03. Debunking Market Myths

Debunking Market Myths.

There’s no doubt that COVID-19 has had farreaching impacts on every aspect of New Zealand’s economy. Our Labour market is no exception. We see sensational headlines every day, many with conflicting messages.

‘Candidate Shortage,’ ‘The Great Resignation’, ‘Great Migration’ and ‘Brain Drain’. So, what is actually playing out in the market and what can you expect to see for the remainder of 2022?

Broadly speaking, it’s taking longer to hire because there are significantly fewer candidates to choose from and those who are receptive to a conversation are looking for more money than ever before. Employers are having to shift their expectations, and retaining the best talent is becoming a top priority for businesses.

CANDIDATE SHORTAGE

2021 was the year for the job hunter and this has not changed in 2022. During 2021 job listing numbers increased by 51% year on year, in February 2022 ad volumes were up 40% and applications down 46%.

With more and more baby boomers set to exit the labour market, and with the border re-opening enabling talented New Zealanders to move off-shore, the candidate shortage is having a profound impact on recruitment.

Employers are seeing a dramatic reduction in the number of applications to online advertising and are recognising the crucial importance of networks, databases and the search process in their hiring approach.

THE GREAT MIGRATION OR THE BRAIN DRAIN

The reconnection of the globe is putting further pressure on our talent short market. We expect to see the recommencement of international movement hit New Zealand’s talent market in the second half of 2022.

There are 750,000 people in the 25-35 age bracket (20% of the working age population) in New Zealand who have not been able to travel for two years. Infometrics forecasts 40,000 New Zealanders could already be getting ready to leave the country. In addition to this many more will soon head overseas for OEs, or be lured to Australia by higher salaries.

Will New Zealand be a successful ‘net importer’ of talent?

Of course, the opening of the borders conversely means that overseas talent – both relocators and returnees, can now come to New Zealand. However, with the visa application process facing the biggest backlog in New Zealand history, the inflow of talent could be significantly slower than the outflow.

It’s also worth reflecting on our pull factors as a location. We need to work on ensuring we are offering better conditions than other countries / regions near us, like Australia and Asia. This means facilitating an easy pathway for senior professionals who may have families and their situations to consider.

At Government-level, we believe there are things that can be implemented to slow the talent drain. Ease of visa application, longevity of visas issued, ease of access to visas, incentives, time taken to convert to a permanent residency, the tax issues we face compared to Asia on our doorstep, cost of living, and rental access to name a few.

UPWARD PRESSURE ON SALARIES

From retail, hospitality, farm workers and picker-packers, right through to the professional services market – everyone is calling out for workers.

At Hunter Campbell, we are seeing a lot of businesses we work with attracting graduates with sign-on bonuses, offering a retention bonus for returning parental leave or long-service workers, providing incentives (even in non-sales roles) and offering significant pay rises above CPI.

Pre-pandemic, people were moving for flat salaries or slight increases. Today, we’re regularly seeing 20-25% shifts in salaries for in-demand areas. The question is, how long can this go on?

Such upward salary pressure will have a drawn-down effect at some point, as productivity outputs will have to rise along with the cost increases to business - and that’s not sustainable.

We’re already an expensive country to do business in, and if you add in 20% increases in labour costs, large multinationals will start looking at the cost of hiring in New Zealand relative to other countries.

In turn, this will have a flow on effect on hiring processes in the wider sense, how much we manufacture vs. import, how much flexibility a company can really offer while holding people accountable for outcomes, and so on.

In the markets Hunter Campbell operate in; middle market to top end qualified professionals in accounting & finance supply chain, operations and procurement and sales and marketing - the sentiment is still that employers will need to have a well defined strategy around their EVP and an ability to meet or in fact exceed market rates to attract the best talent throughout 2022.

THE GREAT RESIGNATION

The Great Resignation refers to a pandemic-driven market shift experienced in the USA and Europe which has seen a change in priorities and a drive to strike a more harmonious work/life balance.

Though predicted to take hold in New Zealand, the actual impacts have been much less drastic. Recent reports state “the New Zealand workforce is generally satisfied with their work lives”. However, this needs to be tempered with this same workforce believing they have “solid job opportunities in the market”.

You can infer from this that movement in the market is not driven from dissatisfaction in their current role, but the lure of greater opportunities available in the market.

It’s not too different from a peak or trough in any economic cycle. We’re in a boom market because confidence returned with a huge spike after two difficult years globally. People came up for air looking for jobs after many lockdowns and market uncertainty.

We’re seeing that as confidence has returned, people are prepared to look for jobs and the appetite for change has increased. There is a higher certainty they’ll find a job not only providing career advancement, but perhaps a significant pay rise. This causes more elasticity in the market. This will remain a factor until the borders open and visa protocols are in place for new talent entering the market.

The Great Resignation won’t last, as the salary increases that it brings are not sustainable long-term.