KEY POINTS:
Higher wages, better training, more responsibility - that's the scenario for employees as the country faces up to a key issue that's not going away: how to be more productive with fewer staff.
New Zealand's unemployment rate has dropped to a record low of 3.6 per cent, and participation in the workforce has hit a record 68.8 per cent.
It's a shortage which has been made more acute by the last five years of healthy economic growth.
Even if New Zealand experiences a slowdown, our ageing workforce will keep unemployment low.
The Department of Labour estimates that between 2006 and 2017, the labour force will need to grow by 1.5 per cent a year to support moderate economic growth of 2.5 per cent a year.
Current forecasts, however, are the labour force will only grow by between 0.5 and 1 per cent per annum.
This is no doubt a concern for watchers of inflation, but Jason Walker, regional director of recruitment firm Hays NZ, says the shortage is going to be "the norm".
"We've never been in this place before. We've never experienced this sort of growth burst before. In the last five years, we've got 330,000 more people in the workforce, but unemployment rates haven't increased."
As a result of the shortage, wage growth has risen to 3.2 per cent. With higher wages, however, will come greater responsibility.
Employers "will have to pay more but you'll need to get more out of your staff through new technology and doing things smarter," says Infometrics economist Andrew Whiteford.
"There's only a limited amount that employers can do in terms of flexi-time and all those sorts of things. At the end of the day, there's going to be very little new labour coming into the market so they're going to have to find ways of using the existing labour force that much better."
The shortage is so severe that in some cases, firms are putting off work.
Up to a fifth of firms surveyed in the Quarterly Survey of Business Opinion say the labour shortage is the biggest constraint on their ability to expand.
Up to 42 per cent of firms in a recent labour department survey reported difficulty finding staff, and up to 26 per cent were having trouble finding unskilled labour.
Employers and Manufacturers Association spokesman Bruce Goldsworthy notes some firms are already trying to retain their key staff by matching global wage rates.
"There is a growing recognition amongst particularly our major exporting companies that they really have to pay rates that will keep their best qualified staff in New Zealand."
Mr Walker says major overseas firms are increasingly going to come to New Zealand to seek talent and offering big incentives.
His firm has been asked by a big British banking firm to find 40 senior bankers in New Zealand. A young Wellington lawyer being paid $75,000 here has just gone to Britain for a job paying 90,000 pounds ($257,000), plus relocation costs.
"What you're going to find with New Zealand employers, where they won't be able to compete on salary, they are going to look at other, non-cash benefits to retain staff."
It's not just the "skilled" labour, such as managers, professionals, technicians and tradespeople, that are in demand.
Unskilled labour is also at an "unprecedented" low, the Department of Labour says, ironically due to education.
The number of people with both school and post-school qualifications has doubled, from 23 per cent to 40 per cent of the working population. Immigration also has a high-skills bias.
" There's a huge build-up of skill in New Zealand," Mr Whiteford says.
"New Zealand loses quite a few of its unskilled workers to Australia, a lot are retiring and young people entering the workforce have far higher skills, so that pool of unskilled labour is shrinking."
Shortages are particularly painful in certain industries. Retail, hospitality, and agriculture or fisheries workers are becoming very scarce, and one source suggests some industries could eventually become uneconomic.
Construction and oil and gas industry workers are also in high demand, as are managers, architects, civil engineers and IT workers.
Immigration is seen as a partial solution, but numbers are falling.
The number of net long-term migrants entering this country has dropped 0.2 per cent, from around 14,000 for the year to November last year, to 10,100 for the year to June this year.
So how are employers coping?
Although offering more overtime is the usual response, employers have also been increasingly offering more flexible hours.
Almost all the 1.8 per cent rise in employment during the first half of the year was part-time work, suggesting that finding full-time staff is getting much harder.
"Lots of young people are working in part-time work," says Massey University economics professor Anne de Bruin, looking at census figures between 2001 and 2006.
"There's been a huge increase in part-time work, and quite a significant increase in multiple job holdings across the age groups."
Mr Goldsworthy says not all employers will be able to offer globally competitive wages, but then again, not all firms are serving an international market. Others are simply moving offshore.
"New Zealanders have to recognise that we are just part of a great big picture and people will adjust their businesses so they can be successful in that big picture.
"And that's what happening, where you're seeing some companies changing their bases of production and maybe moving some of it offshore, or setting up different distribution.
"They're simply adjusting their business so that they can be successful in what is potentially a new business environment."
Mr Hay recalls that during a downturn in Britain, some firms even offered their key staff half a year's salary to go travelling, as long as they returned.
He believes there will also be more poaching of school leavers and sponsoring of university students. Mature workers are already helping plug the gap.
"Statistics say for every two people who retire in the New Zealand marketplace, only one person enters," Mr Walker says.
"Which is going to put great pressure, not just on the skills but on the intellectual property that organisations have. So what you'll find, I think, will be delayed retirement, where even though you're 65 you might find baby boomers coming back into the workforce as consultants or contractors."
Technology is sometimes cited as the great hope to lift production, but experts say its use is limited in industries which rely on the human touch such as rest homes and child care, nursing, call centres and road works.
They are the areas, as New Zealand's population ages and as it currently enjoys a baby boom, that will really be the test of how well we adapt to the changing workforce.
- NZPA
