Migration, huh! (What is it good for?)

Since the onset of the COVID-19 pandemic, migration movements have presented themselves as a puzzling aspect of New Zealand’s economic path forward. Migration has many effects on both the labour market and the wider economy, and will remain a key, but rapidly changing, factor moving ahead, so it’s worth paying attention to.

12/16 migration rule increases uncertainty

Historic net migration figures have been incredibly volatile in recent months, especially when comparing historic figures from before COVID-19 to their current estimates (see Chart 1).

This volatility is because in their reporting of migration, Stats NZ uses a 12/16 rule. To be classified as a migrant arrival (or departure), the migrant must have been inside (or outside) New Zealand for 12 of the last 16 months since their arrival (or departure). This timeframe means that we can’t be certain of whether an arrival (or departure) is a migrant movement until somewhere between 4 and 16 months.

Stats NZ provides an estimate of net migration each month by predicting whether they expect an individual will meet the classification requirements for a migrant arrival or departure, based on previous traveller patterns.

In the late spring and early summer months there is always a large inflow of visitors into New Zealand for either holidays or seasonal work. Typically, most of these visitors will leave the country again well before they reach the 12-month mark. But not this year – due to COVID-19, many of these arrivals have stayed in New Zealand for much longer than they would have under business as usual, making the probability of their classification as a migrant arrival significantly higher. These longer stays have resulted in almost 30,000 more migrants estimated in the year to December 2019 when comparing estimates from February 2020 to the most recent published in September!

Although the most recent estimates suggest migration ballooned from late last year until March 2020, Stats NZ estimates also expect that after the initial influx in arrivals through the Level 4 lockdown, migration has all but come to a halt, with net migration of only 777 through the June quarter. This decline in migrants entering New Zealand has caused issues for firms in need of skilled labour in specialist roles.

Migration is a key way to help fill skill gaps in the short-term

Bringing skilled workers into New Zealand can help plug gaps in the market for labour supply in the short term. Migration of skilled workers is a useful tool when developing these skills domestically is not feasible, particularly in the short term. However, it’s important to keep in mind that importing skilled labour shouldn’t be a long-term solution. Instead, an effectively functioning education sector should fill these skills shortages domestically without requiring the import of labour over time.

In times of tight labour markets, categorized by near full employment and high pressure on labour costs, migration can help ease labour market pressures and bring in more workers to satisfy firm’s demand for workers.

According to MBIE, almost 40% of work visas in 2019 were either for high-skilled or skilled work. High-skilled workers made up almost 25% of total approved work visa, equating to just under 21,000 work visas.

Many firms rely on these skilled migrants to fill jobs. With the New Zealand borders closed to non-New Zealand citizens, many businesses are struggling to fill their labour needs, creating acute skills shortages.

Less migration could be good news for those looking for jobs

It’s important to recognise the current labour market, with New Zealand experiencing a sharp economic contraction. Around 70,000 people have already lost their job because of COVID-19, with many more working fewer hours than they would like. We expect job losses will continue to mount and won’t begin to recover until later into next year.

Not all skills gaps will be able to be plugged by local workers, who may not possess the skills or experience that some roles require. But in those cases, it’s important that New Zealand creates a talent pipeline to fill these roles, and that development needs to start now.

Although we may have skills shortages from the lack of migration, if there was ever a time where sufficient labour could be sourced locally, it is now. With less migrants, the displacement of local labour is low, but what remains an obstacle is matching the local labour supply to the firms that need it. A sustained focus on matching those with roles to employers who have spots to fill will be critical to driving down unemployment, alongside wider skills development to get Kiwis back into work.

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