Wāhaka tuarua: Te huarahi ā-ariā hai tātari i kā tatau o te makete reipāa | Chapter 2: Thematic approach to regional labour market analysis

The Otago RSLG will take a thematic approach to our mahi going forward. While it will require input from all our stakeholders and partners in the region to gain a true understanding of the problems outlined – and what potential solutions might be – our initial analysis on the themes is outlined below. In this section, we also pose questions – these are designed to be open-ended, as we work further with the region to analyse the issues discussed. We look forward to working together on this.

Ko kā hāpori paraheahea ki ōtākou | Vulnerable Otago communities

Tūāhua | Situation

Communities across Otago are vulnerable to economic change. This vulnerability is visible in varying ways –from reliance on a single industry, a single employer, or revenue from a singular economic activity. While vulnerability is varied and difficult to predict, situations such as supply chain impacts, global market variability, and limitation of access to labour can all rapidly impact our community’s economy and workforce.

The communities the RSLG has engaged with to date often feel they are unable to effectively reach agencies and authorities to communicate this vulnerability. Small, disparate communities lack the political clout to effectively advocate for timely support. The RSLG is working with these communities to better understand the nature of workforce vulnerability across the region – to seek out commonalities and amplify their voices – so they can better advocate for themselves. We also want to link communities together to learn from examples of economic diversification projects that already exist in our region, such as those underway in Queenstown Lakes.

In looking to understand this problem more fully, the RSLG brings a skills and training lens. We want to understand how equitable vocational education delivery can complement economic diversification (which will largely be through effective economic and business development), and improvements in transport and digital connectivity policy (which sit with central and local government and private sector investment). A skilled and connected workforce is critical if sectors are to lift productivity through the adoption of new technologies, tailor value-added products more effectively to markets, and meet new regulatory requirements.

We want to understand more about the types of vulnerability that exist throughout Otago’s communities, so that equitable solutions can be considered at a local level. Though each community is unique, we have already found commonalities that cross Territorial Local Authority boundaries. This has helped us to elaborate on common problems and begin exploring shared solutions.

Kā pīroiroi | Complications

Economic shocks such as Covid-19​

The wide-ranging effects of Covid-19 on the Queenstown Lakes District provide a case study on the risks of lack of diversification in our local economies and workforces. The pandemic highlighted the vulnerability of communities that rely heavily on a single industry, such as tourism, which was significantly affected by travel restrictions and lockdown measures.

Fluctuating markets, consumer demand changes and central government spending​

Communities that rely on exports such as food or tourism products are particularly susceptible to changes in global market conditions. Fluctuations in commodity prices, trade barriers, and exchange rates can have a substantial impact on local industries, leading to economic instability. Dunedin, as a significant buyer of services, also faces the precarity that comes with changes in public sector spend. ​

Technological advancements ​

Rapid technological advancements can disrupt traditional industries, particularly in agriculture and manufacturing. Automation, digitalisation, and other technological innovations can lead to job losses and/or the need for workers to adapt to new skills and job requirements. This transition may be particularly challenging for rural communities with limited access to education and training opportunities, or sub-regions with high numbers of SMEs unable to easily expand working capital or R&D investment to adapt. The RSLG is focussing on this as a separate, but interlinked, issue.

An ageing population

Many rural communities in Otago face an aging population, which can exacerbate economic vulnerability. As older workers retire, there can be a shortage of skilled labour to replace them, leading to a decline in productivity and economic growth.

Labour mobility and competition​

Rural communities may struggle to retain skilled workers who are attracted to urban centres with more diverse employment opportunities, higher wages, and better access to amenities and training support. This labour drain can limit the growth potential of rural industries and hinder economic diversification efforts.

Climate change​

Climate change poses a significant risk to communities dependent on agriculture, natural resources, and high transport costs for market access. Unpredictable weather patterns, extreme weather events, increased costs associated with mitigating emissions, and changing growing conditions could lead to economic instability in these communities.

Kia whakatewhahia | To investigate

  1. How can we identify and group distinct Otago communities to further understand this problem?
  2. What skills do people in our most vulnerable communities need to be able to adapt to change? What are current workforce capability/skills profiles?
  3. What is local and international best practice in diversification?
  4. What are projected consumer demand changes?
  5. What tailored advice to the vocational education system could the Otago RSLG give that might help to solve this issue?

Kā pūkeka mō te panonitaka hakarau ki ōtākou | Skills for technological change in Otago

Tūāhua | Situation

Tight labour market conditions and worker shortages are pushing businesses to turn to technology for productivity and automation gains. This technology is changing the way we live and work, and even the nature of some work, so it is clear that higher level technological skills are vital for our workforce now and into the future. Technology could help Otago address perennial issues surrounding low productivity, ageing population, and the global competition for labour.

But technological change is difficult to quantify. It is challenging to predict what impact it will have on our labour market. It will likely range from increased use of computers and/or AI, the automation of systems and devices, new machinery, updated processes, discontinuation of some sorts of work, emergence of new types of jobs, and biotech.

We do know that technology will significantly change the way we work. There will still be a strong demand for workers, but the nature of many occupations – the tasks and required skills – will likely change. There is a need for an agile education and training system that can support people in Otago – from workers to management and business owners – to develop the skills they need to respond to technology driven change - so our region can maximise the potential that emerging technology will offer.

Kā pīroiroi | Complications

Upskill needed across the board

Support is needed in all sectors, at all levels, to enable our region to effectively leverage the advantages of technological change. While workers will need the skills to operate new and emerging technologies, those in management will also need the capability to plan, adapt and pivot as technology changes how we work.

Prevalence of SMEs

In 2020, over 85% of businesses in the Otago region had five employees or less. This means that we need to tailor solutions that are cognisant of adoption and capability levels in small business.

Prevalence of low skill

Otago’s population is lower-skilled than that of the New Zealand population[1]. Low skill levels may present a barrier to our people’s ability to effectively adopt technology and the gains it represents.

Higher skill levels in Otago are also clustered away from our biggest sectors; data shows that concentrations of workers classified as ‘low-skilled’ make up large portions of the workforces of the largest sectors in our regional economy, such as food and fibre, and construction.

A need to improve productivity

New Zealand’s productivity record is comparatively poor compared to other OECD countries. While productivity in the Otago region is growing at a faster rate than in New Zealand as a whole[2], the adoption of new technologies has the potential to accelerate this further. Productivity gains will not only enable us to gain more value per economic unit but will also improve living standards and the quality of life of our workforce through “working smarter not harder”.

An ageing population

Otago’s population is older than that of Aotearoa New Zealand[3]. There are 30,730 people in Otago aged 55+, within a decade these people will all be 65+, nominally the age of retirement. New Zealand also faces declining birth rates and long average retirement periods. This means that in the future there will be less workers to fill job openings that are either driven by replacement or growth. Technology represents a key opportunity to counter this.

Increased international competition for labour

Otago – and Aotearoa New Zealand as a whole – needs skilled migrants to support the growth and prosperity of our economy. However, we are competing on the international stage to attract them, often with other countries that can offer higher wages, lower costs of living, better working conditions and less restrictive immigration processes.

The ability to consolidate jobs through adoption of technology also presents a counter to relying on the volatile – and competitive – international job market for critical labour supply in our region.

Kia whakatewhahia | To investigate

  1. Is our workforce equipped with the capacity to adapt to new technology? What baseline skills will our workers need to be prepared for technological change?
  2. How can workplace owners/decision makers build their tech capability to be able to consider effective tech solutions? What is the SME viewpoint on this issue?
  3. How accessible is tertiary training and education across our region, particularly for those already in work?
  4. Training distribution channels are important – how can we upskill full-time workers? And those not based in our main centres?
  5. What are the gaps/potential improvements or synergies from leveraging off vocational, private, Chamber of Commerce led, or other training that is already available?

He pitomata ka tūhuratia kai te makete reipā ki ōtākou | Untapped potential in the Otago labour market

Tūāhua | Situation

With the unemployment rate low, and the labour force participation rate high, there is little spare capacity – otherwise known as “slack” – in the Otago labour market. Put simply, there are not enough people in the workforce for the number of jobs available in our region.

However, even with the abundance of jobs available in the region, there is still a significant amount of employed people not having their full potential utilised – they may have specific skills they don’t use in their current work, they may want to work in other parts of the region, or they may be able to (and want to) work more hours than they do currently.

Traditionally, economists and the government have categorised these people as the ‘underutilised workforce’. To do this they measure the total number of people in the labour force who are not being fully utilised to statistical benchmarks, including those who are outside of the labour force and considered ‘potential labour supply’.

To this definition, there are approximately 13,900 people underutilised in Otago.[4] But we know that there are significantly more working people in our communities that fall outside of this definition (e.g., people who are working the “full time” 30 hours a week, but wanting to work 40), that have more to offer and have a desire to further contribute to the labour market – but for a variety of reasons are unable to do so.

For this reason, the Otago RSLG takes the position that the traditional definition of underutilisation is too narrow and restricts our ability to be inclusive of all our working people that want to further contribute. This group represents a broad range of people across the community with differing needs, aspirations, and nuanced barriers to employment. As very tight regional labour market conditions continue, they represent an opportunity to help mitigate skills shortages in the region.

We already know that the same groups who have poor labour market outcomes overall are also more likely to be underutilised or not have their full potential made use of. While representing a diverse group, this group share similar risk factors, such as less job experience, lower-levels of qualification, and experience working in industries that are more susceptible to economic shock. These groups are Māori and Pasifika, women, people with disabilities, youth, older workers and those Not in Education, Employment, or Training (NEET).[5]

In response, the Otago RSLG will supplement the traditional definition of ‘underutilisation’ by engaging with the community to identify the additional needs, aspirations, and barriers of this latent workforce. With an expanded consideration of untapped workforce potential, we can support new and existing labour market initiatives and interventions to go beyond the current definition of underutilisation to allow greater support of our working peoples’ potential.

The issue is also more prevalent in some industries than others. The accommodation and food, administrative and support, arts and recreation, and retail trade have significantly higher underemployment rates nationally than other industries.[6] While further research is needed to understand the cause of this, it may be that lower incomes for those working in these industries mean that they desire more hours to raise their earnings. Another possibility is that the customer demand profile of the industry means workers cannot be employed evenly over a working week.

Kā pīroiroi | Complications

Further understanding and engagement needed

We need to further engage with those who are not having their full labour market potential utilised to ensure our response is fit for purpose.

Anecdotally, we know that external factors such as the availability and cost of childcare, transport, accommodation; rigidity of work hours and physical accessibility are key elements to this equation. As we gather more qualitative data, it is likely that certain points will be also raised; for example, most employers do not consider that 30 hours a week is full time.

We need to engage widely on this issue, considering the unique needs of both workers and businesses, to achieve best outcomes.

Restrictive official definition

Underutilisation, as defined by Statistics New Zealand, may not fully encapsulate the Otago labour force who are not being fully utilised.

While it conforms to international standards, it is not nuanced enough to really understand latent untapped labour capacity i.e., those who do not technically meet the definition of ‘underutilised’ but could be enabled/encouraged to further participate in our labour market.

Kia whakatewhahia | To investigate

  1. What is the practical experience of underutilisation, and can this inform our understanding of the barriers that people face which prevent them from being fully ‘utilised’?
  2. What are the barriers, systemic and otherwise, to people entering the workforce? How can we understand this from these groups’ perspective?
  3. What does locality have to do with underutilisation? Does the size of a place, and range of industries in that place, matter?
  4. What targeted training, workplace systems changes, or policy interventions could improve education and employment outcomes for those groups more susceptible to being underutilised?
  5. How might employers, local authorities, and other actors work together to address some of the barriers within a given sub-region?

[1] Infometrics, Otago Regional Economic Profile, “Broad Skill Level” (using ANZSCO data)

[2] Infometrics, Otago Regional Economic Profile, “Productivity: Otago Region” (using GDP/person)

[3] Statistics New Zealand, Census 2018

[4] Household Labour Force Survey, Statistics New Zealand, March 2023 quarter

[5] Ministry of Business, Innovation and Employment (2022). Underutilisation in the New Zealand labour market - where is the spare capacity in the Labour Market? Draft Briefing.

[6] Ministry of Business, Innovation and Employment (2022). Underutilisation in the New Zealand labour market - where is the spare capacity in the Labour Market? Draft Briefing.