEA and go on to University, however they encounter widespread racism at school.
Diversity Works New Zealand (2022) Migrant pay gap. This research identifies that migrants from South Africa, Northern America, the United Kingdom (UK), and the rest of Europe earn a higher average hourly wage than migrants from Asia, the rest of the Americas, Polynesia, Melanesia, and Micronesia.
New Zealand Human Rights Commission (2021). Drivers of migrant New Zealanders’ experiences of racism.
New Zealand Productivity Commission (2021). Impacts of immigration on the labour market and productivity.Francis Collins, Francis & Christina Stringer (2019). Temporary migrant worker exploitation in New Zealand.
Dr Adnan Iqbal (2017). Experiences of Highly Skilled Migrants in New Zealand: Challenges for Professional Integration - OECD (2021), Table A1.3 and Education at a Glance Database, http://stats.oecd.org.
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