If only we had the people

In April 2020, a few weeks into New Zealand’s first nationwide lockdown, our team of five million rallied behind the efforts to eradicate Covid-19.

In the weeks that followed we were secure in the knowledge New Zealand had one of the lowest infection and death rates in the world. Borders were closed, MIQ was in place and it was harder to get into New Zealand than it was to get a ticket to the Met Ball.

An economic report written around that time crystal-balled that our local economy would lose 8,000 jobs to the pandemic. But in the two years since, our diverse export-led economy, with its relatively low reliance on international tourists and students, has gone from strength to strength.

While it’s true that some sectors, hospitality, tourism, and horticulture with its huge reliance on the RSE scheme, have experienced enormous pain, on the whole our economy is doing well.

We could be doing even better, if only we had the people.

This is the story of the economic consequence of Aotearoa’s pandemic response – some would say unintended, some unforeseen, some unavoidable.

We are experiencing a critical shortage of workers, and there are none to be found.
Unemployment is at a record low. Everyone who wants to work is in work. According to SEEK, in February 2022, vacancies in Hawke’s Bay were 81% higher than they were three years ago. Every sector – not just horticulture – is crying out for people. There are skills shortages everywhere, at every level, from the low skilled to the highly skilled.

Yet despite the buoyant employment market, the Bay has a surprising number of job seeker support recipients. Rob Heyes, senior economist with Infometrics, says Jobseeker Support work-ready recipients were in December 2021 17% above December 2019 pre-pandemic levels. Over the same period, the number of temporary work visa migrants employed in Hawke’s Bay fell 18%.

Calls to the Government to open the borders for workers fell on deaf ears for a long time, and when it finally came, the new accredited employer work visa scheme has been criticised for raising the work-to-residence threshold, which will exclude many migrant workers from settling here as residents. The new process has been described by NZ Immigration Law – a legal firm specialising in immigration – as more difficult and costly for employers, offering fewer opportunities for migrants, benefitting no one other than Immigration New Zealand.

To say that Hawke’s Bay is scraping the bottom of the barrel when it comes to finding workers, is an understatement. BayBuzz spoke to a recruiter for the temporary labour market, who described the situation as being “10 inches into the dirt beneath the bottom of the barrel” with many workers hired “woefully unprepared for the realities of a 40-hour work week”.

And true to the laws of supply and demand, with workers in short supply, wages are on the rise. Economist Heyes warns: “If current inflation translates into ever rising wages, New Zealand runs the risk of creating a wage-price spiral where wage rises designed to meet the increasing cost of living feed into higher prices.”

Heyes says the key to inflation is to change people’s expectations. “If employers and workers think inflation will moderate, they will moderate their pay increases. Some economists, Infometrics included, think interest rates should go higher, quicker, to get on top of inflation and solidify people’s perception that the Reserve Bank is on toit.”

Erin Simpson is the co-chair of our local Regional Skills Leadership Group (RSLG), one of 15 around the country, created to identify and support better ways of meeting future skills and workforce needs. He says RSLG does the “deep dive into skill needs and priority areas” and gives “really good advice on training needs for the region”.

Construction and health are two areas of high priority for Hawke’s Bay, along with support for wāhine Māori who have been significantly affected by pandemic job losses.

In construction, Hawke’s Bay could take more young people into apprenticeships, but Simpson says we don’t have enough trades people with the skills to be mentors, and that RSLG will recommend leadership training to help fill this gap.

Fundamentally the current skills shortage issue is about not having enough people, and Simpson knows this well; in his day job he is manager, labour and capability for New Zealand Apples and Pears Inc, the industry body for the sector.

“Normally, we’d have 50,000 migrant workers in New Zealand,” he says, “there’s only around 5,000 and that’s not even touching the sides.”

With borders closed, there’s no quick fix, and once they open, Simpson predicts an exodus of 22 year-olds wanting to do their OE.

He says that incentives to get people into training are bigger than ever, and the schemes are “really good, but overall we are digging deeper than we have for a long time.”

Training needs to change, to make it more appealing to all ethnicities, especially Māori, as a big percentage of career seekers are Māori and Pasifika, he says. “The training doesn’t have to change too much for it to be far more accessible and culturally appropriate.”

Simpson wants to see better accessibility for migrant labour to continue growth in health, construction, meat processing and infrastructure, and worries about the impact on exports. “If we can’t man our industries, our port, the pack houses, etc, it will impact on the growth of the region.”

Julien Leys, chief executive of the Building Industry Federation – representing the building industry supply chain – says the accredited employer work visa scheme needs to be amended to remove the disincentive to bring people into New Zealand.
“It (the scheme) is an impediment at the very time when people will be leaving the country in droves, and our labour shortages will only get worse,” says Leys.

James Truman, general manager Tumu Timbers, says their manufacturing businesses are about 10% short of their ideal staffing level, and that’s been the case for a long time. As for the immigration changes, he says that now is the worst time to go through an immigration reset. “When the labour market is in crisis it is not the right time to put the brakes on letting people into the country.”

Truman is critical of Immigration New Zealand’s recently announced staged reopening of the border to migrant workers, that in the early stages appears to link skill to pay rate, and therefore only allows those earning more than $40.50 per hour into the country on skills visas.

“I would like to see an immigration official come and drive a forklift in a fast-paced production environment and then tell me it is an unskilled role. The focus on highly paid migrants only is ill-thought out. Yes, we certainly need these highly qualified workers and they will be welcomed, but we need many more workers across all role types including those not paying $40.50. There are numerous, critically vacant roles paying the median wage of $27.

“There is no relief on the factory floor. We need the foot soldiers to do the hard graft, the often repetitive, but skilled work that is necessary to enable the rest of the business to thrive.”

Tumu set up its own academy, Building Futures and works closely with a very supportive MSD to encourage rangatahi into work, bring people on, and get them work ready.

“It’s rewarding when you get someone off long-term unemployment and into work,” Truman says, “but the reality is that there simply aren’t enough Kiwis who are available and willing to do the work.”

Simpson says that currently, young people are in the driver’s seat.
“We’re in a (labour) market where young people can get free training, a good salary, and all the benefits they could dream of,” he says. The catch is “knowing what you want”.

Mark Hamilton, managing director of Alexander Construction, a large regional building company, says that Alexander is affected by the skills shortage.
“We are turning away opportunities, and a number of key subcontractors in our network are not keeping up with their commitments on our projects. It’s more about struggling to meet timelines and the need to be planning well in advance and accurately.”

Hamilton says the skills shortage is the worst he has experienced and that in previous cycles they have been able to pull people in from other regions, but as this is a nationwide issue, he hasn’t been able to do that this time.

Luke Irving, founder of international technology business Fingermark, says that finding people in general is now a struggle. The company used to import talent; 85% of engineering and development staff were from offshore, but with borders closed that’s all changed. Due to business growth, Fingermark is currently trying to fill 30 new roles globally, and has expanded its team by 20 over the past six months.

Locally there’s an EIT IT student internship programme that Fingermark is part of, and the company regularly hires its interns into permanent roles.

Irving says there is a lot of energy in the Hawke’s Bay economy, with businesses competing for talent, and with it an increase in remuneration packages, which is “great for the employee”. But he notes that the strategy around hiring has to change.
“It’s more than just the dollars. People’s expectation of workplaces and wellbeing has changed. A lot of people are struggling over the past two years, and they will take time to recover.”

Fingermark offers competitive salaries, and benefits that include health insurance, and puts on a good party every now and then. Irving says: “It is just the start of where we need to be.” He concedes that being a high growth company is now not as attractive as it used to be: “It can work against us in a lot of ways.”

He says that the Government’s ‘one size fits all’ approach to immigration has been mind-bogglingly stupid. “We need people to keep the economy going. Industries like technology, horticulture, farming, and health. All are crying out. It’s creating more and more frustration. “We have to learn and we have to remember what has happened.”

Council are not immune to the skills shortage. The HB Regional Council’s workforce has expanded by nearly 80 in the past two years (mostly new roles to deliver to the Long Term Plan), but it is finding that its highly employable specialist staff are being targeted by other councils, as well as government agencies and private consulting firms who can offer attractive salaries and more flexible working arrangements.
CEO James Palmer says that HBRC is experiencing difficulties attracting skilled candidates for some technical roles, such as in IT, finance, science, policy planning, consenting and engineering, and is currently recruiting for 25 roles.

“We are doing our best to remain competitive and are in the process of implementing a number of initiatives to make HBRC more attractive as an employer, and be a place where people are more likely to stay.

“Like many other organisations, we wish to ensure our people are well developed, with the capabilities to ensure our people can deliver their work with confidence.

In all of this, it’s worth remembering that governments don’t create wealth, businesses do.

New Zealand has long relied on imported talent for jobs that Kiwis can’t or won’t do. The new 2021 Resident Visa could see up to 165,000 working migrants who have been in the country since borders closed get residency, but it won’t do anything to increase the number of workers, which is desperately needed.

Completely closing the borders, turning off the tap of migrant workers, has severely constrained economic activity. So not surprisingly, business owners are frustrated, and businesses are hurting. Timelines are slipping, produce is going unpicked, opportunities are going begging, businesses can’t open for lack of workers, growth is stifled, and those staff who are available to work are under more pressure than ever.

In its Covid response, the Government thus far – and not unknowingly or naively – has deliberately chosen to prioritise health over economic growth. And still we’ve grown, but now the challenge is to address the blockages, workplace stress and inflation caused in part by labour shortages.