Skill shortages are starting to bite

New Zealand is now seeing hot competition for key talent and pockets of wage pressure in certain roles, writes Cathy Hendry.

The horticulture industry has highlighted, in March this year, the true extent of the skill shortages as a result of New Zealand’s continued closed borders.

The industry has seen a $100 million drop in apple exports due to a shortage of workers. While the government did grant exemptions for 2,000 recognised seasonal employer (RSE) workers, attempts to lure Kiwis into the industry have come up short and, as a result, fruit is being left on the trees.

This issue is also starting to bite in the broader economy, particularly for organisations that were relatively unaffected by the lockdowns and are now finding skill shortages are actually impacting on their ability to grow or meet demand.

Of note, are roles such as engineers, trade staff, regulatory, planning and the IT sector. Demand for specific qualified and quality employees is increasing and while an employer may be trying to recruit someone on the long-term skills shortage list, unless they are lucky enough to be working on one of the government-approved infrastructure projects or one of the government-approved events or programmes, the border remains shut with no options to get critical skills into the country.

Employers looking to fill vacancies for specific skills are having to look within New Zealand. Unfortunately, the ability to upskill employees that may have lost their jobs as a result of Covid-19 are unlikely to fill this void.

As an example, an organisation looking to fill a software programmer vacancy, is unlikely to be able to up-skill an employee that was previously working in the tourism sector.

Efforts to retrain such staff in new skills will likely be a long-term fix that will not meet employers’ current needs.

The result is that we are now seeing hot competition for key talent and pockets of wage pressure in certain roles.

Employers that are in critical need for roles are willing to pay over and above market rates to attract employees from other organisations.

Ironically, such an approach is easier for smaller organisations that may be recruiting for a standalone role within their organisation where they can afford to pay over and above the market for such skills.

A large organisation, on the other hand, is likely going to have to consider internal equity of its other roles if it was to increase rates for one employee to retain them.

It is not unusual for premiums to appear in the market when skills are in high demand, however, the bigger question is the long-term effects of such skill shortages and the flow-on effects to growth in the economy.

Large industry groups have been successful in lobbying for exemptions to be made, but the horticulture example has shown that such exemptions have not gone far enough.

The skill shortages will continue to affect New Zealand organisations until the borders are re-opened which is unlikely to be this year.

It will therefore be important for organisations to focus on retaining key talent and investing in training and development.

It is also likely we will see more premiums in the remuneration market for specific skills that remain in critical demand in New Zealand. 

Cathy Hendry is the new managing director at Strategic Pay.

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