16 December 2002


Even if we accepted a frictional rate of unemployment, that leaves 40,000 unemployed people who should be "matched" with current vacancies given the right policies...
Peter Conway, CTU Economist

While skill shortages are a consequence of a dynamic, healthy economy both the government and employers need to act to ensure they do not constrain the country's productive capacity...
Steve Maharey, Minister of Employment

Skill Shortages


by Peter Conway, Economist with the Council of Trade Unions

conway.jpg - 5351 BytesWHY DO WE HAVE 107,000 unemployed people in New Zealand (or 176,600 jobless) when every day we hear reports of labour shortages? The usual reasons given are that the current unemployed don't have the right skills, don't live in the right place, or don't have high enough standards of literacy or good work attitudes. Also, there is an assumed "frictional" unemployment rate to take account of people moving from one job to another with brief periods of unemployment in between. In other words, there is fairly high labour market churn.

Of the current unemployed it is estimated that 63% have been unemployed for less than 6 months, 15% for 6 months to a year, 5% for one to two years and 6% for over 2 years. There were 57,000 unemployed men and 50,000 unemployed women. The approximate age breakdown is 22,000 (15-19), 20,000 (20-24), 14,000 (25-29) 10,000 (30-34), 10,000 (35-39), 10,000 (40-44), 6,000 (45-49), 6,000 (50-54), 3,000 (55-59) and 4,000 (60-64). There were 59,000 Pakeha unemployed and 25,000 Maori, and 9,000 among Pacific peoples. There are 30,000 unemployed in Auckland. There are obvious categories where unemployment is concentrated (e.g. young people in the 15-24 age range and Maori).

  • The major question is however — is this as good as it gets? We have seen significant growth in employment in the last three years (50,000 jobs in the last year). There are many initiatives such as modern apprenticeships (3,254), Youth Training (5,331), Skill Enhancement (753), Training Opportunities (7,947) and other programmes. But why should we accept that having around 100,000 or one in twenty people unemployed is about the best that can be done? What is emerging is that there is much more to be done to ensure that the school — training — work transition for young people is better resourced. Even if we accepted that (say) 3% is a frictional rate of unemployment, that leaves 40,000 unemployed people who should be "matched" with current vacancies given the right policies. Although there are differences in how countries measure unemployment, in USA the unemployment rate fell consistently from 6% in 1994 to a low of around 4% for all of 2001, with little worry about inflation.

  • There is no doubt that this Government is firmly committed to reducing unemployment. There are many good policies. But more is needed. This is one of the reasons why the Council of Trade Unions is drawing up a draft memorandum of understanding with the Mayors Taskforce for Jobs. They have agreed on a number of goals. These are that by 2007, all 15-19 year olds will be engaged in appropriate education, training, work, or other options which will lead to long term economic independence and well-being, all young people up to age 25 being in employment or education and training; and ultimately all people in our communities having the opportunity to be in work or training.
    Source — CTU Economic Bulletin No.32 November 2002 "Comment"


    by Steve Maharey, Minister of Social Services and Employment

    maharey02.jpg - 5641 BytesNEW INFORMATION SHOWING SKILL SHORTAGES remaining at high levels in the economy reinforce the government's emphasis on boosting skill acquisition by New Zealanders.

    Recent surveys reinforce the need to rebuild a training culture across all New Zealand businesses, since this offers the best long-term solution to closing skill gaps.

    Skill shortages have emerged in our economy because of we are experiencing a sustained period of growth and low levels of unemployment. While they are a consequence of a dynamic, healthy economy both the government and employers need to act to ensure skill shortages do not constrain the country's productive capacity.

    The government's industry training strategy is a key response to the skill shortages issue. Last year 95,263 New Zealanders participated in systematic on-the-job industry training and the government has committed to boosting trainee numbers to 250,000 within five years.

  • Earlier in the year the Government launched the Skills Action Plan to address skill shortages by improving the matching of people's skills to job opportunities and assisting people to make better decisions about participating in (or providing) education and training.

    There are four main kinds of activities under the Skills Action Plan:

    Information and guidance responses. Two new means of distributing information on the labour market have been launched. "WorkSite" ( will assist people to more quickly identify and acquire skills and more readily find new work and is aimed at the needs of a wide range of people - employees, school leavers, the unemployed, potential immigrants, employers, government and industry groups.

    The first of a new six-monthly publication WorkINSIGHT aims to improve the matching of people and jobs in the labour market by disseminating information on skills and work in New Zealand. The primary target audience is career advisers, Work and Income brokers and other job market intermediaries.

    Regional/industry initiatives. The Government is working with industry to address skill needs at a number of different levels. For example, at an industry and regional level the Government has established partnerships to address labour and skills issues in areas such as forestry. We have also started working on skills strategies for the seafood, clothing and textile, agriculture and pip fruit industries.

    Education and training initiatives. The government's reforms to tertiary education system will make it better able to respond to the needs of the economy. A 5-year Tertiary Education Strategy has been published, a new Tertiary Education Commission is being established and industry and community skill needs will need to be actively weighed when providers are developing their funding profiles in the future. The Government will also expand the Modern Apprenticeship programme and boost the number of people in industry training.

    Immigration initiatives. New immigration initiatives have a strong emphasis on matching skilled migrants with the needs of the labour market. For example, the Talent Visa introduced in April 2002 allows accredited employers to recruit talented and skilled people overseas. The New Zealand Immigration Service is also working with particular industries to assist them to recruit people with the required skills from overseas.

  • Each of these initiatives will only work successfully if business, government and unions work together. Boosting the overall skill levels in the New Zealand workforce today is our best insurance policy against damaging skills shortages emerging tomorrow.

    In all of these initiatives employers have a vital role to play. To attract and maintain highly skilled staff, business needs to offer appropriate wages and fund firm-specific training. There is also a role for industry associations and groups to work together to address recruitment issues and attract people into their industry. Agriculture is one example of an industry that is doing this.

    The outlook for skill shortages largely depends on the outlook for the economy as a whole. While considerable uncertainty currently surrounds the outlook for some of our major trading partners, robust growth is expected in the New Zealand economy by most commentators. At 5.4%, our unemployment rate remains relatively low and it seems skill shortages are likely to persist in the short term. Boosting the overall skill levels in the New Zealand workforce today is our best insurance policy against damaging skills shortages emerging tomorrow.

    Sources — Press Releases from Steve Maharey, Minister of Employment, 19 November 2002 "Skill shortages down slightly but reinforce need to keep focus on training"; 19 November 2002 "Tackling skill shortages"; and 27 November 2002 "Government Seeks Partnerships to Close Skill Gaps".


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