Tim Gibson: Age will, indeed, weary us

COMMENT

The world - the Western world, at least - is ageing. It's a demographic shift of huge consequence.

For New Zealand, this phenomenon presents two challenges, the first well-understood and widely realised, the second not yet on the national radar screen.

That we have an ageing population is news to almost no one. What is eyebrow-raising is the rate at which the population statistics are changing. Today there are about twice as many children in this country as old people. By 2051, it is projected, there will be at least 60 per cent more elderly than children.

The problems thrown up by the greying of the New Zealand population are many, complex and well enough known.

They include increased pressure on health and welfare services, the under-utilisation of housing stock and problems arising from the changing ratios between the numbers in the workforce and those depending on it for their support.

The long and short of it is that as the numbers of retired people grow so do the demands they place on that sector of the population in work.

This development may be problematic enough, but another, largely unrelated, trend should concern us even more.

Across the industrialised world, there is an acute and growing shortage of skilled and trained people. There is a scramble for talent and it is a phenomenon with profound implications for us in New Zealand.

The reasons are plain enough. With the growth of the knowledge economy, the demand for better- educated, better-skilled workers expands - and expands rapidly.

Take the United Kingdom. Just 30 years ago, one in four new jobs required technical, professional or higher level skills.

Today that rate is three out of four.

If more evidence were needed that the global race for skills and talent is on, look no further than the recent announcement from the British Government that it is relaxing visa regulations to allow those who wish to (and who possessed needed skills) to apply for residency.

Sure, the cost of living in the UK is higher. But if you can earn twice the income you were earning at home, you are not going to be put off.

The United States Council for Competitiveness estimated in 2001 that by 2008, jobs requiring technical degrees would grow at three times the rate of jobs in general. It hasn't seen fit to revise its projection.

The matter is beyond question. In an increasingly borderless and globalised world, market forces will attract the skilled and talented to where the prize is highest.

Should we worry about these trends? And is there anything we can do about them anyway?

The answer to both questions has to be yes.

What we are looking at is a classic catch-22 situation. If major remuneration disparities between New Zealand and other countries exist, there is greater risk of losing the very people we need to drive the economic growth required to push the country back into the top half of the OECD. And only by achieving that latter aspiration can we hope to be in a position to undertake the levels of social spending needed to maintain, let alone lift, living standards in this country.

And here something known as Wagner's Law enters the equation.

Adolph Wagner was a German economist who first propounded the hypothesis that the wealthier a country became, so the cost of its social spending tended to rise and became harder to reduce.

Of course, lifestyle factors and those things which make New Zealand special are always going to provide persuasive reasons for people to stay at home and attract skilled and talented people from abroad to our shores. But we should not imagine New Zealand is alone in offering lifestyle attractions.

Moreover, those factors aside, the plain fact is that where a substantial remuneration gap exists, it threatens our drive for growth.

To bridge the gap in remuneration, New Zealand has to generate much faster growth in those enterprises that promise greater income and profits and higher rates of productivity.

Acceptance of the need to lift New Zealand's rate of economic growth is inherent in the Government's Growth and Innovation Framework.

We know we need to move our exports up the value chain, working smarter to better exploit our resources - human and material - particularly in those areas where we enjoy comparative advantage.

And there is no question the goal of sustained and stronger growth is obtainable.

But the economy is not going to find that extra gear simply by hoping market forces will, unaided, deliver the desired result. It will not.

That's why New Zealand Trade and Enterprise will increasingly concentrate its efforts on sector-based, market-led strategic initiatives, working with high-growth-potential companies to realise their latent capability.

But let nobody believe we can afford to take our foot off the pedal. The clock is ticking.

* Tim Gibson is the CEO of New Zealand Trade and Enterprise