Goods and services produced

The goods and services produced in the Wellington Region changed between 2001 and 2006, and this has had an impact on employment in the region. Total employment in the Wellington Region grew by 8% to over 200,000 people between 2001 and 2006. This is well below the national employment growth of 15% in the same period.

Linked to the low growth in jobs, the Wellington Region experienced lower than average growth in Gross Domestic Product. Over the five years to March 2006, the Wellington Region grew at 2.7% compared to the national rate of 3.7%^[12]. Recognising the significance of this issue, the Wellington Regional Strategy stated:

In 2006, councils in the region invested $3.9 million in economic development. It is proposed this be increased to $4.5 million in 2007/08 and $4.5 to $5.6 million for each of the subsequent two years^[13],

In terms of absolute numbers, the largest employment growth occurred in the Property and Business Services and Government Administration and Defence industries. The growth of these industries is important to Wellington Region as they accounted for over a quarter of the total employment in 2006. A number of industries experienced a decline, including Manufacturing, Communication Services, Transport and Storage and Agriculture, Forestry and Fishing, although these industries are not all large employers in the region.

Across the whole country, recent economic growth during this period has been driven by the domestic economy. Domestically, interest rates over the last eight years have been lower than those over the previous 20 years (although higher than many other OECD countries) and, combined with inward migration have contributed to the growth in consumer spending and the property market. As employment grew and house prices rose, consumers were spurred on to continue spending.

This has created demand for retail products, residential construction, property services, hospitality, personal services, cultural services and recreational services. As these business expanded, this created demand across the supply chain for wholesale goods, business services, communications, transport and storage, finance and insurance. Government spending has also contributed to growth in health and community services and education.

The exporting sector (mainly agriculture and manufacturing) had a more difficult time. The strong New Zealand dollar reduced the competitiveness of manufactured goods and agricultural products in international markets.

At the time of the 2006 Population Census, the largest employing industry in the Wellington Region was Property and Business Services (nearly 37,554 employees, 18.4% of regional employment). This employment was focused on the Other Business Services and Marketing and Business Management Services industries.

The second largest industry in terms of employment numbers was Retail Trade, with nearly 24,000 employees - 11.6% of employment. This employment was focused around the Supermarket and Grocery Stores, Specialised Food Retailing, and Other Personal and Household Good Retailing industries.

Government Administration and Defence was the third largest employer, with slightly over 20,000 employees - 10.1% of regional employment. This employment was focused closely on Government Administration, reflecting the concentration of government departments in Wellington City.

Employment growth was largest in Property and Business Services, with over 5,300 more employees in 2006 compared with 2001.

Over the same period, employment within the Government Administration and Defence industry grew by just over 4,000 employees.

Discussion point 4:

• Does this industry profile fit with what you know about the region?

National, industry and regional impacts on regional employment growth

Employment change in a region over time is a product of three separate components:

• The performance of the national economy influences the performance of the local economy.
• National industries grow at different rates - the scale of an industry in a region and the national performance of that industry influence the performance of the local economy.
• The same industry can grow at different rates in different regions - region specific industry growth influences the performance of the local economy.

By separating out employment growth resulting from each of these three factors, we get a much clearer view of the causes of regional employment growth than from the total employment growth figure^[14]. This section investigates each of these three influences on regional employment growth.

If the Wellington labour market had grown at the national rate, employment would have grown by just over 28,000 employees - this result is represented by the column in Chart 14 called National Growth.

After removing the influence of national growth, i.e. had the industries in Wellington grown at national growth rates, employment would have declined by just over 4,200 employees - this result is represented by the column in Chart 14 called Industry Mix.

After removing the influence of an industry's national growth rate, the remainder shows that employment would have declined by over 17,000 employees - this result is represented by the column in Chart 14 called Region Specific. These three components combine to produce an increase in Wellington employment of over 15,200 between 2001 and 2006.

Industry mix

The mix of industries plays an important role in determining employment growth. While Agriculture, Forestry and Fishing employment declined and Manufacturing employment was almost static between 2001 and 2006, these industries were under-represented in the region. Conversely, the high growth Property and Business Service, and Finance and Insurance industries were over-represented in the region. With a low share of low growth industries, and a high share of high growth industries, the industry mix caused employment in the region to grow.

Region specific

Region specific characteristics have had a major effect on employment growth in the Wellington Region. Between 2001 and 2006, all but the Government Administration and Defence industry, and the smallest industry in the Wellington Region grew at a lower rate than the national averages. Many variables can influence the performance of a region's industries independently of their national growth including regional infrastructure changes, businesses opening or closing and production issues.

Discussion point 5:

• What regional characteristics have created the current industrial landscape in the region? Think about: climate, topography, population, resources, regional planning and culture.
• Is there an over-dependence on a particular sector or sectors?
• Are there opportunities for industry clusters?
• Have there been or are there any major Foreign Direct Investment opportunities?
• Is your regional labour market influenced by offshoring of production?
• What have you heard about growing and declining industries?
• What international, national and regional forces are driving these changes in the industrial landscape?
• What is the outlook for your region’s industries?
• What do you see as the key regional industries? What are their short-term and long-term priorities for these industries?

Employment growth in occupations

In the Wellington Region between 2001 and 2006, employment grew in all the highly skilled occupations (Legislators, Administrators and Managers and Professionals), in the Technicians and Associate Professionals occupation group, and in some semi-skilled and elementary occupations (including Service and Sales Workers, and Labourers). Employment growth was largest for the highly skilled occupations. In contrast, employment decreased mainly in the semi-skilled and elementary occupations (including Clerks, Agriculture and Fishery Workers, Plant and Machine Operators and Assemblers), and in the Trades Workers occupation group. Employment growth in each occupation was smaller in Wellington Region than the national average. The decrease in the employment of Agriculture and Fishery Workers was also greater in Wellington Region.

Source: Census 2001 and 2006, Statistics New Zealand

Source: Census 2001 and 2006, Statistics New Zealand

Regional, industry and occupational impacts on skill requirements

Skill requirements can change for a number of reasons. If regional employment is growing strongly, the economic conditions driving this can be expected to increase employer requirements for the whole range of skills. Skill requirements also change because of changes in the mix of goods and services being produced in the economy.

If there is an increase in the number of houses being built in the region, there will be an increase in employers' requirements for carpentry skills. Skill requirements also change if the mix of skills required in producing a given amount of a good or service changes. If the house builders in a region begin to use wood frames more and aluminium frames less (maybe because the price of wood has come down), employers' requirements for carpentry skills will increase even if the number of houses being built remains the same.

Addressing skill shortages is specifically identified within the Wellington Region Labour Market Strategy^[15]. The strategy notes that

...action is needed to reverse the current trends of:

• decreasing job vacancy fill rates in the region
• people with skills moving off-shore for work
• shortages in the trades, technicians and apprenticeships
• higher percentage of workforce of some groups overrepresented in low skilled employment
• reduction in skilled migrant flows into the region.
• lack of matching of skills to business needs.^[16]

The strategy goes on to identify a range of constraints, solutions and timelines to address these points. The key issue identified is the ability to identify future skill needs and train accordingly. The priority solution identified in the report is for the development of a regionally integrated clearing-house and collective intelligence sharing.

The following is an outline of what's driving changes in Wellington employers' skill requirements.

Highly skilled jobs:

• The employment growth of Legislators, Administrators and Managers was highest among all the occupation groups between 2001 and 2006. This was mainly driven by an increase in the concentration of these occupations in all of the industries, especially in the Property and Business Services and Retail Trade. Together, these industries accounted for more than a third of the total employment of Legislators, Administrators and Managers.
• The employment growth of Professionals in the Wellington was high between 2001 and 2006. This was driven by the growth of a number of industries, especially Property and Business Services and Government Administration and Defence, where over 40% of Professionals were employed in 2006. The growth was supported by the increase in the number of Professional employees in a number of industries, most significantly Government Administration and Defence, Property and Business Services, Finance and Insurance and Personal and Other Services.

Skilled jobs:

• Growth in the employment of Technicians and Associate Professionals was also relatively high between 2001 and 2006. This was partly driven by the growth in a number of industries, most notably Property and Business Services and Government Administration and Defence, where one-third of the occupation group was employed. More importantly, the growth was driven by an increase in the prevalence of Technicians and Associate Professionals in a number of industries, most significantly in Retail Trade, Finance and Insurance and Health and Community Services.
• The employment of Trades Workers in the Wellington Region declined between 2001 and 2006. This was partially because of the decline in the Manufacturing industry employment, which accounted for a quarter of the total employment of Trades Workers in the region. More significantly, the employment decline was due to the decrease in prevalence of Trades Workers in a number of industries, notably Construction, Retail Trade and Property and Business Services.

Semi-skilled and elementary jobs:

• Employment of Clerks in Wellington Region declined significantly between 2001 and 2006. This is due to a pronounced decrease in the share of clerical occupations in most industries, especially in Finance and Insurance, Property and Business Services and Government Administration and Defence.
• The employment growth for Service and Sales Workers had been moderate in the Wellington Region. This was driven by the growth in Retail Trade and Accommodation, Cafes and Restaurants, where more than half of the Service and Sales Workers were employed.
• Employment growth of Labourers and Elementary Workers was small between 2001 and 2006. This is mainly driven by a slight increase in the prevalence of this occupation group in a number of industries, especially the Construction and Manufacturing industries.
• The employment of Plant and Machine Operators and Assemblers decreased between 2001 and 2006. This was mainly driven by the declining employment in the Manufacturing and Transport and Storage industries, where just over half of Plant and Machine Operators and Assemblers were employed. It was also driven by the decrease in the share of this occupation group in a number of industries, especially in Manufacturing, Construction and Transport and Storage.

Paul Mather, Director, Centre for Smart Product at Weltec reports:

There is little in the way of clearly-articulated skill shortage advised by industry. Weltec have isolated issues and likely skill shortages around the current and potential sunrise industries, in particular, high level technician skills to support the high temperature superconductor sector, the biotechnology sector and the nanotechnology sector. There is also likely to be ongoing demand for advanced toolmakers. The issue is, when do we put the money in to develop the infrastructure to support these new industries?

Discussion point 6:

• What types of skill are most in demand in the region? Think about: technical skills such as carpentry or sheet metal working, soft skills such as communication, punctuality and management skills.
• Are businesses able to articulate their skill demands? If not, why not?
• What skills are in growing demand? What is driving this growing demand?