New Zealand Government’s Immigration Policy v Skills Employers Need

Karen Justice, Licensed Immigration Adviser at New Era Consulting, discusses the challenging dichotomy between immigration levels and population growth in New Zealand.

IMMIGRATION v POPULATION GROWTH – STRIKING A BALANCE

Immigration has always occurred to New Zealand; we are a country of migrants like many other countries. But in recent years, as New Zealand weathered the Global Financial Crisis better than most, we have become an increasingly attractive destination for those seeking a better life than their current location. We have one of the highest net permanent and long-term migration rates in the OECD[i].

Today, 25% of people living in New Zealand are foreign born, and that figure rises to 40% when considering just the greater Auckland region. Furthermore, approximately 50% of all permanent and long-term arrivals settle in the Auckland region, which in turn fuels demand for services and amenities whilst feeding the Auckland economy. Interestingly, approximately 20% of Kiwis born in New Zealand do not stay, instead choosing to migrate to other countries around the world[ii].

A reduction in immigration?

There was a lot of noise in the lead up to the election last September around reducing the number of ‘migrants’ by 30,000 or so. This was a popular announcement in many quarters, as this group of the population are easy targets to blame for the housing woes (both runaway prices and severe shortage of housing stock) and congestion in Auckland in particular.

However, talk around this degree of reduction has made business owners and managers very nervous, and wary. The Ministry of Business, Innovation and Employment (MBIE) themselves have identified that there is a shortfall of approximately 30,000 construction workers alone.

Successive earthquakes, and their ongoing ramifications, have drastically affected the Canterbury, Kaikoura and Wellington regions in particular, requiring an unprecedented demand for engineering and construction labour. Add the critical shortfall of housing stock in Auckland and it is not difficult to understand why some 60% of construction firms are finding it difficult to fill certain vacancies.

The result is a very fine balancing act being demanded of the government; fix the chronic labour shortages before they become a handbrake on the economy, but don’t bring in too many migrants as that will further fuel the scramble for housing and services (particularly in Auckland where it is felt most acutely).

Conflicting labour market impacts

At a recent presentation to the 16^th Annual Immigration Law Conference in Auckland, both MBIE policy representative (Ms Sian Roguski) and the Minister of Immigration, Hon Iain Less-Galloway, referred to the conflicting labour market impacts that migration in general has brought to the economy during the last five years.

In particular, data shows that the share of work undertaken by temporary migrants (ie those on work visas and student visas with work rights) has increased over the past five years, particularly in the lower-skilled, lower-paid industries. Conversely, over the same period, the share of work undertaken by recent residents has decreased.

Furthermore, MBIE has identified some evidence that the overall skill level of those being granted residence under the Skilled Migrant category has actually decreased over time. This was recognised by the previous government, who implemented significant changes to the requirements for this visa category in August 2017 in response to these findings.

Under-utilisation in the employment market

It appears that looking at the unemployment rate (currently at its lowest since the start of the Global Financial Crisis) alone does not provide the answer or necessarily inform in a helpful manner.

At the same conference, the Minister commented that there is an approximate 12% under-utilisation rate within the economy; those who are either not in work, or those who are working but only part time. There will always be a group within this number who are unable to work, or who elect to work only part time (either by necessity or by choice) but even considering this group, the rate is high. This indicates that despite low unemployment, there remains capacity in the labour market.

This situation was highlighted in an article by Rebecca Howard, published on Scoop Business on 7 February 2018[iii]. Capital Economics Chief NZ Economist, Mr Paul Dales, was quoted as saying “The recent rise (in the underutilisation rate) does suggest there is a bit more spare capacity in the labour market than the unemployment rate on its own suggests”.

The article goes on to report that in the three months to 31 December 2017, a net 49% of employers reported difficulties in finding skilled labour which was a decrease from 46% in the prior period (to 30 September 2017).  Furthermore, a net 31% of employers reported difficulties in finding unskilled labour, a decrease from 27% in the prior period.

Economists believe that this has generated a mismatch between the labour available, and the skills that employers need. In not being able to source employees locally, employers have resorted to recruiting from offshore, perhaps further adding to the underutilisation rate. In turn, this has contributed to the lack of wage growth experienced in New Zealand despite the falling unemployment rate. The issue for government is how to fix this mismatch.

A ‘New Zealanders first’ approach

The Minister of Immigration and MBIE officials have repeatedly advised that they are looking to a New Zealanders first approach to employment, but also assisting employers where they can demonstrate a clear skill shortage in the current environment. To that end, focus is currently on[iv]:

• Developing workforce development plans in specific areas, such as Kiwibuild.  Kiwibuild will have a migration aspect combined with a local labour focus.
• Review of the Approval in Principle, Accredited Employers and Labour Market Testing aspects of the migration program to ensure they remain fit for purpose
• Review of student work visa rights to ensure the export education sector remains high quality
• Focus on regionalisation of immigration, to consider how the immigration program can best support regions and assist in enticing migrants away from Auckland
• Ongoing work to overcome the exploitation of migrants, including doubling the number of Labour Inspectors to 110 by 2020
• Working as part of the government’s ‘Future of Work’ Ministers, a group comprised of such areas as Education, Employment, Social Development and Immigration all working together to ensure multi-faceted approach to policy changes

Conclusion

In my opinion, there are some tough challenges ahead for the government. Clearly there are multiple dimensions to fixing the wider issue of having the right people with the right skills to fill labour shortages, including the looming issue being grappled with globally of aging populations and declining birth rates.

It is still early days, and we haven’t seen anything of substance yet from the current government on policy changes to address some of these issues. There has clearly been work happening in the background, and it would seem that we should start to see some of the results of that work over the coming four to six months.

Whether it will address the issues remains to be seen. What is clear is that a collective approach, considering all aspects of economy, is going to produce the best results long term, but this can not come at the expense of the critical issues employers are facing right now.