Skills shortage grows critical

New Zealand is in danger of losing the worldwide race for skilled workers.

There is a global scramble to attract people with the skills vital to a modern economy - the European Union alone estimates it will be 1.7 million qualified workers short by 2003 - and the signs are that New Zealand is falling behind.

The quarterly surveys of business opinion by the New Zealand Institute of Economic Research show a sharp increase in the number of firms reporting difficulties attracting skilled staff in the past six months.

More than 40 per cent now identify it as a problem, which institute director Alex Sundakov says is unusual for this stage of the economic cycle.

"What's interesting," he says, "is precisely the fact that the difficulty is high at the moment, even though the economy isn't really zooming away."

The Auckland and Wellington Chambers of Commerce also say members report increasing difficulty getting skilled staff.

Although IT is the most talked-about area, the shortages are developing right across the economy from traditionally high-tech areas like health - Auckland Healthcare had to cut back cancer treatment this month because of a chronic shortage of radiation staff - to more physical occupations, such as forestry.

The causes are complex and the subject of frequent debate.

But they include a mixture of rising demand for specialist skills, low levels of unemployment, skilled people seeking higher pay overseas, a mismatch between what the education system turns out and what business needs, and the ageing population (which means a smaller pool of workers).

Nevertheless, it is a problem New Zealand must solve because the economic impact of a continued skill shortage will be lower productivity, becoming a less attractive investment destination and lower growth.

"The long-term consequences of not having skills in your economy are that your productivity lags behind that of other countries," says Deutsche Bank senior economist Darren Gibbs, "and therefore your ability to generate wealth lags behind that of other countries."

Auckland Regional Chamber of Commerce chief executive Michael Barnett says inability to recruit the right staff could restrict expansion.

"It deprives businesses of growth because they can't get the skills. It has an opportunity cost to them because they can't attract more overseas clients and so on, and in some instances businesses make compromises. They employ below the skill level they want."

Lack of skilled staff is also seen as making New Zealand less attractive as a place to invest.

"Offshore companies looking to invest in other countries like to see a skilled labour force they can tap," says Deutsche Bank's Mr Gibbs, "and if New Zealand doesn't have that, it becomes less attractive as a place for foreign direct investment.

"If you look at New Zealand's recent direct investment record, you wouldn't say it was particularly outstanding. We missed out on some deals."

There is also concern that the contest between desperate firms bidding for the available skilled staff will push up wages.

Mr Gibbs says the QSBO indicator, usually fairly reliable, suggested wage movements should accelerate to 4 per cent over the next year.

"Wages definitely are rising, but we're not seeing the kind of huge settlements yet that mean that things have got to a critical level."

The NZIER's Mr Sundakov is one who fears New Zealand is losing the battle with the rest of the world for skilled workers.

Like many, he believes the answer lies in a two-pronged strategy tackling both immigration and education.

He questions why so few New Zealanders have tertiary qualifications.

"Is it not worth it for the wages? Are taxes too high?"

As for immigration, he sees the need for a major rethink.

"We need to work out what our immigration strategy is because it's not the right balance at present -the points system looks onlyat paper qualifications."

Both points have been taken up by the Government. Big changes have been signalled in tertiary education, and submissions closed last week on an industry training review aimed at aligning industry training with industry development, employment and wider education policies.

Immigration is also being addressed after feedback from the first business-Government forum held in Auckland last year, where many participants suggested aspects of immigration policy posed barriers to attracting highly skilled workers from overseas.

In response, the Government said in February that it would increase the annual number of skilled and business migrants approved to enter New Zealand to around 27,000 a year.

The new target - which takes effect from July 1 - represents a 60 per cent increase on the 1999-2000 figure of 17,000 skilled and business migrants coming to New Zealand.

Other measures announced included:

* Granting open work permits to spouses and partners of work-permit holders from April.

* A pilot project to identify occupation shortages, in lieu of individual labour market tests - a move aimed at simplifying the process of applying for work permits and speeding up the decision time on applications.

* Adjusting, from July, the English-language testing system requirement to make New Zealand a more attractive destination for migrants who are less fluent in English but have other skills.

These moves have been favourably received, but the consensus is that they will take time to have an effect and more needs to be done.

While applauding the Government's efforts, Mr Barnett says businesses must also play their part.

"When you're looking for the needs for tomorrow, you really do need to have a business plan a part of which is in the future and a part of which identifies skill needs for a future time."

Many New Zealand businesses have yet to face up to the need for diversity in the workforce, he says.

"They have a tendency to go for the CV that's got a Smith or Jones at the bottom rather than a person who is obviously a migrant, and yet in many cases some of those migrants are bringing absolutely superb skills to our shores."

In an attempt to remedy this, the chamber is establishing a website to match migrants and businesses.

"We'll be working with the different immigrant communities that are here to try and encourage them to get their people to register their skill sets so we can advertise them to the business community."

The website will be free for migrants and businesses and will be running by the last week of April.

At the same time as New Zealand is acting to reduce the shortage, however, pressure is being applied from overseas, with other countries seeking to poach New Zealand workers or lure their expats home.

For example, FAS, Ireland's training and employment authority, will visit New Zealand in June to tempt skilled workers back to the Emerald Isles.

The competition is heating up. Can New Zealand lift its game, in a race which will have a big influence on future living standards?

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