Youth unemployment at 'crisis level' and AI may mean recovery is tough, NZIER says
Fri, 9th Oct 2026 (Today)
Young people facing "crisis-level unemployment" aren't likely to get any relief simply from the economy improving, the NZ Institute of Economic Research (NZIER) says.
It says the emergence of AI and other technological changes have added another layer of uncertainty that is likely to affect young people's unemployment even as the landscape improves.
It has released an update that notes that unemployment among 15 to 19-year-olds has increased to 25.3 percent and among 20 to 24-year-olds it has risen to 12 percent, while the overall unemployment rate has stayed relatively stable.
It said while young people were always more exposed to downturns because they had less experience, the current situation was different because while the 15 to 19-year unemployment rate was near historical highs the overall employment rate was well below 1990s levels.
Senior economist David Hamill and principal economist Sarah Hogan said young people were facing "crisis level" unemployment, underutilisation and rates of being not in employment, education or training.
They said policy decisions during and after Covid had played a role.
The current government had prioritised fiscal restraint over support, they said, and policies that focused on strengthening the incentives to work overlooked the shortage of job opportunities.
They said the current push to move young people off benefits and into work would only be successful if there were jobs to go to.
NZIER said the solution might not be as straightforward as economic recovery.
"AI uncertainty can affect both employers and young people. Employers may be putting hiring on hold, especially for the workers they expect are most replaceable by AI, and young people are likely to be questioning the value of investment in education and training. "The education and training sector has always been slow to adapt," Hogan said.
"But the impacts of that are worse when technology is moving very fast and in ways that make it unclear what skills employers and workers will need in the near future."
It said the share of migrants filling low-skill jobs had been increasing before Covid and the government had eased restrictions allowing employers to bring more migrants in for minimum wage jobs even though the advice from officials was that a wage premium was needed to minimise the displacement of young New Zealanders.
They said construction and retail, food and accommodation had both significantly shifted the composition of their workforce in a way that favoured migrants on temporary work visas over young New Zealanders.
"Many young people may be locked out in a perfect storm," Hamill said.
"We can't be certain about the role of each individual factor, but there appears to be a complex combination of cyclical and structural risks at work, including a sluggish recovery, business uncertainty, unhelpful policy responses, pre-existing structural problems, accelerating technological change, and increasing reliance on temporary migrant workers in some sectors where young people are also concentrated."
Given the likely role of structural factors, the crisis may persist to some extent even during an economic recovery. Young people currently in the labour market need greater support, and the government needs a workforce strategy fit for the future, be successful if there were opportunities and little had been done to create those.
The Reserve Bank has also indicated it is watching the emergence of AI as a factor for youth unemployment rates.
