The worker shortage that will be everyone's problem

From today, vaccinated Kiwis can come home from anywhere in the world without isolating, but businesses desperate for staff say it's not a silver bullet. Jane Phare looks at the long-term effects of the country's critical people shortage and what companies are doing to attract and retain workers faster than they leave.

Nurseryman Steve Gellert is planning to erect billboards on the boundary of his Karaka property beside State Highway 22 advertising for staff. He's tried everything else, continually running ads wherever he can think of - Seek, Trade Me, the Franklin Grapevine Facebook page.

"It's just a sign of our desperation [to get staff]."

He's looking for experienced growers, people with green thumbs, or anyone for that matter. Gellert's predicament is not unique. New Zealand's skilled worker and labour shortage has existed for years, and in many industries it has reached a critical level thanks to Covid-19 and two years of closed borders.

While it's easy for employed Kiwis to shrug that off as "not my problem", businesses warn that it will become everyone's problem, leading to increased inflation, delays in infrastructure and building, sub-standard health care, poor service and just everyday price rises.

Take the price of "warm" crops like tomatoes and cucumbers grown in greenhouses. Gellert Nurseries supplies young plants to New Zealand's major commercial growers but they can't get staff either.

Steve Gellert, owner of Gellerts Nursery says some commercial growers are not planting vegetable crops because they can't get workers. Photo/Michael Craig

"I've got companies now who are not planting their greenhouses because they don't think that they will have staff to actually grow the crop for the 12 months that is necessary," says Gellert.

Orchardists warn of the same issue. Without enough pickers, fruit will be left unpicked. That will lead to a shortage of produce which will force up prices, while multimillion-dollar greenhouses lie idle and fruit rots on the ground.

Everywhere the Herald inquired, across every industry, there were shortages of both labour and skilled workers. A New Zealand Institute of Economic Research (NZIER) report in December showed that 73 per cent of firms reported difficulty finding skilled workers, with 60 per cent saying they had difficulty finding unskilled workers. Fifty-one per cent of manufacturers said a shortage of labour was the single factor most limiting their ability to increase turnover.

Employers say the worker shortage is holding back businesses from growing, investing in research and development, making sales and following up new opportunities. That in turn will have an impact on the wider New Zealand economy.

And in their offices, factories, manufacturing plants and construction sites, employers say the wellbeing of staff has become a major issue, with existing workers having faced months, if not years, of having to cover for the shortages. Some businesses report that staff leave because they are burnt out or simply fed up.

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Gellert has been trying to build a new $7 million greenhouse for more than a year now, adding an additional 10,000sq m of growing space to his existing 30,000sq m. He wants to grow the company's $10 million turnover and provide training and employment. But there are no workers, either to build his greenhouse or help run it.

Steve Gellert wants to build a new $7 million greenhouse but will need to import specialised builders from Europe. Photo/Michael Craig

A local company contracted to build the greenhouse closed down last year after losing staff. Now he's planning to import experienced glasshouse builders from Europe on essential work visas. As the rules stand, they'll have to isolate for seven days before starting work, which will add to the cost.

But if he uses local builders with no experience, he estimates that the project will take 12 months. If he uses some European builders, he reckons it will take six. And every month counts. Stored around Gellert's 10ha property is millions of dollars worth of pre-ordered equipment, machinery and technology for the greenhouse. With around 80 per cent of the $7m spent on that equipment, that's costing him money.

"We're currently paying a mortgage on that. I'm lucky this is not my first greenhouse because the bank would have foreclosed on me by now."

The rest of the business, including growing houseplants, is keeping things afloat but he says the Government needs to react more quickly to changing circumstances otherwise more businesses will suffer.

Open for business

With New Zealand's "closed" sign flipped to "open" and the border gradually unsealing, neither the Government nor the private sector can accurately predict what immigration flows will look like, which means businesses don't really know what to plan for.

Will there be a stream of talent heading for Australia, lured by higher wages and big opportunities? Will we lose of swag of Kiwis off on their OE? Will valued immigrant workers already here need extended time off to visit family back in their home countries? And will the outflow of Kiwis outnumber returning expats and immigrants and, if so, by how much?

In the face of a global race to attract skilled workers will New Zealand be able to compete? Photo/Paul Estcourt

An ANZ report released this week says analysts estimate a "fairly significant outflow" of Kiwis, in the order of 20,000 a year. But that's a guesstimate. The report points out that the removal of departure cards means it's no longer possible to accurately assess transtasman migration.

With the border still tight for non-Kiwi visitors, the report says it will be easier for Kiwis to leave than for foreign workers to arrive at a time when the market is facing an insatiable demand for workers. But it also adds: "You could drive a 747 through a range of plausible scenarios during these trying times."

Rick Herd, chief executive of commercial construction company Naylor Love, says if New Zealand – and that includes the Government – doesn't get on top of the shortages, the economy and the country's progress will suffer. The company is flat out but is struggling with skill shortages across all areas.

Other sectors report the same. Ryman Healthcare alone is building seven new retirement villages in New Zealand and has land for another eight villages after those have been completed.

Ryman Healthcare's $150 million plans for Kohimarama, one of eight future projects in the pipeline. Photo/supplied

New Zealand needs strategies to better manage the boom-and-bust cycle, Herd says. Fine to clamour for the border to open to allow in thousands of migrant workers, but what happens when the economy slumps? Those migrants lose their jobs and leave, taking training and skills with them, he says.

Ideally, Herd would like to see the Government pull back on public-sector projects when business is booming for the private sector, and restart during slumps. As it is, the country is in the midst of "a perfect storm", with both sides competing for the same pool of skilled workers and construction materials.

Rick Herd, chief executive of Naylor Love, says major public-sector projects clashing with a busy private sector has created a perfect storm. Photo/Michael Craig

A survey of the industry last year showed there were 3230 vacancies across 135 firms. The survey, carried out by the Association of Consulting Engineers New Zealand with the New Zealand Institute of Architects, Civil Contractors NZ and Registered Master Builders Association, showed that 90 per cent of companies were having difficulty recruiting in New Zealand, with 66 per cent reporting no domestic applicants.

The New Zealand market has been "tapped out", the report says, with increased competition for staff in the domestic market. Firms were working hard to grow the pipeline of talent within New Zealand, through education, scholarships and apprenticeships.

"However, these are medium- to long-term solutions and won't address the sector's immediate needs over the next one to five years," the report says.

Recruiters HainesAttract conducted a survey of 500 people in the construction, technology and healthcare industries, of whom 41 per cent said they were considering leaving New Zealand in the next few months. In the technology and digital sector, 48 per cent were considering leaving New Zealand, 37 per cent in construction and engineering, and 20 per cent in the health sector.

HainesAttract director Hamish Price says he and his major clients would like to see more collaboration between the private sector and the Government to help market New Zealand as open for business, to compete with countries like Australia and Canada which are running aggressive campaigns. Canada alone has a target of more than 430,000 skilled workers.

The construction industry is among those hard hit by critical shortages of skilled workers and labour. Photo/supplied

The New Zealand Nurses Organisation says healthcare resources are incredibly stretched, both in hospitals and the aged-care sector, due to vaccinations, testing, and the Omicron outbreak adding to pre-existing chronic staffing issues.

Kate Weston, professional services manager for the New Zealand Nursing Organisation, estimates there are more than 1000 vacancies in aged residential care alone and conservatively more 3000 registered nurses across the DHBs. That doesn't take into account shortages in primary health, and Māori and iwi sectors.

"We're starting to see some really major stresses in the workforce around covering gaps now that we have such a high prevalence of Omicron in the community."

It's a long-term problem that the reopened border will not immediately fix, she says. The industry relies heavily on internationally qualified nurses, particularly in aged residential care. But strict registration requirements mean it can take months, and in some cases years, for overseas nurses to be able to practise here.

"Rather than trying to keep bringing in more nurses, we need to look after the ones that we have here."

That included help to bring family members of immigrant nurses to New Zealand to help them settle.

The meat industry is also facing severe shortages, with around 2000 vacancies still to be filled. The Meat Industry Association says the situation is critical, made worse by staff having to isolate because of Covid-19. The association's CEO Sirma Karapeeva says plants are trying to manage supply by operating night shifts, running longer shifts and extending the processing season. Farmers face longer waiting times to get their livestock processed and that had flow-on effects including animal welfare, farmer wellbeing and on regional economies.

Meat Industry Association CEO Sirma Karapeeva says the Government's immigration settings don't support the industry's attempts to solve its critical worker shortage. Photo/supplied

The reopened border will help, she says, but the industry is concerned at how long the process is taking, and that the Government's current immigration settings don't support the sector's efforts to alleviate the labour shortage.

Karapeeva says nearly 70 Halal butchers are needed but the Government has approved only 15 visas. She points out that the Ministry for Primary Industries Situation and Outlook report forecast that meat and wool export revenue will increase by 6 per cent to reach $11.1 billion in the year to June 30, 2022.

"However without the required number of halal butchers and sufficient labour, we will face real challenges capturing a higher value from our exports."

Rocket Lab, too, has more than 100 vacancies at the moment, including roles in software development, mechanical and manufacturing engineering, avionics, and propulsion development and testing. Director of communications Morgan Bailey says Rocket Lab is looking to attract staff from overseas, particularly for roles that cannot be filled within New Zealand. The chance to work for a global leader in the space industry is an attractive proposition for skilled workers and Rocket Lab offers team members stock-based incentives, career development and benefits like on-site gyms, he says.

Brett O'Reilly, CEO of the Employers and Manufacturers Association, warns that both Canada and Australia "are actively plucking skilled migrants from our queues".

Skilled policy staff are being poached by the government in New Zealand as well as from Australia. O'Reilly, like others, says importing skilled workers is only part of the solution.

It's important for organisations to develop the talent they already have to increase loyalty and reduce churn, he says.

"Organisations that invest in the development of their staff consistently have better business results than those that don't."

Look local , tech boss says

Datacom's managing director Justin Gray doesn't want to see New Zealand revert to "the way it was" before Covid-19 forced border closures and a worsening skills shortage. He acknowledges that importing skilled workers from overseas is a necessary short-term solution, but wants to see a fundamental shift in the country's long-term employment strategy.

To that end, Datacom has changed its emphasis from acquiring talent to building talent locally, and not just from the technology pool. The company is casting the net wide, looking in the regions, in Māori and Pacific communities which are under-represented in the industry, and among young women who might not have seen technology as a career path.

"People from all sorts of backgrounds, all sorts of disciplines, graduates, non-graduates. We're basically taking every opportunity with someone who puts up their hand and says 'I'd love to learn skills to join a digital economy' and we're working out a way to support them," he says.

Managing director of technology company Datacom, Justin Gray thinks building up a loyal workforce within New Zealand is a better strategy than relying on foreign skilled labour. Photo/supplied

"We've got an opportunity to help an economic shift in those regions and help to build pathways to digital careers. If we go back to the way it was, I think we miss an opportunity."

He believe this strategy will build loyalty and that staff are less likely to leave for another company either in New Zealand or overseas.

"And we're being much more thoughtful about saying 'does this role have to be in Wellington, or Auckland or Christchurch, or can it be anywhere? Does it have to have someone with experience or could we train someone?'"

He also thinks working on the company's values and making sure staff understand the difference they make, what he calls "the link to purpose", helps retain staff.

When employers are up against salaries in US dollars or the lure of an attractive overseas location, the impact of what workers are doing in the New Zealand community becomes important, he says.

However Gray acknowledges the struggle New Zealand companies are facing as they try to find enough staff. Datacom has hired more than 700 people since April last year and lost "a few hundred" over the same time. The company is looking to fill between 100 and 200 roles at any one time.

"We are having to manage our workload across our customers to make sure we're putting people in the right place."

Gray is expecting a "spike" of young tech staff to be heading off for their OE, but says the company is going to be "mature" about that. Rather than try to persuade them to stay, Datacom will offer support and welcome staff back into the fold when they want to come home.