The rampant Kiwi dollar is likely to encourage more manufacturers to relocate production to low cost Asian countries. In fact, several manufacturers had already announced plans to move production before the latest Kiwi dollar rally. This will mean more job losses in an industry that has been shedding jobs over the past few years. In April our iconic whiteware producer Fisher and Paykel signalled their intention to relocate 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 about these job losses to Asia? There are a number of dimensions to the answer.
Firstly, it is only the lower skilled production jobs that are typically lost while the highly skilled jobs associated with research, product development and marketing are retained in New Zealand
Secondly, we can afford to lose some lower skilled jobs. There are more jobs than Kiwis with the correct skills who are willing and able to work. And this is not merely a temporary situation; it is the future. The ageing of our population means that the labour 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 labour force growth even with modest economic growth, bearing in mind that labour demand grew at an average annual rate of close to 3% over the past five years.
Thirdly, the skill level of New Zealanders is rising rapidly and the type of jobs on offer needs to match this. Our universities are producing about 23,000 graduates each year. High participation in university study coupled with an inflow of skilled migrants has lifted the total number of graduates by 50% over the past five years to 450,000. While the financial, health and education sectors are creating thousands of new highly skilled positions each year then it stands to reason that we can let go some of our lower skilled positions.
Fourthly, it is the dynamic nature of modern labour markets for jobs to come and go. Large organisation slaying off workers tends to get publicity but not the multitude of smaller employers taking on new staff. When we hear about the number of new jobs created in a year it is the net outcome of a huge number of job closures being eclipsed by a slightly larger number of new job openings. For instance, Statistics New Zealand’s Linked Employer - Employee Data shows us that the 32,000 increase in the number of employees in the twelve months to March 2006 was the consequence of 545,000 jobs being created and 513,000 jobs being destroyed.
Job loss is never a topic to be taken lightly. The process is traumatic for those individuals affected. But the labour market is on their side. They will be looking for a new job in the strongest labour market this generation has experienced. Despite a slowing economy, skill and labour shortage indicators from the Quarterly Survey of Business Opinion are at historically high levels. Unemployment is at a near historic low. And it is estimated that there are probably more than 4,000 job vacancies to choose from in the manufacturing industry.
Some of our most successful companies have already moved their production overseas and have created a business model which is leading the way. Icebreaker, producer of top end clothing, sends high quality South Island Merino fibre to China where it is transformed into garments and then distributed to consumers in 24 countries. 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 New Zealand’s agricultural output, keep the highly skilled, highly paid jobs in New Zealand, and bring the majority of export earnings back to New Zealand.
We may be losing lower skilled jobs to Asia but we are moving a step closer to a high-skill, high-wage economy.