Growth in the labour force is set to slow sharply as the population ages and baby-boomers retire, according to Statistics New Zealand projections.

Between 2001 and 2006, the labour force grew by 270,000, boosted by strong net immigration in the wake of September 11 and the tech wreck. But the increase is expected to fall to 170,000 in the five years to 2011, then to 100,000 in the five years after that. In the subsequent five-year periods, labour force growth is projected to dwindle to an average 15,000.

These are projections based on estimates for births, deaths and labour force participation, and an average net gain of 10,000 a year from migration. They represent somewhat stronger growth in the labour supply than the previous projections in 2005.

One reason is a recent rise in the birth rate. Statistics NZ now assumes a fertility rate of 2.09 children per woman - enough to maintain the population - between 2007 and 2011, dropping to 2.0 over the following five years and to 1.9 by the mid 2020s. The earlier projections had a weaker fertility profile. The statisticians have raised their expectations for net immigration in the short term, and for life expectancy.

The combined effect would be to increase the labour force, currently 2.25 million, to 2.4 million by 2011, 2.5 billion by 2016, 2.6 million by 2025 and 2.7 million by 2040. Previous projections had the labour force remaining just under 2.4 million from the 2020s on.

The labour force is defined as everybody 15 or over who works at least an hour a week for money, or unpaid within a family business, or is unemployed but seeking work. In 1991 half the labour force was over 36 years old. By 2006 the median age had risen to 40 and it will be 42 by 2011 and likely to remain there or thereabouts. This reflects the ageing of the baby-boomer generation - those born in the 20 years after 1945.

At present, just over half the population is in the labour force. The labour force is expected to keep growing faster than the rest of the population until 2013 when 2.46 million will be in the workforce and 2.02 million will not. Thereafter the labour force will grow more slowly than the rest of the population as more and more baby-boomers reach 65.

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