Wellington needs to resharpen its edge

Those of us that live in Wellington like to think of it asthe creative and innovative hub of New Zealand with the highest qualifiedworkforce and highest incomes.   But it appears that Auckland can increasinglylay claim to that mantle.

Wellingtonians have historically enjoyed the highest averageweekly wages in New Zealand largely due to its concentration of high payingindustries such as financial and business services and of course government.But the gap between average earnings in Wellington and its northern neighbour hasbeen gradually closing and in early 2008 Auckland surpassed the capital for thefirst time.

Wellington has in recent quarters regained its top spot asit has ridden out the recession better than Auckland.   While the northern cityis more heavily exposed to hard hit sectors such as manufacturing, constructionand retail, Wellington has had the moderating effect of government. And this isthe bottom line.   For all the talk about innovation and creativity Wellington is still a city built around government.

Government has been by far the largest contributor toemployment growth in Wellington since the beginning of the decade.   The publicsector has accounted for almost 30% of new positions and if we include thepositions in the private sector that depend indirectly on government spending(and I would include a sizeable component of my own job in that) then thefigure is probably closer to half.

If we delve down into the details of where employment growthin Wellington has come from and rank the 500 industry categories according totheir contribution to employment growth in Wellington the list is topped byCentral Government Administration.   The category ominously titled ‘RegulatoryServices’ ranks number eight.   Almost a thousand of the 33,000 net jobs createdin Wellington over the last nine years were for people who ‘enforceregulations, licensing and inspection activities’.   This does not sound likethe types of activity that one might describe as innovative and creative.

Auckland on the other hand is showing the hallmarks of acity of knowledge and innovation.   The sector that contributed by far the mostnumber of new jobs over the past nine years was the knowledge intensive‘Professional, Scientific and Technical Services’ which includes informationtechnology, corporate management services, engineers and architects.   Theseprofessional services together with Education and Training accounted for about40% of the 100,000 new jobs created.

With its critical mass of businesses and proximity to thelargest market in New Zealand Auckland has a huge advantage over the capitalfor attracting new enterprises and luring head offices northwards.   Auckland’s critical mass also entices the majority of new migrants to New Zealand to make the northern city their first stop.   Wellington largely misses out onthis significant source of growth.

Wellington is looking particularly vulnerable as Labourgovernment largesse gives over to public sector belt tightening. The city’smajor source of growth over the past decade may even turn into a source ofdecline as government departments are downsized.   Wellington will increasinglyneed to rely on its innovative niche sectors to drive growth.

In the shadow of the expansive public sector are plenty ofexamples of highly innovative and creative industries in Wellington.   The filmindustry is probably the best known.   From humble beginnings to being worldrenowned Weta Digital and Weta Workshop are today probably among the largestnon-government employers in Wellington.

Wellington has also spawned Icebreaker which crafts topquality merino wool from the South Island into fashion items which are marketedaround the world.   It is an outstanding New Zealand business model.   Icebreakeruses a natural resource which we have in abundance.   They outsource the lowvalue adding production process to Asia but keep the high value addingfunctions of design and marketing in Wellington.   And they have built their brandimage around our pristine and spectacular environment.   One could say similarthings about other successful companies based in the Wellington region, likethe office furniture company, Formway.  

In a speech to Hong Kong’s film industry earlier this year Wellington’s mayor spoke proudly of the success of Wellington’s film industry.   She spokeof how the Wellington City Council had cut red tape and speeded up the consentprocess for the film industry. An environment had been created in which thefilm industry could take decisions quickly, be nimble and change direction at amoment’s notice.

This is the type of environment we need to grow more Weta’sand Icebreakers. We live in hope that the next decade will not foster another1,000 enforcers of regulations, licenses and inspection activities.

 

Source: Statistics New Zealand

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