26 Jan 2023

Immigration not a solution to fill skills gaps - economist

8:29 pm on 26 January 2023
Prime Minister Chris Hipkins speaks to media after meeting business leaders in Auckland.

Prime Minister Chris Hipkins speaks to media after meeting business leaders in Auckland. Photo: RNZ / Nick Monro

A leading economist says New Zealand has never had a "proper conversation" about what immigration is for, which is creating uncertainty for both immigrants and businesses in the country.

Shamubeel Eaqub, from Sense Partners, told Checkpoint that making it easier for workers to come to New Zealand would benefit sectors like health, which were experiencing intense labour shortages, but he cautioned against loosening immigration settings too much in the current economy.

"New Zealand has long relied on immigration to fill our skills gaps, but it's not a panacea, because when people come, that also increases demand," he said.

While the country was currently dealing with "incredible demand for workers", Eaqub noted that job advertisements across the business community had begun to fall late last year.

"That means that I think there's less urgency to kind of open up the floodgate, per se."

Shamubeel Eaqub

Shamubeel Eaqub Photo: Supplied

His comments came as the country's new prime minister, after meeting with business leaders in Auckland, said changes to immigration settings in a bid to ease labour shortages, were a definite possibility.

Chris Hipkins visited the Auckland Business Chamber hoping to quell concerns about how his party would tackle issues like inflation and labour shortages.

Among those meeting with him were Fonterra's CEO, bank bosses, Auckland Airport bosses and other commerce leaders.

The chief executives told the new prime minister that staff shortages were their biggest problem as they discussed solutions for the forecast recession.

"I certainly wouldn't rule out further changes; the conversation I had with the business community was about getting the balance right," Hipkins said.

That balance, he explained, was between changing immigration settings and invigorating local workers across the country.

But Eaqub told Checkpoint New Zealand had "never had a proper conversation about what immigration's for".

"We kind of use it as a political tool to deal with whatever we want to at the time," he said.

"Currently it happens to be that it's labour shortages, 10 years ago it was because we wanted population growth and economic growth, and I think it's really unfair to ... use immigrants as these little political chess pieces.

"We need to be a little bit more structured around what we want it for, that would create more certainty - both for the immigrants and for the businesses in New Zealand."

'Auckland is incredibly important'

Much of the prime minister's meeting with business leaders was behind closed doors, but Hipkins later said he had a clear message for those struggling.

"We want businesses to thrive in New Zealand so that they can create good, well-paying jobs for New Zealanders, so that Kiwi families can get ahead."

He said his government would back New Zealand business to do so, stating he would work to provide certainty as quickly as possible.

Hipkins also recognised Auckland business as a priority.

"Auckland is incredibly important to the New Zealand economy, [it's] the hub of commerce for New Zealand really, and our gateway to the world," he said.

Auckland Business Chamber chief executive Simon Bridges said meeting with businesses on his second day was a strong start for Hipkins' leadership.

"Both sides gave as good as they got, very candid, very frank, and that was excellent."

He said there were clear issues across Auckland and the rest of the country that needed addressing.

Workers' skills, immigration, and the need for training and education were all topics of debate among the leaders and the new prime minister.

Egg shortage, lack of staff hitting businesses hard

Elsewhere in Auckland, businesses were still feeling the pinch of labour shortages and inflation.

Chef Oscar, from La Noisette bakery on Karangahape Road, said they needed more than just new staff.

"It's more than staff shortages, it's about the skilled staff that we require," she said.

Rising inflation was making everything much harder, Oscar said.

The egg shortage hitting the country, in particular, had come as a shock to everyone, she added.

"We're only allowed 30 eggs a day, how can a bakery rely on 30 eggs for a day?"

Is hiking the minimum wage the answer?

In the face of businesses' struggles to attract and retain staff, one group has called for the minimum wage to be increased.

Council of Trade Unions secretary Melissa Ansell-Bridges told Morning Report they would like to see the country's minimum wage increase to $23.65, bringing it into line with the living wage.

That would be an 11.6 percent hike, dwarfing any in recent history.

But National's finance spokesperson, Nicola Willis, advised caution, saying the minimum wage was already high enough and any further hike would fuel inflation.

Eaqub, speaking to Checkpoint, said every time there was discussion about raising the minimum wage there were questions about whether it would lead to mass business closures or mass inflation.

"Both of those things haven't happened in the past," he said.

"The difference now, of course is the minimum wage is now relatively high, compared to the medium - or normal - wages that we see in New Zealand, so the pressures are building."

He said he would be "very surprised" if the government opted to push through an "inflation or inflation-plus increase in minimum wages" in the current economic environment.

"We get the business closures, or the reduction in profit margins, when the economy's not that strong and I think that's where a lot of the concerns will be coming this year."

Increasing the minimum wage was "always a political decision" he said and in an election year the government would be trying to keep everyone happy - "including the business sector".

Tweaks to policies such as the abatement rates on things like Working for Families would have more impact on low-income workers' take-home pay than increasing the minimum wage, he added.

"Most of these people are on such low incomes, or they're getting other benefits too ... that increase in wages will be eaten up by loss of entitlements elsewhere."

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