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Need to Know: Where have all the staff gone?

It’s the single biggest barrier to business right now and is driving inflation in almost every industry. What is causing New Zealand’s labour shortage?

So many Business Central members we speak to express their frustration that they can’t find staff. Stories of poaching are proliferating and businesses are straining under the pressure. Our Business Confidence Survey found three-quarters of employers are seeing additional stress on their staff due to the shortage.

Issue date

Real economic impact

The labour shortage poses a major risk to the economy, particularly in its ability to adapt and respond to broader forces. Wages are rising at 8.8 per cent a year, ahead of record inflation at 7.9 per cent. 

Employers are incurring high costs to look after their staff but inevitably these costs are passed on to consumers as higher prices, driving up the cost of living and hitting the back pockets of New Zealanders.

What is driving the shortage, and what can we do about it?

New Zealand is not alone in the struggle to find workers. Most developed nations are facing a similar environment of low unemployment and high inflation. But the New Zealand experience is different.

In the United States, early retirements and the so-called “great resignation” has been said to play a much larger role in the labour shortage. The US Chamber of Commerce found that 3.4 million fewer people were looking for jobs compared to pre-pandemic. With Covid concerns, the lack of access to childcare and early retirement, people had simply opted out of the workforce.

But New Zealand hasn’t seen the same scale of opt-outs. In fact, more people are in work than before. In June this year, the employment rate was 68.5 per cent, higher than 67.1 per cent in June 2019. The post-pandemic exodus from the labour force seen in other countries has so far been avoided here, and the majority of our population is working.

Immigration is an answer

Historically, immigration to New Zealand has tracked the economy. When times are good people come here looking for work, but when times are tough they look elsewhere. As our economy has grown, businesses have created new jobs and migrants have flown in to fill the gaps.

This changed with Covid and the subsequent border closures. While some New Zealanders returned from overseas, this was coupled with a significant exodus from the country and a major slowdown in new migrants.

Net migration fell from a record gain of over 85,000 a year, in February 2020, to a loss of nearly 16,000 by February 2022. In effect, a difference of over 100,000 people each year.

The net loss has come down in 2022, but New Zealand is still losing thousands of people a year. We’ve had negative migration before, from 2010 to 2013 in the wake of the Global Financial Crisis, but at the same time, unemployment was high and economic growth slowed. A worker exodus didn’t place the same burden on economic expansion.

Post-Covid, the economy rebounded quickly behind a closed border. New jobs were created, but this time there was no one there to fill them. Businesses can adapt well to changing circumstances, but without staff they can only adapt so much. The pressure to meet orders and cope with rising costs has now fed into inflation.

So... what can we do?

Upskilling the workforce is a great start but it's limited by the workforce itself. Early in the pandemic, Business Central worked with the Government to create the Apprenticeship Boost Scheme, making apprenticeships more affordable. We’ve had great feedback from members on the scheme, but there are only so many workers we can upskill. The low-hanging fruit has already been picked.

What we really need is to keep pushing the Government for action on our borders. New Zealand needs an efficient immigration scheme that lets employers bring in staff quickly and affordably.

As part of the BusinessNZ network, we’ve had a few wins on this front. We’ve pushed the Government to increase the working holiday visa cap and more recently reopened the skilled migrant and parent visa pathways, opening the door to vital new workers. We also won temporary sector agreements to boost migration in key industries, though this is only a short-term fix.

Australia stealing a march?

Already, Australia's net migration has rebounded from pandemic lows and they are rolling out the red carpet to the world. 

The new Government’s job summit has resulted in a major increase to overall migration to help employers find staff. They have eased restrictions for permanent residency and lifted entry caps for workers. 

To avoid being left behind by our nearest neighbour, New Zealand should look to do the same.

Practical tips for attraction and retention in a tough labour market

1. Make onboarding and orientation a priority First impression makes a world of difference. Research shows highly-rated onboarding processes can increase retention by 82 per cent and productivity by 70 per cent. Socialise new staff with the team, and pair them with mentors to help them stay.


2. Use training as a reward and retention opportunity for high-potential candidates As members, you get access to a number of affordable courses in leadership and professional development, and we encourage you to use them to reward high-potential staff.


3. Referral bonuses are more common during recruitment Not only do referred employees more likely fit in with the team's culture, the bonus component is a great incentive for exisiting employees.


4. Keep giving feedback Daily or weekly feedback from managers helps employees feel more engaged, helps them grow into the role, and all of this translates to a much higher retention rate.


5. Can you let people do some work from home? New research shows employees value a blend of in-person and remote work as the equivalent of an 8 per cent pay increase.


6. Improve rest and relaxation spaces at the workplace With the labour shortage increasing stress for management and staff alike, steps to help them relax, even for a moment, will go a long way.


7. It isn’t all about the dollars Employees often regret leaving a strong workplace culture for a higher salary, and employees who work for a company that measures happiness and wellbeing are 80 per cent more likely to stay with their employer. Keep your people and culture strategy up-to-date and value employee wellbeing highly.


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