Loss of skilled workers forcing a rethink on future of the workforce - recruitment firm

Hamish Price says New Zealand faces critical employment and demographic challenges that require fresh thinking from employers and government.

He says the country is going through a migration-driven loss of skilled people on a scale not previously seen.

At the same time there are significant changes in workforce demographics and a mounting infrastructure deficit to tackle.

Price, who is the chief executive of Wellington-based recruitment specialists HainesAttract, says there is a degree of complacency with some small business employers who see rising unemployment coming to their rescue.

“While the unemployment rate is starting to creep up, it is still below historic levels and has not climbed as high as expected.

“What a lot of small and medium enterprises don’t understand is that unemployment is not going to relieve their skill shortages. Fundamental skill shortages remain, particularly in engineering-related roles but also in the power sector, renewable energy, and the health sector.”

Price says corporations and larger companies are experienced at workforce planning, more aware of what is happening and willing to take a long-term view. This is less often the case with smaller businesses.

“These employers don’t have the ability to train and develop people internally so they need to take our strong New Zealand story out to the international market.”

Price says the pre-pandemic LookSee programme successfully brought those skilled people to New Zealand.

“We were saying: You need to come to New Zealand and see what it is like. You’ll have interviews, you can meet the employers and sniff the roses. It had a 75% success rate”

The basics must be right for this to work. “Brand New Zealand isn’t going to carry talent here all on its own. The offers must stack up, the onboarding has to be right.”

He says that there’s a widespread perception that migrants are no longer as interested in New Zealand: “…but they absolutely are. We are continually speaking to candidates from around the world. New Zealand is still very attractive to skilled migrants.”

Price says the task is both a sales job and one that educates potential migrants on what to expect. “Talent has a choice. We’re up against the Aussies, the Canadians, the United Kingdom. We haven’t been active enough telling our story since the pandemic. Now we need to do this again.”

Price says the job has become urgent and there is no time to wait. To back up his argument, he points to work by Massey University professor emeritus Paul Spoonley who says New Zealand’s demography began to change substantially at around 2013 as we came out of the Global Financial Crisis.

“We had three things going on. One was the ageing of the population. At that time the first of the baby boomers were reaching the age of 65. Soon one in five New Zealanders will be over the retirement age. Eventually that will climb to one in four,” says Spoonley.

This trend has been accompanied by a rapid drop in fertility. “At the moment, New Zealand’s fertility rate is 1.53 which means that each cohort is a quarter smaller than the previous cohort.

“You need 2.1 births per woman to replace an existing population. At 1.53, we’re below replacement level. By 2032 there will be 30,000 fewer children in our school system. That has a flow-on effect when students exit the school or education system and enter the labour market.”

An ageing population and fewer births mean a smaller workforce. Spoonley says there are other countries further along this path, notably Japan and Germany.

However, he says unlike other countries, New Zealand has made up for the worker shortage by importing people. “Since 2013 there has been a rapid rise in immigration and, apart from two years of Covid restrictions, it has remained high.

“In 2023 we saw our largest inward migration of 253,000 people and a record net migration gain of 133,000 people. In 2023 the population grew 2.8% which is seven times the OECD average.”

Unlike most other countries, New Zealand operates a points system which means the bulk of immigrants arrive under the skilled migrant category.

Spoonley says the hitherto high net immigration rate changed dramatically in 2024.

“The numbers dropped considerably, but there was also large-scale emigration of New Zealand citizens. Before Covid we had a net loss of 3000 citizens a year, now it has hit 54,000. We know the largest group of them are in their 20s.”

The New Zealand diaspora is well over a million people. Spoonley says it is the highest skilled diaspora of any OECD country. Many are tertiary qualified.

In some circles this is characterised as a ‘brain drain’ but Spoonley says it would be more accurate to call it a ‘brain exchange’.

“If you look at the churn that occurs in the health system, we lose our medical graduates and nursing graduates to countries like Australia because they can pay more. They are actively recruiting here. But then we gain medical graduates and nursing graduates from countries like South Africa or the UK.”

That has been the pattern in the recent past, but Spoonley says there’s a question about whether it will continue in the near future.

“Will we continue to see the ongoing significant migration of skilled New Zealand citizens?

“We need to ask if we are doing enough to attract migrants. And then we should make sure we keep them here. What we may notice is that it is not only New Zealanders emigrating, but migrants are leaving too. If that’s the case, it is a real concern.”

Spoonley says he worked on a project examining what New Zealand would look like in 2038. It is clear the country will rely on continued immigration to keep the population growing, but there’s a question over how fast people want the population to grow.

New Zealand got a hint of what the near future could look like during the pandemic when immigration was curtailed. Employers complained loudly that not enough migrants were being admitted and that was leading to major shortages in key areas.

“We can’t do much about the ageing and those exiting the workforce. And no country has really solved the issue of fertility decline. Which means migration becomes one of the few options that you have to compensate for the coming crunch.”