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Future Waikato labour market challenges - Maharey

Hon Steve Maharey

17 April 2003 Speech Notes

Time for action:

addressing current and future Waikato labour market challenges

Comments at the Waikato Employment and Skills Forum. University of Waikato, Hamilton.

"There are risks and costs to a program of action. But they are far less than the long range risks and costs of comfortable inaction."

I'm unsure whether or not this quote from John F Kennedy was made in the context of arguing the call for space exploration. But the core truth of this statement speaks greatly to the mission that we here today are on.

Introduction

Kia ora ladies and gentlemen.

Our mission is the journey to long term and sustained economic health for the Waikato region. It's about action. Action focused on practical solutions. Action that addresses causes not symptoms. And action that builds a better future for all New Zealanders.

To build that better future, will take commitment by us all. The government very much sees the need to continue building strong links with all the parties represented here if we are to answer the challenges this country faces.

And, thank you all for attending.

The need for action

So, why the express need for action now? Employment and growth are topics that have preoccupied government and business since time immemorial.

Today "s economy though, is presenting us with challenges New Zealand has not had to face for some time. The challenge of low unemployment. This has presented an interesting dichotomy:

On the one hand we have some firms citing a lack of staff as constraining their potential for growth.

On the other there is a pool of people looking for work, who lack the appropriate entry-level skills for these industries.

Further out on the horizon, there's the need for government, community and industry to work together as the labour market shrinks with an ageing population and as economic success boosts demand for skilled motivated workers.

New issues mean new remedies are the order of the day.

New remedies

This regional forum is all about developing new remedies to address the current and future challenges. We're already on the path - the first regional development plan set out the early steps. We now need to consolidate our efforts on the journey. And this is the purpose of today. It's the platform for robust discussion and debate about what we - together - need to do; and about how government can help you move forward.

Firstly, information is power - we need to take stock of where we are. And quality information on the labour market is one area in which the government has invested to fuel regional growth activity.

So let's take a look at the Waikato:

- Job growth was strong over the last year. Employment levels were 3.7% higher than 2001. This is the fourth highest growth in the country, well above the national growth of 2.9%.

- Closely aligned, Waikato's rate of participation in the workforce is now one of the country's highest.

- These figures reflect the strong economic growth in the region - an estimated 4% in 2002. This compares with 2-3% for 1999 and 2000.

Other economic indicators also reflect the strong growth experienced last year:

- Retail sales have grown strongly since 2000, further rising by 12% in the year to June 2002. Growth has eased off recently though, falling to 9% in the year to February 2003. This fall is likely to continue.


- This is supported by the Westpac/McDermott Miller survey of consumer confidence - in March the index fell to the lowest level (109.3) since late 2001.

- Situations vacant advertising in the Waikato Times has fallen steadily since a peak in mid-2001, reaching a five-year low in March 2003. This suggests that labour market conditions are set to weaken. Waikato job ads fell 7% in the year to March 2003 after being steady in the year to March 2002.

- Building consents show construction has lifted sharply over the last year, with the number of new dwelling units authorised rising 16 % in the year to February 2003. The strength of the local economy, relatively low interest rates and a lift in population growth through migration have boosted construction.

- House sales in the wider Waikato-Bay of Plenty-Gisborne region rose by 37% in the year to February 2003, according to the Real Estate Institute of New Zealand. This is the highest growth of the 11 main regions. Median house prices in the region have also lifted - up 3% in the year to February 2003.

- The region's occupancy rate - for accommodation - rose to 46.5% in the Waikato region in the year to February 2003, up 1.8 percentage points on the previous year. Though below the national average of 53.1% this figure is high for the region. Growth in tourism is expected to continue - the Tourism Research Council expect annual average growth in visitors of 2.8 percent to 2008.

- The dairy payout from Fonterra was a record NZ$5.33 per kilogram of milk solids for 2001/02 season, totalling NZ$5.9 billion. The payout for the current season will be less.

For most New Zealanders, think Waikato and you think Mooloo. You think Mystery Creek. You think dairy farming.

And certainly farming and the primary sector remain the strong backbone to your regional economy.

- Agriculture, forestry and fishing top your employment statistics, accounting for some 15% of your work force. The national figure is 8%.

- Manufacturing and retail trade are also up there on 12% for the region. And there's a growing trend in property and business services, health and community services and education.

- This highlights the interestingly diverse characteristic of your region. While higher skilled occupations are less prevalent in the region than nationally, this is the opposite for Hamilton City. The City has a higher proportion of higher skilled occupations than the rest of New Zealand.

- And, though only at 1% of Waikato employment, the electricity, gas and water supply sector represents a larger proportion of regional employment than the national figure.

Social development - the tensions between supply and demand

In essence, long term, sustained economic well-being is the central goal of social development. The key to that development is the careful balancing act of the supply of skills to the demand for labour.

For New Zealand to thrive economically each region must attempt this balancing act according to their own unique circumstances.

So what is the supply situation in this region?

Generally speaking the pool of available labour, currently outside the workforce includes:

- 37% who have been unemployed less than six months

- 33% who have been unemployed for between six months and two years

- 20% between two and four years

- 10% for over four years.

Predominantly, qualifications do not feature - some 63% have less than three School Certificate subjects.

The highest proportion - 37% - are aged between 25 and 39 years

This is closely followed by 15 to 24 year olds who make up 34%.

Those 40 years and over make up the remaining 29%.

There are some distinct groups within the overall pool:

- Youth are characterised by both a lack of qualifications and employment skills. Peer pressure often has a negative impact on their attitude towards work, and drug and alcohol problems are not uncommon.

- Migrant workers experience difficulties across the employment spectrum. At one end you have fully qualified doctors waiting three years for their qualifications to be recognised. At the other, migrant workers often fill the lowest paying positions in desperation to enter the workforce. Language and cultural hurdles are part of the mix. Migrants often prove to be quick learners in terms of knowledge of the welfare system but often lack knowledge of New Zealand's legal system.

- Mature workers - those 40 years and over - are more likely to have skills that have been gained on the job, so as a group tend to lack nationally recognised qualifications. They are more likely to be seeking secure employment and are less likely to have good job search skills. This group also includes people experiencing the need to make late-life career changes because of redundancies.

On the demand side, there's a common thread: all employers are looking for fully qualified trades people and staff. The desired learning curves are short. The region's key industries - agriculture, forestry and fishing, and manufacturing and retail trade - dictate what the specific skill demands are.

But there's also a demand for some of the real employment basics such as reasonable communication skills, punctuality, reliability and a good work ethic.

The balancing act

Helping people currently outside the workforce cross the divide to skilled worker - and a worker with the skills need by employers - is the sharpened focus of Work and Income.

Already Work and Income have developed a number of initiatives to provide the bridge:

Working with the Tertiary Education Commission and industry training organisations Work and Income are:

- identifying industry groups prepared to take on and train clients who aren't "fully qualified' but have completed pre-employment courses. Clients are then able to build their work experience and gain training in the employment environment

- contracting services to provide clients access to the entry-level skills and ethics needed by employers

- using the Gateway programme to move secondary school children seamlessly into employment or training opportunities.

Other Work and Income initiatives involve:

- using work-based training to make introductions of clients to employers.

The employer then gains the confidence that the person they're employing has the minimum skills they require. At the same time this builds the skills, confidence and work ethics of the client

- using wage subsidies to off-set the cost of employing and training clients

- helping clients market themselves, through CV presentation, and introducing the client to employers in the industry group they want to access.

There are other ideas in the pipeline. A development that could be considered is the inclusion of a "quota'-type requirement, linked to training, in government tenders. That is, including a requirement that tenders should include the employment of local people. This would be supported through Work and Income arranging for the training.

For example, if the Huntly housing tender included employment of "x' number of apprentices the Tertiary Education Commission could be brought on-side to structure a training programme.

All these initiatives have to start with an indepth knowledge of what employers need. This is the key to building sustainable employment, which will feed the region's economic health.

However the journey is not an easy one. There are a number of bumps in the road.

Looking ahead

The outlook for the Waikato economy over the next year is for a slowing in growth.

The Waikato-South Auckland district is New Zealand's largest dairy farming region - you have a third of all New Zealand dairy farms. So, it's no surprise your economy is heavily affected by dairy company payouts.

It was February when Fonterra broke the news that it's payout would be 3 percent lower than its prediction in July last year. The forecast for the current season has fallen to NZ$3.60/kg of milk solids, reducing dairy farmer's earnings by around NZ$2 billion. What's more this lower payout figure also assumed no further deterioration in the international market conditions.

Commodity prices in the six months to 30 November 2002 were the lowest in a decade and 30 percent down open the previous year. Compounding this, the New Zealand dollar was, on average, 15 percent higher against the US than this time last year.

And then there's the drought. While Waikato farming community has perhaps been less directly affected by this than say, Hawkes' Bay farmers, we're now facing the spectre of power shortages as lakes and rivers continue to reach critical levels.

A silver lining for New Zealand from Australia's drought is that milk supply has been reduced by some 10%. Even if the drought ends, pasture and stock conditions are such that we are unlikely to see Australia's milk production recover quickly. Fonterra report that the tightened supply should help stabilise prices

When war broke out in Iraq it was hard to predict exactly what effect it would have on world economies. During the more active days of the conflict we've seen markets and the price of crude oil rise and fall markedly on a whim.

Now, as things are seemingly settling - in Iraq, at least - the key question is whether the United States economy will revive from its lethargy of the past couple of months.

That said, global markets had been showing signs of shrinking prior to the more serious talk of war.

These are factors over which we have no control.

And if everything stopped there, we may as well all pack up shop. The reality is, now is precisely the time we need to respond proactively. Now is the time for new actions.

Solutions in action

The recognition of a need for a different solution was behind the establishment of the Ministry of Social Development some 18 months ago. The Ministry has been founded on the adoption of a different approach; an approach where we tackle the causes behind peoples' problems rather than throw money at the symptoms.

Such an approach requires a focus on the long term. It means working in partnership with New Zealanders to help them find their potential as productive people in society. It requires providing help across a wider range of areas in peoples' lives.

In responding the Ministry has worked hard to gain a better understanding of the economic drivers in each region; to assess the opportunities and barriers. Its efforts in this area are encapsulated in the various regional economic development plans.

Plans are one thing. But it is people who mobilise them. The Ministry is also increasing its efforts to build genuine partnerships with other government agencies, community leaders and groups, industry and individuals. People who share a common vision and who are committed to working together to achieve it. And working together is the key.

Government and business

Work and Income here in the Waikato understands this. They know that we can only achieve sustainable employment through industry-driven, demand-led strategies. This requires improving connections with industry and employers. This requires putting employers in the driver's seat.

For Work and Income, what this means is that they will work within these relationships to identify pre-employment training so clients are up-skilled to meet local labour demands.

They will target higher paid jobs so clients can gain greater economic independence, and create packages that provide a mix of training, wage subsidies and post employment support to benefit clients and local business alike.

Some excellent partnership work is already underway here.

- Bank-able NZ is a unique project financially supporting small businesses that would otherwise be unable to source bank funding. The Ministry's partners in this project are Enterprise Hamilton, WEL Energy Trust, and the Westpac Trust, National and ANZ banks.

This scheme is successfully ensuring Work and Income clients - and other small businesses - establish a long-term business relationship with a commercial lender, therefore building the sustainability of their business.

The scheme is not a hand out - but a leg-up.

WEL Energy Trust has contributed $50,000. Work and Income's initial contribution of $50,000 from the Contestable Fund has now increased by $100,000. This increase was due to the success of the programme but also thanks in large part to the work of Regional Commissioner Te Rehia Papesch.

Te Rehia has been on secondment from Central Region and I'm delighted to report that she has been confirmed for another six months in this key role.

- the Huntly e3p Project aims to help local people secure employment during the construction of the combined cycle gas turbine power plant at Huntly. This project partners Work and Income with Genesis Power the developer of the plant, Skill New Zealand and Waahi Whaanui Trust (the Huntly Community Organisation).

Work and Income have arranged the specific electricity and construction industry training of its clients to ensure there is a locally based, suitably skilled workforce available.

Even with delays to the project, many clients have been able to find work with their newly acquired skills.

This project is very much the model for Work and Income's future focus.

It's that process of looking ahead to identify potential opportunities; putting in place the programmes that develop the needed skills, and identifying the right people for the training.

It's a process that ensures those people currently outside the workforce have the best opportunity to participate.

This internal focus is being channeled through the introduction of new work practices. In future, case managers will be able to devote much more time to focusing on their clients and matching them with current and future employment opportunities.

It's a change that shifts the focus from paying out benefits to securing long-term employment.

- while Task Force Green projects are very useful for developing and enhancing community amenities, they're not historically a strong avenue for job generation. That is changing.

Working with the Hamilton City Council's Employment Initiatives team, Work and Income has developed a programme taking advantage of the skills and knowledge gained by taskforce workers. The programme covers core employment skills to complement the on the job skills gained.

These efforts have seen a dramatic rise in the number of Task Force Green workers moving into private sector employment. Not back to a benefit.

Community and agency partnership

Work and Income's working partnerships extend beyond industry.

Currently the office is working closely with the Hamilton Multicultural Centre in helping migrants work through income assistance and employment services. Two case managers work onsite at the Centre on the Thrive programme, a specialised migrant case management service.

Regional Commissioner Te Rehia Papesch is to soon sign a Memorandum of Understanding with this University for specialist employment services for graduates. The Memorandum extends substantially the formal alliance entered into a couple of years ago.

Currently Work and Income run employment familiarisation courses - Uni Track - at the end of the academic year to help graduates break their way into the workforce. A number of them make their way into the Ministry.

Nice to know you put your money where your mouth is Te Rehia!

And case managers keep in regular contact with the University's own placement service.

Close working relationships with other government agencies are collaborations the government is keen to foster.

In October 2001, the Tiaki Tangata project was launched in Huntly. Tiaki Tangata is an agreement between 13 government organisations to work collaboratively with the Huntly Maori community to progress initiatives that are a priority for Maori in Huntly. This formal agreement, sponsored by Te Puni Kokiri and signed by the chief executive and senior Waikato regional managers, is significant in that it: commits the resource and activity of each public organisation over three years and requires the organisations to work together on projects identified by the Huntly community.

The Tiaki Tangata experience led to the establishment of Intersect Waikato, which provides an infrastructure through which eight government organisations with social development responsibilities jointly work on regional initiatives. The participating government organisations are Work and Income, Te Puni Kokiri, Ministry of Education, Housing New Zealand, New Zealand Police, Waikato DHB, Child Youth and Family and Community Probation.

The strong focus in this region on people with disabilities is reflected in a collaboration of Work and Income with a number of other agencies. These include Workbridge, Workwise and the Waikato District Health Board.

This intersectoral collective has produced a whole-of-government strategy, which in part aims to see people with disabilities productively employed. Work and Income will be the lead agency in three of the four initiatives to be undertaken shortly.

Helping the momentum

Providing solutions to complex social issues such as long-term unemployment takes active participation from all parts of a community.

To help build the momentum in forging stronger links the government has developed particular tools that can be used to work alongside other initiatives. One tool - specifically available to employers and others such as training providers - is the Skills Action Plan.

In a nutshell, the Skills Action Plan aims to reduce skill and labour shortages, now and in the future, especially in the regions.

The plan incorporates a range of initiatives:

- industry and regional initiatives

- education and training initiatives

- information matching initiatives

- immigration initiatives

The plan recognises that no one response will meet all needs. For example, immigration is only part of the answer for some employers - and not the answer for everyone.

Action with a price or comfortable inaction?

The principal reason why we are all here today is to build on the journey already begun; to take knowledge that we gain and apply it.

Our success will depend on the strength of our partnership and our commitment to realising the vision for an enduring, strong economy for the region.

Today we need to identify further what we think needs to be done.

And today we need to identify and commit to what we're going to do.

So, the challenge is on: it's time for action.

ENDS


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