Māori: Demographics for Economic Return

Section one: Context

Purpose Statement

The purpose of this research is to help create an evidence base on the impacts of demographic trends and their implications for Māori economic futures.

This research piece is part of wider research undertaken by the New Zealand Institute of Economic Research, commissioned by Te Puni Kōkiri.

Better understanding of Māori demographic trends follows from the famous whatakaukī (Māori proverb):

He aha te mea nui o te ao? He tangata! He tangata! He tangata!
What is the most important thing in the world? It is people! It is people! It is people!

Introduction

This paper outlines key elements of Māori demographic trends and discusses their implications for the achievement of Māori economic growth aspirations. It does so in response to NZIER’s (2011) paper ‘Positioning the Māori economy to 2025’, which makes the following key points:

  • The Māori economy is growing and accounting for an ever larger share of the New Zealand economy
  • Māori production is skewed towards the primary sector, especially agriculture, forestry and fishing, which exposes the Māori economy to several levels of risk (global and local)
  • Māori secondary and tertiary education outcomes are improving. However Māori remain under-represented in degree level courses and over represented in low skill occupations
  • Wages remain the dominant source of income for Māori households
  • While much Māori business is focussed on commercial objectives, there is also a need for social, cultural and environmental objectives to be met

The paper will show that Māori demographic trends – alongside those of non-Māori New Zealanders, present the Māori population with significant opportunities that address all of the above points. Central to the exercise is the recently but now widely acknowledged concept of the ‘demographic dividend’ - sometimes also referred to as the demographic ‘bonus’ or ‘gift’. The concept refers to a period during demographic transition (the shift from high to low mortality and fertility levels), which is viewed in economic terms because it has the potential to convert into an economic dividend.

The structure of the paper is as follows. First the demographic dividend concept is outlined in a little more detail, followed by the argument that, for Māori, a different type of dividend may also exist, resulting from the historical coincidence of being a structurally youthful population located alongside a significantly older one (Jackson 1998, 2002, 2011a, b). The paper then considers the dividend-related implications of regional and industrial differences in structural ageing,1 and concludes by echoing comments made by most scholars examining the opportunities offered by the dividend. All are emphatic that just having the demographic dividend present does not ensure it will result in an economic dividend. That requires foresight, planning, political will, and leadership.

1. Structural ageing refers to declining proportions at younger ages and increasing proportions at older ages.

Key Points

  1. Differences in the timing and speed of demographic transition between the Māori and European-origin populations have led to significant differences in age structure. In 2006 the median age of the Māori population was just 23 years, compared with 38 years for the European / New Zealander / Other population.
  2. The differences have many positive implications for Māori . Uppermost among these is a potential economic dividend to be gained from the historical coincidence of being a structurally youthful population located alongside a significantly older one. This ‘window of opportunity’ can be termed a potential ‘collateral’ demographic dividend.
  3. The opportunities for the conversion of the collateral demographic dividend to an economic dividend will accelerate from this year, as New Zealand’s Baby Boomers (and the Baby Boomers of other European countries) begin to enter retirement. As each successively larger wave of New Zealand’s ‘Boomers retires across the following two decades, it will be replaced by a successively smaller cohort, resulting in a ‘demographically tight’ labour market. The situation and its positive implications for the structurally younger Māori population will be reinforced by a sizeable ‘bite’ in the total age structure which currently exists across ages 25-39 years and which, in combination with the foregoing trends, will generate a vacuum in the New Zealand labour market that Māori can disproportionately fill.
  4. The opportunities will be further reinforced in many non-urban areas, and also in many industries, where structural ageing is further advanced, leading to severe labour and skill shortages and the potential for the more youthful Māori population to capitalise on these deficits.
  5. Importantly the proposal that a potential collateral dividend exists follows two other demographic dividends recently identified in the demographic literature, neither of which have yet been explored in detail for Māori. The first arises as fertility falls and the proportion of the population at the youngest ages declines, and that at the key working ages (15-64 years), increases. During this finite period the working age population grows somewhat faster than the total population, and there is a potential economic dividend because the bulk of the population is potentially employed and earning. This period may have already peaked for Māori, but the proposition is inconclusive and further research is urgently needed, because the extent to which it can be realised depends on proactive investment in social capital, particularly education. The second potential dividend builds on the first and arises as structural ageing continues and a disproportion of the population reaches the highest income earning and saving age groups, before reaching retirement age. Despite its relative youth, the Māori population is presently entering this period, which, if adequately invested in and facilitated by an appropriate policy environment, has the potential to be long-standing. However failure to invest in the first dividend will compromise the realisation of the second dividend.The proposed ‘collateral dividend’ is a third interpretation of these trends, and has investment needs similar to the first dividend.
  6. Taken together the trends have significant positive implications for Māori in industries and regions in which Māori have a high level of social, cultural and economic interest. Identifying these opportunities and then strategically investing in them will deliver the economic gains that Māori seek.
  7. The paper echoes comments made by most scholars examining the opportunities offered by the demographic dividend, which must be seen as windows of opportunity. All scholars are emphatic that just having the demographic dividend present does not ensure it will result in an economic dividend. That requires foresight, planning, political will, and leadership.

The paper should be read with three important caveats in mind. First, the classification ‘Māori’ reflects a multiple ethnic origin count, meaning that a sizeable proportion of the Māori population is counted in both the Māori and non - Māori populations – and vice versa. This does not greatly affect the relative age structures of each population, nor the arguments presented herein. Second, the concept of the demographic dividend has thus far been conceptualised as occurring for ‘nations’ only – that is, at national level. It is argued here that, for the purposes outlined above, the concept is equally relevant at sub-population level, particularly for a relatively large sub-population such as Māori. Third, the comments regarding the fact that the dividend exists as a window of opportunity, and not as a fait accompli, should not be taken lightly, as it is only with the onset of the first dividend period in today’s developing countries that the developed world has become aware of what has, for them, already passed.

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