The rampant Kiwi dollar is likelyto encourage more manufacturers to relocate production to low cost Asiancountries. In fact, several manufacturers had already announced plans to moveproduction before the latest Kiwi dollar rally. This will mean more job lossesin an industry that has been shedding jobs over the past few years. In Aprilour iconic whiteware producer Fisher and Paykel signalled their intention torelocate 350 jobs to Thailand. Next was Sleepyhead with a possible 250 jobs,followed by Dynamic Controls with another 200 jobs, both to China.
Should we be concerned aboutthese job losses to Asia? There are a number of dimensions to the answer.
Firstly, it is only thelower skilled production jobs that are typically lost while the highly skilledjobs associated with research, product development and marketing are retainedin New Zealand
Secondly, we can afford tolose some lower skilled jobs. There are more jobs than Kiwis with the correctskills who are willing and able to work. And this is not merely a temporarysituation; it is the future. The ageing of our population means that thelabour force will grow by less than 1% each year over the next ten years. Growth in demand for labour over this period will match or outstrip labourforce growth even with modest economic growth, bearing in mind that labourdemand grew at an average annual rate of close to 3% over the past five years.
Thirdly, the skill level ofNew Zealanders is rising rapidly and the type of jobs on offer needs to matchthis. Our universities are producing about 23,000 graduates each year. Highparticipation in university study coupled with an inflow of skilled migrantshas lifted the total number of graduates by 50% over the past five years to450,000. While the financial, health and education sectors are creatingthousands of new highly skilled positions each year then it stands to reasonthat we can let go some of our lower skilled positions.
Fourthly, it is the dynamicnature of modern labour markets for jobs to come and go. Large organisationslaying off workers tends to get publicity but not the multitude of smalleremployers taking on new staff. When we hear about the number of new jobscreated in a year it is the net outcome of a huge number of job closures beingeclipsed by a slightly larger number of new job openings. For instance,Statistics New Zealand’s Linked Employer- Employee Data shows us that the32,000 increase in the number of employees in the twelve months to March 2006was the consequence of 545,000 jobs being created and 513,000 jobs beingdestroyed.
Job loss is never a topic tobe taken lightly. The process is traumatic for those individuals affected. Butthe labour market is on their side. They will be looking for a new job in thestrongest labour market this generation has experienced. Despite a slowingeconomy, skill and labour shortage indicators from the Quarterly Survey ofBusiness Opinion are at historically high levels. Unemployment is at a near historiclow. And it is estimated that there are probably more than 4,000 job vacanciesto choose from in the manufacturing industry.
Some of our most successfulcompanies have already moved their production overseas and have created abusiness model which is leading the way. Icebreaker, producer of top endclothing, sends high quality South Island Merino fibre to < >China whereit is transformed into garments and then distributed to consumers in 24countries. All these processes are managed from their head office in < >Wellington;the home base for more than 80 staff who drive in-house design, marketing,product development and their supply chain work.
Icebreaker utilise NewZealand’s agricultural output, keep the highly skilled, highly paid jobs in NewZealand, and bring the majority of export earnings back to New Zealand.
We may be losing lowerskilled jobs to Asia but we are moving a step closer to a high-skill, high-wageeconomy.