Opinion: Why we need a permanent solution to the growing problem of cheap migrant labour

Investing in local labour could be a solution to our seasonal worker shortage, writes Julian Wood. Photo / File

In February this year, Maxim Institute called for a shift away from New Zealand's over-reliance on temporary workers towards investing in the long-term and local workforce.

Weeks later, Covid-19 forced New Zealand's hand to close its borders, and labour shortages and exasperated courgette growers have hit the news headlines ever since.

In response, the Government announced last week that it would allow 2000 seasonal workers in over the coming months.

While some will rejoice, we caution against any incremental return to an unsustainable policy of the past.

An infinite supply of cheap, temporary workers is a double-edged sword — it meets short-term demand but has long-term costs. One major cost is a distortion of price signals in the labour market.

As labour shortages emerged in the early 90s, employers found they couldn't find workers at the price they wanted to pay.

Rather than allowing the market to raise prices and pivot the economy towards smarter solutions, we chose to relieve this wage pressure by opening our doors to temporary workers.

This has allowed our primary sectors to expand at the expense of a potential shift towards higher productivity ways of operating.

Low wages and long but seasonal hours also reinforced to young New Zealanders in the
regions how unattractive these jobs are.

Furthermore, for employers, it also reduced any incentives to train or to turn a job into a career.

Why would they take a young person and invest in them if they can find a fit, hard worker from overseas who will work for whatever they are offered?

As local labour retreated or was undercut, the least well off in the regions become even worse off.

The result was the need for ever more temporary workers, and so began a self-fulfilling, and as we now know, fragile cycle.

So, while the recent move to allow 2000 seasonal workers is good for this year's harvest, it is also good that the Government is lifting seasonal wages to $22.10 an hour and requiring that workers are paid a 30-hour per week salary while in quarantine.

The Government needs to be firm if market signals are to work.

Horticulture NZ chief executive Mike Chapman welcomed the news, but also warned about possible labour shortages for the spring 2021 and harvest 2022 seasons.

Industry needs to reckon with the reality that the market must adjust, and them with it.

In a post-Covid world, if the Government wants to really "build back better", there will
be no return to pre-Covid levels of temporary labour fixes.

The composition of jobs in the economy will change, and many firms will need to change their business model accordingly: rebalancing wages, conditions, and training for the long term.

For employers reliant on temporary cheap overseas labour to be profitable, this might mean making some hard business choices.

We can't return to the past. The border closure provides us with an opportunity to move
towards a new, more sustainable and better future— one where investing in local labour is a permanent fix.

Julian Wood is a senior researcher for Maxim Institute.