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August 2016 Labour Market Report

August 2016 Labour Market Report

Posted on 8th August 2016 by Russell Phillips

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A lesson on why the industry should get behind submissions to include in-demand skills on absolute skills shortages lists.

The hottest topic in New Zealand continues to be the alarming rise in house prices. Amidst relatively buoyant economic growth, nationwide residential house prices rose by 13.5% according to the QV House Price Index. The Auckland market has increased by 16.1% year on year, and 4.7% over the past three months. Values there are now 78.4% higher than the previous peak of 2007.

Driving house prices is a range of factors. Investors have had an almost fanatical attraction to bricks and mortar but net migration gain has too contributed to unprecedented gains, or so we are told. While the latest changes to loan value ratio (LVR) for investors may soon be 40%, will this have an impact on house prices? If not, and the LVR does not slow house prices, what’s next in New Zealand’s tool chest. Slowing down migrant arrivals?

From the perspective of a New Zealander observing pressure being applied by opposition political parties to slow immigration, we look at why this may be the case. Figures from Statistics New Zealand showed that in the 12 months leading up to February 29, long term arrivals exceeded departures by approximately 67,000. This is the highest level of net inward migration on record. This year it now looks highly likely that net migration will surpass 70,000. There are a lot of people who want to live here and a lot of New Zealanders returning.

Net migration to NZ was the strongest from India, with a reported gain of 12,600 in 12 months. According to news sources, this was driven by changes to student visa rules which now allow part-time work. China was the next strongest source of net migration, with a gain of 9,700, followed by the Philippines at 5,200, and the United Kingdom 3,700.

In Auckland, net migration gain from new long term migrants and returning New Zealander’s keen to re-join our booming economy was 36,000 last year. Reports show that we are currently capable of building 10,000 homes annually in Auckland. Logic may tell you that the pressure placed on housing is so extreme that house prices may continue to rise while migration gains are the dominant feature of housing pressure.

Herald columnist Lincoln Tan recently wrote that of “14,000” arrivals from India last year nearly 11,000 arrived on student visas. While Lincoln Tan may well be referring to different figures than those released by Statistics NZ, it is worth considering the education boom is thought to be worth 3 billion dollars to the economy. For the motor industry, many of these migrants are also buying and servicing vehicles so this should not be overlooked.

While Automotive Employment NZ is pro-migration, pro-education, pro students and learning, and, for that matter, pro everything that assists the economy, it is worth considering what is driving the foreign student boom. There is little doubt this cash cow is being milked but what are the impacts to motor industry employers if the foreign student boom creates difficulties for employers supplementing skills. Many employers are dependent on supplementary skills to drive growth.

What is driving the foreign education boom?

According to the migrant advisory site, Broken Luggage, one of the primary loopholes, if you do not qualify to move to New Zealand, is education: “Get a degree” says Broken Luggage. Let us look at why they make this recommendation. Is this migration loophole causing issues? Is Automotive Employment NZ observing a risk to genuinely skilled migrants who could well be casualties of immigration clampdowns if this occurred? We cannot advise on immigration issues but below are the comments made by licensed Immigration Advisers Eagle Migration.

Automotive Employment NZ asked immigration advisers Eagle Migration how obtaining a degree/diploma can lead to residency. They used the following example to demonstrate:

John Smith cannot get a job in NZ; he can, however, study a degree or diploma in NZ.

John signs up for a level 5 course (we are assuming it is a two-year course). Once the study permit is approved, John now has the right to live in New Zealand for the 1st year of this course.

Once John completes semester 1 and 2 he can then lodge a new student visa application with evidence that he attended class, passed the first year’s papers, and has enough money to pay for fees and living expenses.

Once John completes his second year of study, he has completed the level 5 course. John can now apply for an open work visa allowing him to live and work full time in NZ for another year. The openwork visa will only be granted if John has studied a course/courses from level 4 to 6 for at least two years, or studied a course from level 7 for at least 1 year or more. This gives him time to find a job that broadly matches his qualification. John can now also apply for a 2-year employer-assisted work visa before the expiry of his open work visa, provided he can obtain a full-time job broadly in line with his qualification. Using this example, John has now been living and working in NZ for 5 years. If his course was 3 years he would have been here for 6 years.

There are other methods of making this easier. If John studies on a student visa for a level 7 degree qualification on the long term skills shortage list, he may then apply for an open work visa for his partner. His partner may then work full time for any employer in any role and John can work 20 hours per week. John’s children can only attend school without having to pay international student fees for them if he studies a PhD qualification in NZ. John’s partner can now also work towards getting a job that meets Immigration NZ requirements. Assuming John took the level 7 long term skills shortage course referred to above, John’s partner will also have the same time period to secure a job that leads to residency.

Automotive Employment NZ notes that 5 or 6 years of living in New Zealand is often sufficient enough to find a job that leads to residency or to find some other route.

Radio NZ (RNZ), in its report July 8, 2016, noted: Tertiary institutions are trying to enrol thousands of students that Immigration New Zealand does not believe is really intending to study here. The report went on to say that Immigration New Zealand turned down 3,864 visa applications for the institutions, and approved 3,176 during that time.

The chief executive of Newton College of Business and Technology in Auckland, Ashish Trivedi, told Insight that all institutions enrolling from a specific location were having a lot of students turned down. His organization was one of 21 that Immigration New Zealand said had decline rates above 60 percent. “Some of it is a real necessary crack down on fraudulent activities and we support that. We have had rejections to student visa applications based on fraudulent activities”

So is foreign education providing a migration loophole that could present a risk to genuinely skilled and experienced migrants?

While we cannot advise on immigration issues, like every one of us, we can ask questions?

  1. What happens if New Zealand moves to slow down migration? If we do this, will this impact skilled migrants currently not include on absolute skills shortage lists that are nonetheless in demand?
      
  2. We already have heavy pressure on housing affordability and availability. Despite controls imposed to slow the rise of house prices, will this work? If house prices continue to rise, will pressure on infrastructure see NZ move to reduce migration numbers? 

  3. Automotive Employment NZ has noted nearly 30% plus of candidates applying for a range of fairly junior admin roles and technical sales roles had arrived in NZ over the past 3 or 4 years. Many seem to be using the residency and student visa route referred to above by Eagle Migration. While Automotive Employment NZ cannot advise on immigration issues, we can advise on employment. Many of these graduates who came over on study permits may have gained qualifications but did not possess commercially sought after work experience (we do acknowledge that some did have useable skills but we are referring to the majority, not the minority). Without possessing skills that are in demand, are these graduate students securing employment ahead of New Zealanders who are also attempting to get a foothold on the employment ladder? If so, does it matter, and why?

  4. At the time of writing, New Zealand unemployment is at 5.1% OR there are 131,000 unemployed. In June 2006, with similar trading conditions, New Zealand’s unemployment rate was 3.6% / there were 79,000 unemployed. This is a difference of 52,000 unemployed. The social cost of 52,000 unemployed is significant, not to mention the financial cost.

  5. You would hope the gaping loopholes in the education-to-residency route would become the obvious choice to tighten up on but comments such as those made on RNZ, have us wondering:
    “We do review the absolute shortages lists regularly and it may be a case of tightening up on those migrant arrivals that do not tick this box.”

  6. Automotive Employment NZ was concerned when Automotive Technicians were removed from the absolute/essential skills shortage lists in 2014. Once this occurred, Automotive Technicians were effectively deemed not be in absolute demand: this is despite industry recognizing that the shortage has never been more critical. Should there be a move to tighten immigration policies, and should include on the absolute shortages lists be introduced as the instrument to slow migration, would this hinder employer ability to supplement shortages with offshore skills?

MTA Acting Chief Executive Craig Pomare said, “MTA understands there could be as many as 2,000 vacancies for qualified Automotive Technicians nationwide.” In 2014, just 130 Automotive Technicians graduated. It is entirely possible the same or a greater number moved away from hands-on automotive repair roles.

Until solutions are found by the NZ motor industry to achieve a tenfold increase in skills training, we will need to be able to supplement available talent. Taking the above into account, how important is it for the industry to ensure true skills shortages are included in the next essential skills review? We ask this and also add another question; how will industry achieve a tenfold increase in training when the current training model is heavily weighted towards having the internal skills to train in a skills shortage?

Will New Zealand move to stem the flow of genuinely skilled migrants, slow the 3 billion dollar student cash cow, or do nothing?

Elections loom in 2017; will housing pressure, unemployment, and migration soon be an election issue given the fact that we are heading towards the final quarter of 2016?

Summary

There will always be differing opinions when the topic of immigration, unemployment, and training are raised together. This does not remove the fact that in order to grow business, employers need to supplement skills shortages with genuinely skilled migrants.

The year ending 2016 is a benchmark year for Automotive Employment NZ. During 2017, increasing engagement with candidates, in turn, creasing our ability to supply New Zealand based candidates is our focus. Unemployment is tipped to keep dropping; supplementing skills shortages from overseas will need to continue.

Industry’s voice will need to be heard to ensure true shortages are reported to MBIE. Those larger companies in our industry should already have sought advice from an immigration adviser about achieving Immigration NZ accreditation to protect long term supplementary skills supply.