OPINION: Who would want to run a business right now? Contending with Covid-19, lockdowns, and the subsequent economic shock, Kiwi companies now have to deal with a crippling labour and skills shortage.
A largely closed border means businesses can no longer rely on migrants to fill high and low skilled jobs. Meanwhile, uncertainty over working holiday and essential skills visas, and employment restrictions on foreign nationals, have hindered firms’ ability to hire in recent months.
Government policies designed to boost Kiwi employment have also had a detrimental effect.
In October, The Ministry of Social Development (MSD) changed the process for hiring migrant workers under the Essential Skills Work Visa category. With a view to giving Kiwis the first crack at jobs, the MSD created regional lists of occupations with an oversupply of local job seekers.
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Previously, businesses had been required to list vacancies with Work and Income to demonstrate they had searched for Kiwis first. Following a failed process, the MSD would then issue a skills match report to support an employer’s visa application for a migrant worker.
Companies say that under the revised system, the MSD rarely provides skills match reports to support visa applications if the role remains on the oversupply list.
However, businesses say not enough Kiwis are applying for their jobs, despite the number of people on Job Seeker benefits remaining high. Anecdotal evidence from industry trade bodies such as Hospitality NZ suggests employers are hamstrung by a lack of local applicants and the inability to hire migrants.
The obvious counter-argument to these complaints is that Kiwi companies are not offering high enough wages. That if businesses, particularly those in hospitality, paid more attractive salaries, attracting local staff wouldn’t be a problem.
There’s some weight to that viewpoint. If businesses can’t lure Kiwis to work in bars, restaurants and coffee shops, then why not try and improve their terms, make themselves more attractive to job seekers, and pass on the extra costs to consumers?
Certain sectors, particularly hospitality, tend to underpay staff. Surely many of the inner-city cafes, bars and restaurants calling out for workers would have a much better chance of filling roles with locals if they lifted wages.
But while many businesses could pay more money to solve their worker shortage, lifting wages won’t fill every type of vacancy.
Seasonal work in the horticulture sector, for example, will always be better suited to people travelling on working holidays or people content with temporary work. Those jobs, often located far from urban centres, simply aren’t as well-suited to the average New Zealand job seeker, particularly those with children.
More than 5800 people came off benefits to do seasonal work between last November and the end of May, according to the MSD. Between November and February, that number was tracking slightly higher than the same period in 2020.
However, the flow of local workers wasn’t enough to plug the horticulture labour shortage, despite incentive schemes designed to help workers into the jobs with additional payments.
Meanwhile, many other businesses just can’t find the skills they need here. Restaurants cite a scarcity of highly-trained chefs that would normally be brought in from overseas. Other sectors have similar stories, notably the construction industry, as the dearth of skills becomes evident.
According to Infometrics economist Brad Olsen, solving the skills and labour crisis is more than just a “money equation”.
“It isn’t solely down to wages,” he says. “For some businesses, paying more in wages will bring a larger benefit. But the simple message [solving the shortage by paying more] isn’t strictly true across every occupation and industry. You could pay me $50 an hour, and I still wouldn’t make a very good chef.”
“There are a number of areas where the biggest challenge is the available skillset, and where people are located. Pay is an obvious part of the equation, but it’s not the only one,” he adds.
The skills shortage and hiring struggles bite as the Government embarks on its “immigration reset”. The Government aims to end New Zealand’s reliance on migrant labour in low-paying jobs, and wants more emphasis on training Kiwis and driving automation where possible.
Yet the Government’s recent decision to extend Working Holiday Visas for foreign nationals hints that ministers recognise the urgent need for so-called low-skilled migrants, and perhaps offers an admission that Kiwis have not been able to fill the void in many sectors.
Hospitality NZ’s Julie White welcomes the move to extend working holiday visas, but wants the Government to adopt a more pragmatic approach to filling skills gaps. She believes making visas more portable between employers, relaxing limits on the number of hours international students can work, and adding more roles to the skills shortage list can help.
“Industry and government need to get together and accept the reality of this labour crisis, which is global. A lot of countries have relied on migrant workers. Having cut this resource off, the Government needs to be front-footed and take a practical view on the people left in the country,” she adds.
The crisis has underlined New Zealand’s reliance on migrant labour. New Zealand’s transition to wean itself off overseas workers will take years of training and investment and is likely to bring challenges for the small companies absorbing the costs, not to mention knock-on effects such as higher inflation, as this all plays out.
In the near term, both sides need to do their part to try and alleviate the current crisis. Businesses able to stretch and offer better wages and terms will trim their vacancy lists. The Government should play its part by making it easier for migrants to take on the roles Kiwis can’t or won’t do. Industry and Government will need to be more flexible if New Zealand is to fix the labour market mess.
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