6. Changes in the Supply of Talent and Skills
- Labour is a critical input into the production of goods and services. Effective use of new machinery, the implementation of new processes and the spotting of market opportunities can't happen without the appropriate skills acquired formally through educational institutions and on-the-job learning.
- Matching of skills to labour market needs is also important. To address current skill shortages, in the face of continuing unemployment, particular emphasis is needed on matching with demand the skills of those outside the labour force, and upskilling those in the labour force to meet both current and anticipated demand.
- The indicators suggest that skill levels are improving:
- The proportion of the population with school qualifications is steadily increasing, but the proportion with post-school qualifications is not changing significantly. The averages also hide marked differences for some segments of the population, particularly Māoriand Pacific peoples where attainment is below average.
- New Zealand has high levels of continuing education and workplace training. This country ranks top in continuing education and training for adults in the International Literacy Survey.
- Migration, over time, appears to have little impact on the availability of skilled people. The data on the net inflows of skilled people confirm a 'brain exchange'.
Educational Attainment of the Population: New Zealand Has Average Levels of Educational Attainment Compared With High-Performing OECD Countries
Why is it Significant?
Transforming New Zealand into a high value-added economy requires an increasingly educated, skilled and adaptable workforce. This is essential for New Zealand to lift its productivity and growth to levels more consistent with New Zealand's international counterparts.
This does not necessarily imply that New Zealand needs more university graduates, but that the workforce needs to possess the necessary skills and training to do what firms require. This means raising the proportion of the workforce with basic education (particularly literacy and numeracy), as well as the proportion with technical and management skills. A better match of supply and demand in skills and training will also have an impact.
The development of more generic attributes, such as communication, analytical, problem-solving and cognitive skills, is also growing in importance. These skills, which are more transferable across roles in the workforce, will help New Zealand adapt to an increasingly fluid market for labour.
Levels of educational attainment can be used as a proxy for the skill level of the workforce. That said, they do not provide information about the type, area or quality of the skills.
How Does New Zealand Perform?
Between 1986 and 2001, the proportion of adults (those aged 25-64 years) with no qualification fell from 41 percent to 26 percent. The proportion with only secondary qualifications rose from around 20 percent to over 36 percent, and with a university degree increased from 7 percent to over 14 percent. However, the proportion of adults with any kind of tertiary qualification (university plus "other" tertiary qualification) remained around 38 percent. This suggests that the level of basic/generic training of the workforce is rising, but that the proportion that goes on to higher education is remaining static. Nevertheless, the distribution within the tertiary category suggests some graduation up through the tertiary category, from more vocational qualifications towards university degrees.
Distribution of Population Aged 24-65 by Highest Qualification
International comparisons of qualification levels are difficult. Education and qualification systems differ across countries, as do definitions and categorisation of tertiary and non-tertiary or post-secondary.24 Data sources also vary. For example, in the table below, the New Zealand data comes from the Household Labour Force Survey rather than the Census.
For the countries listed below, the proportion of the adult population with secondary qualifications is 42 percent, with tertiary 28 percent. With 40 percent and 29 percent respectively, New Zealand's profile is about average.
Adult Population Aged 25-64 Years by Highest Level of Qualification (Secondary) 2001
Adult Population Aged 25-64 Years by Highest Level of Qualification (Tertiary) 2001
What Does This Mean for New Zealand?
We cannot draw too much from the international comparisons. The comparison is with 18 higher-income OECD countries only and there are difficulties in comparing qualifications between countries.
There are also potential difficulties with using highest educational qualification as an indicator. The indicator captures only the highest qualification rather than the number of qualifications or the depth of the education received.
With those caveats, trends within New Zealand show that an increasing proportion of the adult population is completing secondary-level qualifications, and that participation in post-secondary education is also continuing to rise (although this does not appear to result in an increased proportion of people with post-secondary qualifications).
This means that the overall skill level in the population, as measured through highest qualification, is rising. This improvement is most marked in those leaving secondary school with a qualification.
The corollary is that labour force participation rates for younger age groups have fallen, as young people spend more time in the education system.
However, the indicator data also point to continuing low skill levels for the 20 percent of the population who have no formal qualifications. In many cases, this means poor functional literacy and numeracy. Those in this category, therefore, face lower incomes, more risk of unemployment and reduced chances of improving their prospects.
Removing disparities in the educational performance between Māoriand other students could result in an improvement in New Zealand's economic performance, particularly as demographic projections show that Māoriwill increase to 20 percent of the population by 2051. At that stage, young Māoriwill be a more significant proportion of the workforce.25
Upskilling of the Workforce: New Zealand Has High Levels of Continuing Education and Workplace Training
Why is it Significant?
Evidence suggests that labour productivity, service quality and the rate of innovation are all improved by training. Training enhances a firm's ability (through its employees' actions) to cope in an environment characterised by fast-paced change and intense competition.26
However, the benefits of training can be obtained only if there is a strong link between businesses' skill requirements and the responsiveness of the labour market to those requirements. Skill shortages and continuing unemployment suggest that this match may not be occurring.
For those in the workforce, upskilling includes:
- improving functional literacy and numeracy
- formal training through polytechnics and universities, as well as apprenticeships
- on-the-job and other less formal training.
How Does New Zealand Perform?
Education participation rates for 15-19 year olds in New Zealand are below the OECD average (72 percent versus 77 percent). However, there is evidence of relatively good education participation by older age groups here. 21.4 percent of New Zealanders aged between 20 and 29 participated in formal education in 2000, the same as the OECD average. In the 30-39 years and 40+ groups, the New Zealand participation rate is nearly double and triple the OECD average (at 9 percent and 3.1 percent respectively).27 These rates are, however, significantly lower than Australian participation rates across all age categories.
As shown in the chart below, New Zealand is at the top in continuing education and training for adults (16-65 years of age) in the International Adult Literacy Survey.28 In this study, the average number of hours for New Zealand per person of all continuing education and training was approximately 135. Job-related education and training was approximately 113 hours per person.
Hours of Continuing Education and Training Per Adult
Encouraging people to complete formal qualifications is one way of lifting the level of human capital, but skills can also be upgraded through workplace training and job rotation.
The Firm Foundations study provides insights into the levels of on-the-job training being conducted by New Zealand firms.
In 2001, 84 percent of firms (with six or more full-time equivalent employees (FTEs)) had put at least some of their employees through in-house training, and 72 percent had put at least some of their employees through external training programmes.
Over the Last 12 Months Proportion of NZ Firms With At Least Some Employees Participating in:
Less formal training mechanisms, such as job rotations and exchanges are used less often by New Zealand businesses, with 46 percent of firms surveyed offering this form of training to their employees.
There is also a link between the firms that invest in training and firm performance (i.e. returns on investment). Firm Foundations reports that the firms that achieved good operational outcomes all invested in some employee education and training. This compares to 83 percent of all firms surveyed (with six or more FTEs), and 49 percent of firms with poor operational outcomes.
What Does This Mean for New Zealand?
International evidence suggests that the unemployment rate could fall further. For example, the US employment rate fell below 4 percent in 2000. In New Zealand, there are still groups of the population with high unemployment (most notably those without qualifications). Further training can result in both lower unemployment, and also more intensive use of those already in the workforce (i.e. an increase in labour productivity).
Net Inflow of Skilled People: The Data Appears to Confirm the 'Brain Exchange'
Why is it Significant?
International migration is important to growth and innovation. It is an important channel through which companies can access skills and talent, especially in knowledge-based sectors. This is particularly important for New Zealand, which has one of the highest proportions in the OECD of overseas-born people in its working age population. In 2001, one in five of New Zealand's working age population was born overseas, with a proportion of one in 3 in Auckland. This compared to one in four in Australia, one in five in Canada, one in ten in the US and one in twenty in the UK.
Closer economic ties between countries have resulted in rapidly growing flows of goods, services, capital, information, and short and long-term migration. As a result, the market for skilled people is increasingly global rather than national. Ageing populations in the OECD, with associated concerns about smaller cohorts entering the labour market in coming decades, are resulting in more open migration policies. This suggests that the trend towards greater international migration will accelerate in coming decades. The result is an increasing turnover of people (churn), which may assist in the formation of the networks and exchanges of ideas that underpin innovation but could have significant impacts on regional economies and on social cohesion.
New Zealand residents with skills and talent in demand in the global economy can now access opportunities in other countries that were previously unavailable to them. These include earning higher incomes, more opportunities to use their skills and talent, and living in cities with a more vibrant cultural life (see also Chapter 9: Global Connectedness for a discussion of New Zealand cities' international ranking).
Attracting, retaining and regaining skills and talent in New Zealand will include offering a favourable mix of factors both economic (job opportunities, income, career development) and lifestyle (physical environment, housing, social services, education, security, range of goods and services).
How Does New Zealand Perform?
Permanent and long-term (PLT) skilled migration trends are one measure of New Zealand's success in attracting, retaining and regaining highly skilled people - both New Zealanders and overseas-born migrants.
PLT migration measures migration lasting more than one year. However, it may be of limited usefulness in today's fluid international labour market because:
- it does not reflect the economy's ability to utilise the skills of expatriates and others through high levels of global connectedness
- temporary and short-term work-related migration can make a useful contribution
- PLT migration statistics measure migrant intentions. Many migrants change their plans ('category jump'). As a result, planned long-term absences from, or stays in, New Zealand may end up being much shorter than intended and shorter absences and stays may become long-term.
The level of inward PLT migration to New Zealand has fluctuated markedly over the last 20 years. The source of this fluctuation is overseas-born arrivals, with the numbers of returning New Zealanders remaining relatively stable over this period. In addition, immigrant source countries have changed. The UK has historically been the major source of inward migrants, but arrivals data for recent years show a significant increase in the number of migrants from non-traditional source countries, particularly India and the People's Republic of China.
The number of PLT departures has also fluctuated over the last few decades. Departing New Zealanders account for the bulk of PLT departures. The biggest group is young adults, often skilled, who often return later in life, bringing with them work experience, knowledge and advanced qualifications. However, a growing number of older working people are leaving. This may reflect dissatisfaction with the scale and nature of employment opportunities within New Zealand (a result of the small size of the economy), the focus on primary industries, and economic conditions in New Zealand compared to Australia.
The charts below show annual net PLT migration by occupation. We have grouped professionals, associate professionals and trades workers into the 'skilled' category. The first chart shows that skilled migrants account for a small proportion of total migrants. This is partly because principal migrants - those whose skills are assessed under immigration policy - account for fewer than half of the around 12,000 migrants currently approved under the Skills Category, with the rest being family members. It may also be a result of problems with categorisation and completion of arrival cards. Over half of all arrivals fall into the 'not applicable/not stated' category, which, from 1997, included those not actively engaged in work, including students. A large proportion of cards is also deemed 'unidentifiable or illegible'.
The charts below suggest that, over time, the migration of skilled workers roughly nets out and lends support to the notion of a 'brain exchange' rather than a 'brain drain'.29 It does not, however, provide information on the particular types of skills migrants have or their relevance to New Zealand, or migrants' employment outcomes.30
Annual Net Permanent and Long-term Migration
Skilled Migration
There is growing recognition of the importance of international recruitment, and of the international market for skilled workers. However, comparable data for international comparisons is elusive. There is no generally recognised definition of highly skilled, partly due to problems regarding recognition in one country of qualifications from another. As noted above, skilled migrants often migrate on a temporary basis, for well-defined periods, and are thus excluded in analysis of PLT migration. Furthermore, different countries are likely to have different skill requirements (skill demand and policy focus), in terms of both industries and occupations.
What Does This Mean for New Zealand?
Migration directly affects the economy in two key ways: migrants bring skills, talents, diversity and new ideas, and high levels of net migration affect household demand for goods and services and can boost domestic demand. Immigrants can also increase the supply of labour.
New Zealand's working-age population grew by 2 percent over the year to December 2002. Over half of this increase was due to net migration gains, with 30,500 working-age migrants entering the country.
Immigrants coming to New Zealand (both foreign nationals and returning Kiwis) frequently provide benefits to the economy that cannot be gleaned from data; for example, qualitatively different tacit knowledge from broader job experience, or connections and contacts abroad.
However, the process of adjusting to New Zealand society means that foreign nationals may take some years to become fully productive. Limited English language skills have been identified as a key barrier to successful settlement. Recent changes to immigration policy to strengthen English language requirements are designed to address this and target migration at those who can adjust and become productive most rapidly.
The growing number of students coming to New Zealand to study and those entering on a temporary work permit are an untapped source of potential skilled migrants. These people come in as short-term migrants, but may decide to stay or re-enter as permanent migrants.
Immigration policy is only one of a number of influences on net migration. The attractiveness of New Zealand as a destination for overseas-born skilled migrants is also important. With a large number of countries seeking skilled migrants, New Zealand's attractiveness is influenced by how potential migrants perceive New Zealand's position in relation to other countries regarding:
- economic and social conditions
- wages
- lifestyle and security
- tightness of immigration policies.
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