Critical industry skills shortage set to grow by 38% in six years

A critical skills shortage in the manufacturing and engineering sectors is set to grow by 38% to 40,000 workers by 2028 if immediate action is not taken, according to a new government study.

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The research commissioned by Hanga-Aro-Rau, the Manufacturing, Engineering and Logistics Workforce Development Council, found widespread disruption caused by COVID-19, immigration policy settings as well as constraints on supply chains and the international labour market will see the industry skills gap continue to widen - if left unchecked.

The report’s authors found that while rates of employment among other ethnic groups now exceeds pre-COVID levels, the pandemic has exacerbated inequities for Māori and Pacific peoples and their participation within the national manufacturing and engineering workforce is up to 25% lower than prior to COVID-19.

The regional impact of the pandemic is even greater with an industry-wide employment decline recorded for up to 32% of Māori and 18% of Pacific peoples - in the Waikato manufacturing sector.

Researchers found that Māori and Pacific workers are at least 10% less likely than other ethnicities to complete training or find work following the completion of their training. Māori are also 5% more likely to receive a Jobseeker benefit five years after graduating than other ethnic groups.

Phil Alexander-Crawford, chief executive of Hanga-Aro-Rau, one of six Government Workforce Development Councils (WDCs) tasked with aligning the vocational educational systems with industry needs and providing support for Māori businesses and iwi development, says more needs to be done to better support Māori and Pacific people into a higher level of vocational training.

He says the research shows Māori and Pacific people favour tuakana-teina (intergenerational learning) and the disruption caused by COVID-19 will have a legacy impact on the pipeline of new workers for years to come.

“We know that Māori and Pacific workers will pass knowledge down through to the younger generations within the workplace.

“They are also an essential referrer to the industry, and it is common to see extended whānau working within the same firm for decades.

“When this link is broken and an individual leaves the industry, the impact on the sector can be far more widespread reducing the pool of potential workers from future generations,” he says.

The study showed that Māori and Pacific peoples will not reach skills parity with other ethnic groups by 2028 without immediate intervention, including new targeted new culturally relevant training programmes.

In addition, without net migration returning to pre-COVID levels, the domestic workforce will be insufficient to address the widening skills gap and that increasing the participation rate of groups who are also significantly underrepresented at all levels of the manufacturing and engineering sectors including women and disabled workers, will be essential for reducing the skills shortfall.

Alexander-Crawford says the pandemic has demonstrated industry needs to reduce its long-term reliance on migrant labour to remain sustainable.
He says the skills shortage could be partially offset through investment in technology and improvements in labour productivity.

“Historically around a quarter of skilled labour needs in manufacturing and engineering are met by migrants.

“By 2028 we will need 463,000 workers in key regions around the country, however based on current trends, a skills shortfall of over 40,000 is set to constrain future manufacturing output.

“We need to begin work immediately to reduce barriers preventing the development of an equitable domestic workforce.

“The research has found this is a complex issue to address and will require a coordinated approach from industry stakeholders, the vocational education system and government support agencies,” he says.

Dieter Adam, NZ Manufacturers and Exporters Association CEO, says the shortage of workers at all skill levels is impacting export relationships built up over decades.

“It is not uncommon for manufacturers to be facing a 15% shortfall in their current workforce. Up until around 12 months ago this was mainly at the higher skill levels however this has now grown to include semi-skilled labour as well.

“A large part of New Zealand’s manufacturing and engineering sector does not operate in the high volume, low value production of consumer goods. They’re typically SMEs who are dominant in a small niche of the capital goods business and have longstanding relationships with relatively few customers.

“When you’ve had good relations with customers for 20 years and you have to tell them you can’t fill any orders until the end of next year and you are losing customers as a result, this is a serious blow to a business of this size.

“These customers have a policy of never relying on one supplier and as a result, New Zealand is losing contracts to our international competition,” he says.

Adam says the new Hanga-Aro-Rau report will provide valuable data and context for those involved in long term resource planning and investments within the industry.

“Until now the industry has little in the way of verifiable numbers to support their anecdotal assessment of the current situation.

“As a result of the research, we now have greater insights into the numbers, including key demographics that are disproportionately underrepresented within the sector.

“We are already seeing increasing interest in the upskilling of existing staff, but we will also see increased emphasis on breaking down the training barriers that prevent those from diverse cultural backgrounds from putting their hand up for training.

“The sector is also going to need to look at how it can incorporate more flexibility into what are usually rigidly defined operating times for shifts - in order to attract more female and younger workers,” he says.

Alexander-Crawford says there are three key pathways open to the manufacturing industry including attracting more workers through training or from other industries, upskilling the current workforce and increasing productivity.

“We know that the manufacturing and engineering sectors are competing with other industries, both domestic and international, for skilled labour.

“New initiatives which reinforce the attractiveness of the sector and increase workforce participation in training are needed to reduce the skilled labour shortage - particularly within key demographics such as Māori, Pacific, disabled people and females, who are underrepresented in these industries.

“With Māori and Pacific peoples expected to see the highest population growth of any ethnicity over the next six years within the regions where Aotearoa’s largest manufacturing facilities are concentrated, they represent a critical segment of the future workforce for these sectors,” he says.

John Tan, partner at Deloitte, which worked in collaboration with Hanga-Aro-Rau and the Tertiary Education Commission to produce the research, says COVID-19 has had a disruptive impact on the manufacturing and engineering workforce and these impacts may endure in a volatile post-pandemic period of significant economic uncertainty.

He says while there is a risk that workforce capacity constrains economic output, there is also an opportunity to adopt different strategies for post-pandemic workforce development.

“Since COVID 19, there has been a reversal of the trend of positive net migration to New Zealand, highlighting New Zealand’s traditional reliance on skilled workers from overseas. The shortages in skilled and unskilled labour are particularly acute in the manufacturing and engineering sectors, for which there is intense global competition

“Our estimates show that there is a significant workforce capability and capacity gap of up to 17,000 manufacturing roles and 12,000 engineering roles, and the size of this gap is likely to increase if current trends persist. This capacity and capability gap is putting upwards pressure on the cost of labour and risks constraining output,” he says.

Alexander-Crawford says the report will be presented to a summit later this month where employers, industry stakeholders, Government, and vocational education participants will collaborate on implementing solutions to the skills shortages and workforce development challenges faced by the sectors.

Read the full Post COVID-19 workforce development needs in New Zealand’s manufacturing and engineering sectors report