‘Devastating’: Worker shortage causes crisis – employers plead for help

Covid-fuelled labour shortages – from floor workers to chief executives – have reached crisis point as frustrated Kiwi employers struggle to run and expand their businesses. Jane Phare and Liam Dann look at the economic fallout and what can be done to fix it.

Steve Gellert’s never seen it like this in the 34 years he’s been in the family nursery business. Skilled staff; any staff. Where are the people with green thumbs, he wants to know.

He’s desperate for them. He has plans to grow Gellert Nurseries’ $10 million annual turnover but is too busy working as a grower in the greenhouses for that to happen. And while he’s building a $7m glasshouse on his land at Karaka this year, he can’t find a grower to run it – apart from himself, that is, and he’s supposed to be running the business.

Gellert’s desperate search for staff is replicated throughout New Zealand after Covid-19 caused border closures, thousands of migrant workers went home and Immigration New Zealand got tough about letting them back in.

Employers and Manufacturers Association chief executive Brett O’Riley says the shortages are at all levels, from chief executives down. Most of theassociation’s members now have a new line of activity, he says – filling out immigration forms.

“It’s the fastest growing cottage industry in New Zealand and still we have issues with consistency and interpretation” says O’Riley. “Even in situations where the need is acknowledged it still takes time to get that person into the country. All of that contributes to a businesses’ bottom line and productivity. “

We’ve had business owners in tears in meetings with us.

Those grappling with Immigration New Zealand say the parameters are unclear and confusing, that the Government is not listening. One economist told the Herald that if the labour shortage is not resolved, it could lead to increased inflation and a rise in interest rates, causing the economy to slump.

O’Riley says across New Zealand, businesses’ frustration levels are running high.

“We’ve had business owners in tears in meetings with us. They’re just desperate because they can’t get anybody to take their issue seriously. And at a time when we are supposed to be focusing on health and safety and wellbeing, that doesn’t seem very equitable. “

Senior Government ministers indicate some flexibility for bringing in skilled workers, he says.

“But what we see at a practical level is that pathway is not always clear, is not straightforward. And in many cases it comes down to the individual person you deal with at Immigration NZ and how they interpret the policy.”

O’Riley says the piecemeal way in which the Government is handling the labour shortage issue makes it difficult for businesses to plan in the short and medium term.

“The way we seem to be driving our immigration policy is by exceptions.”

This month the Government extended the stays of around 10,000 people on working holiday and seasonal work visas by another six months. And Agriculture Minister Damien O’Connor announced that border exemptions will be granted for a further 200 dairy farm workers and 50 veterinarians over the next year to help relieve shortages in those areas. But business owners say those measures are not nearly enough.

O’Riley: “At the moment he who lobbies hardest and loudest gets the attention. Some businesses might be in industries that don’t have an industry wide problem.”

Lack of staff has a massive impact

On the phone from his Karaka home Gellert is almost at a loss for words, struggling to leave frustration to one side and tell his story. He’s trying to keep the load off his existing staff; if he takes on casuals his already-stretched senior growers need to take time out to train them. And then the casuals move on.

“It’s insane and it’s had a massive impact. We simply don’t have enough skilled staff to look after the plants,” Gellert says.

He points the finger at Immigration NZ, saying they haven’t listened to his pleas to allow a qualified grower into the country after advertising unsuccessfully for a year on Trade Me and Seek. He says immigration told him “find someone in New Zealand”.

“We have battled with immigration to try and get a qualified person here who can help my business, who will help me employ more people, not let us go broke and allow us to keep investing in the business.”

He’s spent big money with immigration lawyers and been turned down twice. Now, with the Australian bubble open, he’s pinning his hopes on a young Dutch grower living in Australia, who has a horticulture degree and did his internship in New Zealand.

It is this man Gellert hopes Immigration will allow into the country to run his new 10,000 sq m greenhouse, propagating and growing “warm crops” like tomato and cucumber plants, and indoor house plants.

Gellert and his wife Gill live in a road that carries their surname, a keepsake from the days when Gellert’s father subdivided a former sheep farm into lifestyle blocks and kept about 10 hectares to develop Gellert Nurseries, growing plants in 30,000 sq m of glasshouses.

It’s been a success story helped by a recent boom in pot plants. After lockdown, houseplant sales have more than doubled in the past year and Gellert is now the largest producer of phalaenopsis orchids in the country.

It’s a business in growth mode but he doesn’t have enough people to run it.

“There is never a day when we don’t have a role or roles that we are trying to fill.”

Those spoken to for this story all agreed that employing New Zealanders first was the ideal and that more has to be done to upskill existing workers, develop training programmes and improve conditions in traditionally low-paid industries so Kiwis view them as a career.

But, they say, that will take time, and meanwhile, the Government is not moving fast enough to help plug a critical gap.

Auckland Business Chamber chief executive Michael Barnett says severe labour shortages are top on the list of worries at the monthly breakfast meetings he holds with chief executives and industry representatives.

The country has gone from allowing 90,000 migrant workers into the country to just a few thousand. Who, he asks, is going to fill that gap?

Of the 4.7 per cent unemployed, a very small percentage of those people are willing and able to work, Barnett says.

“So you’ve got this very small pool of people who are available.”

He says the problem has both business and trade implications. Without workers, the economic fallout affects businesses at all levels. And the lack of skilled workers in the export industry becomes a trade issue affecting billions of dollars worth of exports.

“It’s a matter of understanding the economy and the consequences of not having these people available. “

Meat Industry Association (MIA) chief executive Sirma Karapeeva understands full well the export implications of not having enough skilled workers. Her industry faces a struggle to fill $3.5 billion worth of halal meat orders which she says has the potential to put the rest of the $9.2b export sector at risk.

The lack of halal butchers compounds a labour shortage of 2500 workers across the industry, meaning some plants can’t run at full capacity, value-added cuts are not processed and there is more wastage, resulting in reduced earnings across the industry.

The shortage of halal-trained butchers is now a serious issue, Karapeeva says.

“Some of our plants are starting to really struggle and they’re starting to question whether they can continue to process in accordance with the halal requirement. The returns drop and that’s not good for anyone in the supply chain.”

Halal training is available in New Zealand, Karapeeva says, but the candidates are not.

Certified halal butchers must be practising Muslims of good character, and approved by their mosque and community, conditions that are administered by the Ministry for Primary Industries. The Muslim community in New Zealand is small and concentrated in the cities, while most of the meat-processing plants are in the regions, Karapeeva says.

“The real challenge is finding people who meet all those characteristics and technical skills, and are willing to move to Invercargill or Balclutha or Timaru. There might not even be a mosque there [in regional towns] and it can be quite challenging for someone to be so disconnected from their community.”

The Government’s immigration reset has made things “very difficult”, Karapeeva says.Immigration NZ does not view halal butchers as skilled workers because of pay structures within the industry. Immigration regards jobs below the New Zealand median wage of $25.50 an hour (rising to $27 an hour next month) as low skilled. Those workers are entitled to a 12-month visa only, whereas a “skilled” worker is entitled to a three-year visa.

But Karapeeva says immigration officials don’t understand the payment structure in the meat industry, a system that has been in place for decades and works well to incentivise productivity.

“In reality they’re being paid well above the median wage. The pay packets in the meat industry are quite complex in terms of the hourly rate plus productivity incentives like piece rates and overtime. Once you take all those into account they are being paid really well.”

If the industry had a choice it would “absolutely” prefer to employ New Zealanders first, she says. “It’s easier, less logistics and complexity.”

The MIA is running two initiatives to deal long term with staffing shortages, including a new recruitment website aimed at making Kiwis aware of the wide range of career opportunities in the industry.

“We’re looking to showcase the fact that it isn’t just men in white overalls and gumboots that work in the industry.”

What about the beneficiaries?

Andrea Scown, CEO of Mitre 10, says all of the co-operative’s 85 stores are looking for staff, from the shop floor up to highly skilled IT staff needed to oversee the company’s five-year digital upgrade. Scown’s getting nervous about the approaching spring season, the retail boom time between September and Christmas.

But rather than targeting Immigration NZ, Scown wants to know why the Government does not tap into the nearly 366,000 working-age people on benefits. The seven-day-a week retail sector will welcome the extra labour pool, she says.

“It occurs to me that we’re not really looking at what we could do to remove barriers for some of our skilled beneficiaries,” she says. “If we want to really lift productivity, why not give beneficiaries with skills the capability of doing more hours?”

Scown speaks from experience. Years ago, as a 23-year-old accounts clerk, she found herself as a sole parent on a benefit.

“I remember having real financial barriers to what I could earn a week before it impacted my benefit.”

Scown advocates relaxing the current earning caps to allow beneficiaries to work more hours as a stop-gap measure, without penalising their benefits to such an extent.

“If it’s only for a short period of time, that could be a very ready and willing workforce.”

Scown also thinks there’s a post-Covid nervousness behind Kiwis’ reluctance to move towns in search of work, leaving some Kiwis in a state of fear and less willing to change their environment.

Take Masterton’s Mitre 10 MEGA, she says, which is struggling to find staff at all levels. Pre-Covid, Kiwis would have been willing to move from centres like Palmerston North, readily relocating between regions to where the work was. Now, she says, there’s a reluctance to leave family, schools, community.

“We’ve got roles in some of our provincial towns that we’ve been trying to fill for more than six months.”

Watch out for inflation

ANZ chief economist Sharon Zollner says although the closed borders are creating a labour supply shortage, strong consumer demand is adding fuel to the fire.

“Households are spending freely. So I wouldn’t want to cast it only as a supply issue.”

Zollner worries about the long-term economic effect if the labour shortage issue isn’t resolved.

“Inflation!” she says. “Lots of inflation.”

She joins economists around the world who are debating the impact of the pandemic on rising costs and how long interest rates can stay low.

“The longer this inflation issue goes on, the more you see it being built into inflation expectations. That matters because it can influence wage negotiations if the market is tight, which is clearly is,” Zollner says.

“It matters because it makes it easier for shops to pass on cost increases. And it matters because it brings forward more demand as consumers decide it’s better to buy now than later if they think an item is going to cost more next month.”

That can boost demand and exacerbate the existing supply problems.

Eventually inflation could kill off demand. In other words, it could damage the economy, we would see unemployment rise, and that would solve the labour shortages, she says.

“If inflation goes up and interest rates go up then that could cause things to come to a screeching halt. People might become concerned about the housing market. So even just talk that central banks will lift rates more aggressively could cause a collective freak out.”

OUT OF WORKERS: A Business Herald Series

MONDAY:
• The tech sector’s new pain point

TUESDAY:
• Worse than Covid: Hospitality’s battle for staff
• Kate MacNamara: Immigration and the puzzle of New Zealand’s tight labour market

WEDNESDAY:
• ‘Ridiculous’ shortage of MIQ spaces for construction workers
• Covid-19 highlights labour shortage in seafood industry

THURSDAY:
• Horticulture has ‘wall of work coming’ and dwindling staff
• James Cameron laments worker shortage

COMING UP
• Economic fallout and the human toll
• Solutions: What should the Govt be doing, how firms are adapting

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