KEY POINTS:
Of all the issues that gnaw at Auckland businesses, Michael Barnett has been surprised by how much one in particular has started to bite. For years, when the Auckland Chamber of Commerce chief executive surveyed companies on what was holding them back, the top reasons cited were lack of demand and finance.
Now, another problem looms large: the skills shortage. "In our surveys, about 50 per cent of businesses have been saying that they're finding it difficult getting people with the right skills," says Barnett.
The situation has gone beyond being an inconvenience for companies: it's a national headache.
"It must be an issue from a New Zealand perspective in terms of growth of the economy."
Plenty of people agree. Six years ago, when the skills shortage began to kick in, it was not much more than an irritating recruitment issue; sure, it took more time and more advertisements to find the right people, but companies just got on with it.
Now, many industries face critical shortages - and it's not just in the occupations you'd expect. Anyone who has tried to hire a tradesman will not be surprised that plumbers, electricians and cabinet makers appear on the list of skilled workers in long-term short supply. But Department of Labour surveys reveal the squeeze is being felt among hairdressers, chefs, roofers, heavy truck or tanker drivers, and drainlayers too.
And, according the department, it's a jam which is not going to vanish; it will be an ongoing feature of our economy, requiring employers to change their attitudes. For firms to adapt to this new environment, our workplaces will need a shakeup.
There are so many reports bulging with evidence of the skills shortage, it's lucky there's no shortage of skilled report-writers. Two of the most telling are from the Department of Labour.
Its latest Skills in the Labour Market report, published in May, noted that after a slight improvement between early 2005 and December 2006, the pinch has gone back on. Stronger increases in pressure were noted in the March quarter, pushing firms' perception of the difficulty of finding skilled staff to the highest level since September 2005.
The proportion of firms reporting difficulties jumped to 41 per cent in the March quarter, up from 29 per cent in December. The labour shortage was cited as the main constraint on expansion for 22 per cent of companies, well above the 17 per cent that has been the average for the past six years.
And it seems some companies are just making do with what's around. "While employment increased strongly in the March 2007 quarter, there are indications that employers are hiring workers that are less skilled than they desire," says the report. "During their annual business and tax talks Treasury said some firms raised concerns about the quality of staff they are hiring. Not only is this indicative of long-term skill shortages, it is also negatively affecting labour productivity growth."
Another report, based on a survey of employers who had recently advertised vacancies, revealed only 61 per cent of the 5486 positions surveyed were filled within 10 weeks of being advertised.
The constraints were felt across all major occupational groups - less than half of all trades positions were filled, and severe shortages were noticed among architects, engineers and health professionals.
Other positions with low rates of success were chefs (52 per cent of advertised positions filled), hairdressers (56 per cent), heavy truck or tanker drivers (40 per cent), roading and paving machine operators (40 per cent) and drainlayers (36 per cent).
Within the information and communications technology (ICT) industry, a report on computer science careers by Otago University's Simon McCallum found that not only was the situation tight - it was getting worse.
"Without action we can expect that fill rates will drop below 30 per cent for vacancies over the next three years," wrote McCallum, from the department of computer science. "Wage bills will increase as a result and margins will be squeezed. The wage increase of 6.3 per cent to June is likely to be closer to 8 per cent next year and possibly 10 per cent the year after. Unless the IT sector takes significant action now this problem will restrict growth and cause wage costs to skyrocket."
As evidence of the pressure companies feel under, McCallum wrote that the university had been approached by 20 IT companies seeking to raise their profile on campus in an attempt to lure graduates. Two years ago, only two companies knocked on the university's door.
McCallum noted that it was not a uniquely New Zealand problem by any stretch - most Western countries were experiencing similar shortfalls, and shortages were even being reported in China and India.
New Zealand businesses seem to have a high level of angst about the problem, though. In a survey of 7200 companies in 32 countries last year, consultancy firm Grant Thornton found New Zealanders were more concerned than anyone else.
When asked to rank constraints on their ability to expand, 60 per cent of New Zealand businesses listed skills shortages. Australia (59 per cent) and South Africa (58 per cent) were the next most concerned.
Grant Thornton New Zealand spokesman Peter Sherwin says the shortage should ring alarm bells. "A continuation of this will cause further problems in our economy and we may well see more businesses leave New Zealand to solve their skilled worker shortages or exchange rate problems," says Sherwin. "We need a more balanced economy and we won't get that with a lack of truly skilled workers."
The bureaucrat in charge of grappling with the issue, Australian-born Monique Dawson, laughs at the suggestion that she is a beneficiary of the skills shortage. She will admit, though, that she was head-hunted from across the Tasman last year, leaving the Department of Employment and Training in Queensland to take up one of the deputy secretary positions at the Department of Labour in Wellington. She is in charge of the work directions group, which has responsibility for improving the performance of the country's workforce and workplaces.
Dawson believes shortages are the inevitable consequence of strong economic growth and tightness in the labour market. With demand for labour high and unemployment set to remain low, a deepening of the shortages is expected.
Other factors are at play too, says Dawson, including the shift in the country's demographic balance as baby boomers pack up for their retirement. Over time, the proportion of people working versus the proportion in retirement will reduce.
"We are always going to have a tight labour market," she says. "It's about getting people to understand that this is now a feature of our labour market and that trend means there needs to be a change in the way people think about it."
There will be minor fluctuations, depending on the economy's strength. For instance, she says, the reduction in concerns about the shortage between March 2005 and December 2006 was on the back of a cooling of the economic cycle. When the economy improved again, anxiety about shortages rose.
Overall, though, we are locked into having ongoing skills shortages. "It will continue forever," she says.
Not everyone is convinced. "I've been around long enough to know I'm not sure I entirely agree with that," says Tony Wright, vice-president of human resources at New Zealand Steel, which, with 1200 staff, is one of the country's biggest single-site employers. "In terms of the labour shortage, you are really betting on how long this peak of the economic cycle will sustain. I'm not predicting there will be unemployment, but history tells you it's going to be there sooner or later."
The New Zealand Institute of Economic Research has been surveying business opinion on the issue for more than 30 years. Chief executive Brent Layton says in one sense there will be a skill shortage forever. "I think firms are always looking for more people with more skills - at a price," says Layton.
The NZIER's historical data on firms' perception of how difficult it is to find skilled staff shows it is clearly linked to economic cycles. In 1983, a net 18 per cent of firms were saying it was easier rather than harder to find skilled staff. By 1985, it had swung right around, with a net 60 per cent saying it was harder rather than easier.
The same trends can be found in the data relating to businesses citing skill shortages as the main factor constraining their growth. In the fourth quarter of 1990, the figure hit zero - no firms believed a shortage of skills was holding them back. Today the figure is at 22 per cent.
Another factor at play is immigration. According to the department's labour market skills report, New Zealand has suffered a fall in the net inflow of permanent or long-term migrants, from 14,800 in the year to November, to 11,200 in the year to April. This, together with unemployment rates only slightly above record lows, means the supply of labour is tight indeed.
Dawson says New Zealand is playing in an international market. "There's a big game of Monopoly going on at the moment in terms of people thinking where they can recruit from," she says. "We need to be in that game."
Nowhere is that more evident than within ICT. Microsoft founder Bill Gates told a US senate committee this year that he wanted the number of one particular category of work visas available for foreign workers boosted by 300,000 to address an acute deficiency of computer engineers in his and other companies.
Garth Biggs, executive director of the HiGrowth Project, which aims to swell ICT's contribution to New Zealand's GDP, says this country's experience is mirroring what's happening internationally. "But some countries seem to be better able to attract migrants," he says.
On top of that, the number of graduates is dropping fast. The number of computer science and information science graduates next year is expected to be less than half the number in 2004.
For those in the industry, that will mean increasing salaries and plenty of inter-company poaching. But, Biggs says, that is not a sustainable position.
HiGrowth is working with the industry to figure out why ICT is suffering. Part of the problem, he says, is a perception that ICT is low-paid and geeky - both assumptions which Biggs rejects. "The geek profile has been false for about 20 years." An advertising campaign will be launched shortly to show students and parents how cool and well-paid ICT can be.
In conjunction with the Department of Labour, HiGrowth is also trying to understand why New Zealand is having trouble attracting skilled ICT professionals from overseas. One issue is a misunderstanding of the cost of living, says Biggs. "For example, if an American is offered $100,000 to come and be a senior programmer, there's a temptation for them to say, 'that's about US$70,000 - I can't live on that'. We know you can but they don't."
Germans, meanwhile, encounter problems because they typically have to give three months notice - "whereas New Zealand companies typically want someone to start in two weeks time", says Biggs.
The Chamber of Commerce's Barnett has spent plenty of time trying to solve the quandary of how to tempt overseas workers Down Under - and, just as importantly, how to convince New Zealand businesses they should hire skilled foreign staff.
"The message to New Zealand business is that if you are going to be able to get the skills you want, then maybe you should look at this pipeline of people [from overseas]," says Barnett. "They may be two or three months away, but we've got a large number of people who are saying, 'yes, we would like to go and live and work in New Zealand'."
Barnett says the shortage has been noticeable for about five years, but it's getting worse. "If you look at Auckland at the moment there are about 25,000-30,000 jobs available. I think a lot of people have got to the point where they are not recruiting - firms aren't operating to their optimum."
Since about 2002, the chamber has run a website to link new immigrants struggling to find work with employers. The skill level of many of those registered on the site is impressive. Of the 1000 CVs listed, 92 per cent are tertiary qualified and have more than five years experience, says Barnett. About 400 job-seekers and employers are matched up through the site each year.
Last month, the chamber and the Immigration Service launched a new website for people interested in coming to New Zealand. Already, there are 2000 pre-registered candidates - 25 per cent with ICT skills, 14 per cent accounting and finance and 12 per cent engineering and architecture.
"It's the sorts of areas where we've got need," says Barnett. "We've got to get out to business and say, 'Here's a pool of people who are interested'."
Traditionally, large firms such as Fonterra and Fletchers have recruited from overseas. Barnett believes small to medium-sized businesses need to learn how to as well.
"New Zealanders have got to see one of the things we're building towards and getting much better at is seeing diversity as an asset. Five years ago, all the little tags would be added, like 'must have New Zealand experience'."
Today, diversity is going to have to be more accepted within workplaces. "There needs to be a mindset change," says Barnett.
Monique Dawson, too, believes a change in attitudes is required. "The other thing we need to think about is over time we aren't going to be able to recruit out of the traditional countries," says Dawson. Many of our immigrant workers come from Australia, Britain and South Africa. "But more and more we're going to have to be recruiting out of other countries. We're going to end up with an increasingly diverse workplace."
The new immigration bill tabled in Parliament this month includes a streamlining of the visa system and other measures designed to make it easier for skilled workers to enter the country. The Government has also recently fine-tuned the Skilled Migrant Category, clarifying and refining the points system to better reflect the shortage.
Dawson sees immigration as part of a three-pronged strategy she calls make, buy or fix - "make" meaning giving young people the right skills, "buy" meaning immigration, and "fix" meaning retraining current staff.
"The message we're sending is perhaps before you think about recruiting someone, should you think about retraining and upskilling existing, loyal employees? Most of the time that would be the most sensible thing to do."
Dawson also wants there to be a change in attitude to her department, from being seen as "inspectors going in when something goes wrong" to being advisers. It is trying to collect better information about where shortages exist, and the regional differences, so career advisers and trainers can adjust accordingly.
The department is also talking to the Tertiary Education Commission about delivery of training. "Most of the people we need to get to are working and they find it very difficult to be released from work to do training because their firms have skills shortages," she says. "We're talking about training that can be delivered in the workplace and around working hours - these are the types of conversations we're having with the TEC, the unions and business groups."
If there's one area where business lobbyists such as Business New Zealand and the Council of Trade Unions see eye to eye, it's skills shortages. This month Business New Zealand, the CTU and the Government signed an agreement committing them to boosting workforce skills. "Increasing the skills and expertise of people currently in the workforce is critical to drive greater productivity and so accelerate economic transformation," Tertiary Education Minister Michael Cullen said at the signing. The parties are also collaborating on a workplace productivity agenda, with representatives sitting on an advisory group helping identify measures companies can adopt.
Perhaps the Government's proudest contribution to industry training, though, was the resurrection of the apprenticeship scheme in 2000, after it was ditched in the early 1990s. In March, a 23-year-old carpenter became the 3000th person to complete his modern apprenticeship.
Pieter Burghout, chief executive, of the Registered Master Builders Federation, says the dropping of apprenticeships saw trainee builder numbers plummet from about 2500 at any one time to just 800. It created a "skills hole" that dogs the industry today. He's pleased with the modern apprenticeship scheme and says the number of qualified builders being churned out each year is nearly back to 2500, although shortages will linger for another five years or so. Skills at the top end of the industry - quantity surveyors, building engineers and technical specialists - are scarce too, an issue that needs addressing through better education.
So is there unanimous agreement the country is properly addressing the shortage? Not quite. The National Party believes the Government is not doing enough to motivate secondary school students into the right careers, and John Key has said National would beef up the technology curriculum so students more inclined to the trades could find their niche. "Our skills shortage is creating bottlenecks throughout our economy," says Key. "Perversely, just as industry is crying out for skilled workers to fill these positions, businesses report that many school leavers don't have the basic skills needed for their particular industry."
Providing more technology-based subjects - such as carpentry, boatbuilding and automotive courses on offer at some schools - would get more students interested in learning, and perhaps lead them to careers they are passionate about.
Sounds like a good idea. But there's one problem which needs fixing before similar courses could be offered by other schools. First and foremost, a Key government would need to employ more technology teachers - funnily enough, there's a critical shortage of them, too.
Tackling a farming-skills crisis
On a beef and sheep station in the hills north of Gisborne, Laurence Burkin is trying to solve a rural crisis.
There was a time when New Zealand could be described as a nation of farmers. Now we can't get enough of them - the skills shortage is not just a city-slicker issue.
"There's a shortage nationally," says Burkin, and it's getting worse. On New Zealand's 80,000-odd farms, the average age of farm owners is about 50; farm workers are aged about 40 on average.
"The rate of older farm employees is dropping faster than the rate of young people coming through," says Burkin.
"There are not enough young people with the right skills to service the agricultural industry."
For the past decade, Burkin has been trying to do something about it. He spent 10 years at the renowned Hawkes Bay agricultural training farm, Smedley Station, before moving north to help set up a new training scheme this year.
Faced with shortages in their own region, a group of Gisborne farmers and businessmen founded the Waipaoa Station Farm Cadet Training Trust. Burkin was hired to run the trust and train the cadets. Five young men started the two-year course this year, and there will be space for five more next year.
During their time, the cadets will study New Zealand Qualifications Authority papers and gain valuable on-farm experience. "They experience the full cycle of farm life," says Burkin. "We're coming up to lambing, so we're co-ordinating that with their theory work."
Burkin says there are many reasons why farms are struggling to find the right staff. Lack of motivation and the plethora of alternative careers available these days are two factors, as is a change in farming-family lifestyles.
"In years gone by, kids were being groomed for work," he says. "They got up in the morning and milked cows before school, not watched Hi-5 on TV. What we're doing now is grooming them to go out and experience randomness."
Farming has also become far more highly skilled, with increased productivity and greater-value products required.
"It's no longer something you do from the heart, in general. We need higher-trained personnel to run farms."
Despite the challenges, Burkin remains optimistic, believing in the importance of instilling sound technical and life skills in his cadets.
" The key is, it's about people," he says. "You treat people right and it will be okay."
In search of keen apprentices
Kevin Schreuder started at the bottom to get where he is today. Out of school, he was an apprentice motor mechanic, putting in the training and hard work to land himself a good career.
But now that he is in charge of one of Auckland's largest motor-service crews, he struggles to find anyone to tread the same path.
Schreuder is the group service manager of John Andrew Ford & Mazda, which has seven service centres in Auckland. He has 79 "automotive technicians" working for him, but he desperately needs at least another eight. Not only are his experienced mechanics being tempted into other jobs, he struggles to find anyone for the apprentice positions he needs to fill.
"The problem's been growing but it has probably escalated in the last two years", he says. Finding motivated young men and women to be apprentices is hard enough; meeting their wage expectations is even harder.
"It blows me away," he says. "They might have a part-time job at Pizza Hut where they're earning $10-12 an hour. When they start an apprenticeship, they expect to be making $15-16 straight off the bat, and the money just isn't there.
"It's almost like they're not prepared to do the hard work for the future."
The shortage, he says, is causing him and his customers major problems. Delays in getting vehicles serviced can be anywhere from five to 15 days. "That's unacceptable," he says.
In an effort to find staff, Schreuder has been talking to tertiary institutions offering pre-trade courses, negotiating an arrangement where the top students get to undertake work experience and land a virtually guaranteed job offer.
Facing similar problems, John Andrew's Australian parent company is travelling to Manila to find 30 potential recruits there.
Schreuder has asked it to find him 10 staff, too. "We realise now we can't rely on the industry itself. We have to do something as a company."
Skills shortage 'manageable'
The skills shortage is a predicament Tony Wright prefers to the alternative.
"It's a good problem to have as an economy - much more positive than managing surplus labour," says the vice-president of human resources at New Zealand Steel.
In glum years, the Glenbrook plant in Waiuku has had to lay off staff. But with steel in demand worldwide, there is a shortage of staff and recruitment times are stretching.
"We're sometimes taking up to three months to fill positions, although that tends to be for the more technical roles," says Wright. "Normally it would take about half that time."
So company is looking more overseas, especially to Britain and South Africa. "Historically, though, New Zealand Steel has always looked a little further afield."
The BlueScope-owned company, which employs 1200 staff including 300 engineers or other professionals, takes on up to six apprentices a year.
It also offers scholarships through the University of Auckland and the local Franklin District Council, as well as giving holiday work to about 70 students a year - all in an effort to attract people.
Being a specialist industry, too, has its advantages - it means there is not so much competition for talent, at least in New Zealand.
"If you're into engineering, we are an attractive option."
Wright says the mill also enjoys a reputation for paying well, and the location - away from the hurly-burly and congestion of Auckland city - can be a positive too.
Overall, Wright says that while the shortage is an issue, it's not a major problem.
"It's something we manage but it's not burning up a huge amount of time trying to figure it out."
* Eugene Bingham is the New Zealand Herald weekend news editor and a freelance writer.
