Liam Dann: A smarter, more productive post-Covid economy - what the Government needs to address now

Worker shortages are getting worse and risk derailing plans for a more productive economy. Photo / Getty Images

OPINION:

The Government needs to start taking labour shortages seriously or it's going derail its own plans for a smarter, more productive post-Covid economy.

The shortage of workers highlighted in an Auckland Business Chamber survey last week was shocking.

The survey revealed an immediate need for 6700 roles in Auckland, with 1300 of those in construction and about 1000 for the aged care sector.

That was feedback received from just 1000 of its 4000 member firms, within 48 hours of launching the survey - which is still live.

So it's a snapshot, but one that reflects the anecdotal evidence we hear daily from business people, frustrated and worn out by the near impossible task of recruiting staff.

The chamber survey threw up some tough anecdotes.

The general theme was a merry-go-round of staff poaching within industries and a local business community consumed with recruiting at the expense of focusing on productive growth and long-term planning.

Chamber chief executive Michael Barnett said he had never seen shortages in the labour market this bad.

That statement was immediately politicised.

Bad?

What's bad for business owners must be good for workers right?

Well, it's true that the tight labour market is good for job seekers.

We should always aim for a world where everyone has a job.

But the labour market is not that simple, particularly when it is being distorted by artificially restricted supply.

And when you get to long-term inter-generational unemployment, that's a structural social problem that is very hard to fix.

Apply whatever political lens you want. There are myriad valid sociological reasons why a segment of the population struggles to participate in the economy.

Business needs to play its part in addressing these issues. More commitment to training, sure.

Businesses facing an endless grind on recruitment can't thrive, though. They're not in a good position to address structural issues.

That's where we are getting to now. Business is not booming.

Consumer demand is holding up better than we feared last year.

But supply-side constraints are creating an illusion that this economy is stronger than it is.

Finance Minister Grant Robertson rightly points out that these are better problems to have than unemployment and recession.

They are, however, the problems we now face.

They are problems that need to be addressed before we lose the valuable window of opportunity we earned last year.

The reality, of course, is that the shortages are mostly a symptom of a pandemic we can't do much about.

Nobody with any credibility is arguing that we abandon a health- and science-led border policy.

So for now, all our immigration issues are Covid-19 management issues.

The Government's proposed immigration policy reset - however radical it ends up being - is still a long way from being relevant.

The Productivity Commission has only just called for submissions of interest (June 21) on a review that will eventually inform policy when the borders can be safely opened.

We won't see the first draft of the Commission's review until October.

Whatever the Government believes is beneficial from a reset of immigration policy shouldn't be conflated with what is needed to get the economy through the next year.

Government critics certainly have conflated the two.

The political right is happy to lump them together because it shifts the blame to the government ideology rather than the more complex issue of how we manage borders.

That's actually undermining more reasonable business calls for help - which mostly just revolve around more empathy, more efficiency and some kind of medium-term immigration planning.

Robertson must understand all of this because he hears it week-in week-out at business functions and meetings he attends.

Quite where Immigration Minister Kris Faafoi is in all of this is hard to know.

He has been largely absent from the debate.

Michael Barnett, Auckland Business Chamber chief executive. Photo / Supplied

Meanwhile the shortages will drive wage growth but they won't necessarily make workers better off.

Inflation is an issue all around the world right now. There's the trillions of printed money ($53 billion here), there's shipping disruption and there is disruption to global markets.

Pushing up wages without driving productivity just adds to inflation.

The cost of living becomes a race between prices and wages. History tells us that this is a race the poorest people always lose.

New Zealand faces a dangerous cycle of inflation in the next few years if we let this labour shortage roll on unaddressed.

It will push interest rates higher at a time when the mortgage debt burden is extreme for young homeowners.

Higher interest rates will also be a handbrake on business investment, putting another handbrake on hopes for boosting New Zealand's productivity.

The Government's long-term goals of reshaping immigration, upskilling local workers and driving capital investment to get business working smarter are all admirable.

They should carry on with the immigration review.

But there is a different, more specific problem in need of attention right here and now.

We need Immigration NZ working more efficiently to ensure skilled foreign workers already in the country can stay.

There are skills and training mis-matches to be addressed. There appears, anecdotally, to be an untapped pool of older workers keen to do more.

We need a rare and difficult combination of bureaucratic competence combined with pragmatism and flexibility.

That's not easy to achieve. But neither was beating Covid-19. The Government should rise to this challenge.

And even if the solutions are limited for the time being it would lose nothing and gain plenty by letting business know that it understands and is working on the issue.