Hawke’s Bay is booming. Retail sales have been strong and a friend from the car industry says they’ve set a new car sales record in August. If you have any significant building to do, the lead times are typically 6-9 months.
The Covid doom merchants were wrong. Or were they?
Some corporate bankers in Auckland tell me the peak of their ‘distressed loans’ was three years after the global financial crisis. The big wheels of the economy grind to a halt slowly and this new government has some challenges ahead of it.
In the rural sector we often talk about major negative events requiring a ‘two-year work out’. So it is with the sheep farmers in Hawke’s Bay after last year’s drought. Many had to sell down their capital stock and another bad year is baked in the cake. It’s easy to read about such things but you don’t really understand the emotional toll that drought took on farmers until you talk to them face to face. They are tough buggers but it didn’t take much to get the bottom lip quivering this year.
“One death is a tragedy, a million deaths a statistic,” Stalin purportedly said. It’s perfectly true. Politicians and economists pontificate over the big numbers but the real experience is that of individual businesses.
My own apple sector is heading for trouble this year and it’s all about labour. Each year we get an ‘Approval to Recruit’ (ATR) 121 RSE workers from Samoa. There is a perception that these guys pick all our apples, but in our case they make up only one third of our pickers. Another third is typically made up of working holiday makers from around the world and the final third from locals. So at present only one third of our workforce is available.
Given that big foreign exchange earners like tourism and hospitality continue to be badly hobbled by Covid-19, you’d expect this new government to ensure that primary industry exports continue at full speed. It’s for this reason the RSE workers are likely to return and this poses little Covid risk to NZ. After the measles crisis Samoa were quick to close their borders and have remained Covid-free.
Many think getting our RSE workers back will solve our harvest problems, but we’ll still be missing the backpackers.
Over summer there are about 60,000 working holiday makers in NZ. While these are often short-term workers who stay for only a few weeks, they are irreplaceable. Many of them saw a couple of toilets and showers on our orchards and asked if they could live in vans or tents on site. If I were 22 and touring the south of France I’d sleep in a van to save a few shekels too.
The big advantage of backpackers is that many of them don’t need beds and our labour crisis is really an accommodation crisis.
The Government is spending about $30,000 a day on emergency housing in Hawke’s Bay. We’ve had a harvest labour crisis for several years, but also a housing crisis. Much criticism can be levelled at John Key’s government for failing to recognise the housing crisis but Labour, in their first term, failed to deliver on its grand plans to build houses.
Government statistics show that net migration in the 5 years from 2010 was only 19,000, while in the next 5 years it was 276,000. Covid is driving the number higher still with record net migration of almost 80,000 in the year to June 2020. Most of the foreigners have left NZ, but the Kiwis continue to pour back in. Every tourist cabin and ageing motel in Hawke’s Bay has been signed up to emergency housing.
The RSE scheme has been somewhat of a political football since its inception. Each year we have our total numbers confirmed in January and bring them here almost immediately. Some who have invested in worker accommodation have found it sitting empty as they secured fewer RSE workers than they had hoped. The uncertain nature of RSE policy has been a significant disincentive to those looking to invest in housing. This winter I had a ‘shovel ready’ provider ready to build, but only if I signed-up to rent the facility for six months. In the midst of Covid uncertainty I couldn’t sign and he wouldn’t borrow and build.
“If you pay decent money, you’ll get the workers,” I’m often told, but the money isn’t the problem. The average RSE worker earns about $1200 a week in the height of the season and we are budgeting for a 12% increase in wages this year.
Even the minimum wage has increased 30% in recent years, while inflation has risen just 8%, so wage growth is happening. Make no mistake, we employ a lot of minimum wage earners. The key reason for this is lower productivity. We now employ a lot of people past retirement age, as well as those with mild physical or mental challenges. Many of these people work within their capacity and we appreciate their contribution. It’s tough, physical work and some only pick half as much as an RSE worker might.
There have been some stories about worker exploitation of recent times. From what I know these exclusively relate to labour contractors. The big apple growers look after their RSEs well as they have skin in the game. They need pickers for the next decade or two and can’t pack up and disappear like a labour contractor can.
The contribution of foreign seasonal workers has been immense in our industry. Our permanent employees have doubled in the last 7 years and the seasonal workers have helped that happen.
Many don’t like the idea of migrant labour, but apples in Europe get picked by seasonal workers from Eastern Europe, while in the USA it’s guest workers from Mexico. These short-term workers support year-round employment for local communities, but more importantly, they ensure food security.
I had a call from a zucchini grower in Northland the other day who is really struggling to get Kiwis to do the hard work. He normally gets a small contingent of RSE workers during his peak season. Given it’s an annual crop and he could see the worker crisis coming, I asked him how he reacted. “I planted half as much,” he replied. That’s a rational decision, but not great for the local economy. Such moves force supply down and prices up so that will hurt you at the supermarket.
The most important thing a government can do is instil confidence. Right now there is more than a whiff of fear in the apple industry and across horticulture in general. That fear stifles investment and employment. Even I’ve cut down some trees to make the harvest more manageable. It costs about $9 a box to get the crop to the point of harvest and that could sink you if you can’t turn it into cash.
I’m expecting a really tough year in 2021, but farming has always been cyclical. We’ll hunker down for a year to two but come back strongly. The food story out of Hawke’s Bay still looks amazing and with a few bold tweaks to government policy there will be no stopping us.
In the meantime, strap on a bucket and give us a hand.