Fine balance of employment set to tip

Investment in young talent needed to meet future demand, especially in construction.

Employers are going to need to work harder to engage staff rather than just "retain them" and there will be even greater need to develop the skills of young people and other employees in order for New Zealand to face the challenges of the future, says Managing Director of Hays New Zealand, Jason Walker.

The 2016 Hays Global Skills Index, in collaboration with Oxford Economics, shows increased labour market participation in New Zealand is not keeping up with demand.

This country's increase from 5.1 to 5.2 on the overall Index shows increased pressure in the job market - it's slightly harder to secure the right talent than it was a year ago.

Walker says: "The Global Skills Index that we do is really a reflection of the health of the economy when it comes to the employment sector."

He says it factors in different aspects. "We look at the mismatch of education/ labour market stability and wages - that sort of thing.

"What it's telling us about the New Zealand market as it sits right now -- these reports are a reflection of the past 12 months -- in all it's well-balanced. There has been increased demand in the job sector but we've managed to meet a lot of that through migrants coming in."

He says we are seeing a mismatch in salary increases. Those who work in highly skilled occupations, such as engineering and IT are the ones getting salary increases at the moment.

"But there's very little movement in salary in the semi-skilled sector. So that wage growth and that wage gap between those who are qualified with high skills and those who haven't got those skills is growing."

Walker says there's a lot of pressure on salaries in the high-skills area as there are shortages, however overall the wage pressure is 2.7.

"So somewhere someone is not getting the increases that they need or deserve or desire." So the gap between those with education and required skills and those who don't have that is getting wider.

"I would suggest that that's not going to change for a very long time as it's where the demand is coming from. And that's because, in the last 12 months we weren't really a rock star economy, but because of the increased investment, private and Government, in commercial construction, residential construction, infrastructure projects that are starting to happen right now, you are going to see that gap widening further."

Walker says there's going to be an increase in labour market participation, "because that's what happens as the unemployment rates come down. Then you should also see an increase in overall wage pressure. What will happen with supply and demand is if there are not enough people in the market, the demand increases. That will happen until about 2023, if you believe all the forecasts coming out at the moment.

"If the demand is met, we're going to have to get an additional 40,000 people in the construction sector within the next five to seven years. So that's going to have an impact moving forward.

"We will need to get people from outside the country, we're going to need to improve education. We're going to have to get graduates and trainees into positions and apprenticeships. So there's going to be a lot of investment in young talent that will have to flow through if we're going to meet that demand.

"Right now, as we see it, we're finely balanced. And that balance is going to change."

Because the wage pressure has high-skilled industries at the maximum level, there's no more room.

"So we need to bring in or train more of those individuals in jobs like engineering and technology, in trades and financial, legal and those areas. There's not enough trained experienced people coming through," Walker says.

"It's worth noting that it's being announced that there are plans to reduce the number of people migrating to New Zealand by 5000 in the next 12 months. If they do that wisely and they make sure we get the right people in, who have the skills that we require that will be ok.

"But reducing 5000 - that can be significant for some of the industries who have high demand and high skills shortages.

"It could backfire - but on the positive side if that means employers will have to invest more in training employees and people who are unemployed and are knocking on doors trying to find something to do - there is quite high youth unemployment and we could train them up so they can contribute at a high level - that's a positive thing."

Walker says employees' value is starting to increase as the market improves. "There is an opportunity for them to make sure they are in the right job with the right opportunities. A few years ago, it was so tough you had to stay where you were, now if you're not happy, you can look for and find new opportunities."

He says there has been a 13 per cent increase in ads from year to year if you look at the Trade Me job stats.

"Employers can't be apathetic - they will have to continually engage their staff. It's not even that you're simply retaining them, you're going to need to continually attract them."

He says it's about doing simple things: "It doesn't take a lot of money, the number one thing is making sure that every person in your business feels valued by the organisation".

"Do you recognise people for a job well done? Do staff understand how success is measured, do they have a clear understanding of how their role has value to the organisation?"