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Canterbury rebuild - demand for occupational skills

Report No. 1, 18 July 2011

Introduction

The following report is based on information provided by five of the major construction companies that are involved in the Christchurch rebuild and the Alliance (which is a coalition representing the interests of the major infrastructure construction companies).

The Department of Labour (the Department) has established a longer-term project to collect and coordinate construction company estimates of demand for occupational skills. Time constraints have meant that we have not yet made contact with the small and medium building companies that comprise the bulk of the sub-contracting sector. Given their significance for labour demand and training, we will be exploring ways to capture this data.

The companies that provided the information were visited in Auckland and Christchurch. The objectives of the discussions with these companies were to:

The companies interviewed have all agreed to participate in the project and provide information when it becomes available. They have requested confidentiality given that there are commercial sensitivities underpinning information about their labour demands and opportunities to access sources of labour.

This report covers the state of current knowledge about the rebuild, company understanding of rebuild timelines, aspects of commercial/residential building, labour demand and supply, other issues impacting on company actions and suggestions from companies about government action.

State of knowledge

The information about infrastructure construction and commercial building is opaque at best. Although this is not unexpected it does mean that companies are unable to be specific about their planning and consequent labour demand. The Alliance is expecting the infrastructure planning to be completed in six to eight months and will then be in a position to allocate rebuild work to Alliance members.

The general attitude seems to be one of “quietly” gearing up for the expected onrush of work in February/April next year. Gearing up involves making arrangements with subcontractors and seeking to recruit key workers. There are already constraints on the availability of workers in certain occupational areas and companies are actively looking here and abroad for these skilled workers.

Commercial construction is one of the difficult areas for companies to forecast. Owner plans are unclear and the scope and scale of rebuild work is unclear. The expectation is that some owners of destroyed properties will not rebuild and some may not go back into the CBD. There is some commercial rebuild work underway particularly for companies that have had longer term relationships with building owners. Loyalty counts as does the work of dependable and quality-oriented construction companies.

The companies working on insurance company rehabilitation and rebuild projects (residential) are reasonably active and labour shortages are already appearing.

Anticipated timing

There was a fairly consistent message that the construction market in Christchurch is, at the moment, fairly flat. It was commented that tradespeople are still leaving the industry and it was hoped that the government would respond to this with early action. The point was made that if there is no early stimulus then the market situation will become very difficult.

As indicated above the real pressure on labour and resources is expected late in the first quarter next year as construction begins in earnest and the companies interviewed expect major difficulties in securing suitable and quality labour.

Commercial/Residential/Infrastructure

There is some concern that the early start on residential rehabilitation and rebuild work will lock labour and subcontractors into that sector and labour for infrastructure and commercial building will be harder to procure. There is some frustration that companies are unable “to go hard” and contract or employ labour now when the full extent of the commercial and infrastructural work is still unclear.

It was suggested that the labour situation will be back to that experienced in 2004/05 when things pick up. This will mean that labour prices will go up (already moving up with the recent pay deal) and it is feared that labour will become very difficult to deal with.

Some companies are uncertain that the rebuild will be particularly profitable and consider that although “a living will be made” superprofits are not on the horizon. Companies, particularly the smaller ones, clearly do not want, or intend, to overextend themselves and will be taking a reasonably conservative view of the amount of work they will take on. Alliance companies will be selected for packages of work according to their capacity and suitability for particular work when the size and scope of the infrastructure projects becomes clearer.

Labour demand

Already labour shortages are appearing. These include:

It is anticipated that there will be very strong demand for all trades once the rebuild picks up steam. Roofing contractors are expected to be in heavy demand along with suppliers of aluminium windows.

Although solid figures are not yet available companies are planning on a very significant expansion of their workforces. With an overall estimate of $2 billion worth of horizontal construction an Alliance member was indicating that its potential share could require it to put at least 36 individual work crews on the ground in Christchurch. It would be intending to subcontract for much of the labour whereas some other Alliance members would be taking a different approach by employing labour and delivering services themselves.

The Alliance is planning for an increase in work crews from the current 38 working in Christchurch to at least 150 crews.

As an indication of how labour demand will be picking up a smaller company mentioned that it would be looking to increase its labour force by between 30 and 50% (increasing staff numbers by 2 project managers, 2 to 3 quantity surveyors, 12 supervisors, 2 site managers and 60 trade labourers). Another company is currently looking to recruit 30 carpenters and 3 quantity surveyors and is having difficulty locating suitable and good quality candidates.

Better figures for labour demand will become available as the work requirements clarify. The companies contacted are more than willing to provide us with updated information.

Labour supply

Migrant labour

Companies are already looking offshore for key occupations. The UK and Ireland have been mentioned, particularly for the higher skilled occupations (quantity surveyors, site managers etc). Problems here include the fact that seismic activity is continuing and some potential employees have shown some nervousness about this; it is also difficult for New Zealand companies to pay the salaries required to get these skilled employees to come to New Zealand. This latter issue is a real problem for the second tier construction companies (not small but not as large as the majors) that feel that it will be very difficult, if not impossible, to compete with the majors in critical labour areas.

Construction workers from the Philippines were mentioned by more than one company as these workers were considered to have a good work ethic, honest, well-educated and with some English language skills. They were thought to be a better prospect than Thai or Malaysian workers.

Internal migration – mainly temporary – is being actively pursued by construction companies. Skilled labour is being sourced (generally from the company’s own resources) from Auckland, Dunedin and other cities. But there is some reluctance on the part of families to move to Christchurch while seismic activity continues. Expense is also a factor as employees may have to commute (home for the weekend) or secure tenants for their distant houses while they try and organise longer-term accommodation in or around Christchurch.

Accommodation in Christchurch is a very real issue for all the companies interviewed. Not only is it in critically short supply (for the dispossessed local residents as well) but workers are having to be housed outside the city (Woodend, for example, some 20kms away). This accommodation issue will deepen as the rebuild work picks up.

Labour quality

It is becoming very difficult to secure good quality labour. The supply of good quality labour from the local labour pool plummeted “overnight” in April when the EQC work “got legs”.

WINZ labour was not highly rated because of the drug-taking histories of potential employees – this comment came from one company who had tried to secure labour from this source and will continue to do so. Construction companies have very stringent drug policies (reflecting the dangers associated with construction activities) and potential workers could be disqualified form employment because of this.

Again a small sample, but one company commented positively about its experience with prison labour from Rolleston prison. The “work-to-release” scheme was working well for it (a small number of prisoners have been involved – the workers have to have had work experience in relevant skill areas).

Good quality labour is still leaving the Christchurch area for Australia (in this case Western Australia). The attraction is apparently two-fold – higher rewards and the absence of ongoing seismic activity. Better opportunities in Australia and the pressure from families that are distressed by the earthquake activity is providing a strong incentive to leave.

For a number of the reasons already mentioned it is difficult to find good quality labour with post-apprenticeship experience. The critical need is to be able to locate qualified staff with between four and ten years’ experience.

Training

Companies are taking on new apprentices but don’t see this as the prime answer for alleviating their likely labour problems. One company is sending its apprentices to Dunedin for block course training because Christchurch tertiary institutions do not, apparently, run day courses. The company feels that an apprentice is too tired after a day’s work to be able to take full advantage of the training and as a consequence takes longer to complete the apprenticeship (five years compared to the three or so years with the Dunedin training).

Apprentice training and lower-level skill training is a major concern for the sub-contracting sector. There will also be an expectation on the part of principal contractors that sub-contractors will have taken steps to ensure that they have an appropriate number of trained and qualified staff available to take up contracted work. The Cabinet decision that training matters will be a consideration when an agency is contracting construction work in Christchurch, adds further weight to the need to make progress on organising apprentice and skill training.

The Alliance is working with ITOs to try and organise fast-tracked training for key occupations given that the normal training programmes will not meet forecast needs.

Issues

Materials

There is some worry that the supply of certain materials will not be sufficient to meet demand. There are only 4 concrete plants in the Christchurch area and the pressure will come on supplies – this may require companies to book supplies 2 to 3 weeks ahead. Aggregate may not be a problem but cement could be in short supply. With only three good scaffolding companies shortages are expected. (Gib Board is already being imported from overseas).

Christchurch City Council

Not unexpectedly there was some criticism of apparent delays stemming from Christchurch City Council internal processes. The concern was expressed that local government politics may be a factor in this. There was also criticism of the Council for delays relating to Code of Compliance approvals.

NZQA

Although not seen as a political issue, the New Zealand Qualifications Authority (NZQA) was criticised for the time it took to vet overseas qualifications.

Department of Labour

The Department’s action in going out to listen to company voices and to collect information about the state of the labour market was seen as an extremely positive development. The Alliance, for example, thought the Department should act as a central point for the collection of data (it will be collecting information from its own members and will supply this to us). It was thought that having ongoing contact with the Government on these labour issues, through the Department of Labour will be critical in the months (and years) ahead.

Some immigration matters were raised (the cost and difficulty of becoming an Accredited Employer, the possibility of the relaxation of visa requirements specifically for the Christchurch rebuild) but there was no criticism of services at this point.

Future actions

Wider contact

Although the major construction companies will be good sources of information about sub-contractor issues, it will be important to develop independent sources of information about SME and sub-contractor issues. We have already been offered assistance on this by the BETA partnership (with ETITO as a prime contact).

We will also be making contact with a wider range of the larger construction companies involved in the rebuild. This will be done over the next few weeks.

Regular return of information

To help companies with the task of providing occupational demand and supply information to us we developed a simple template that would show, in tabular form, the particular occupations that are in demand (by each of the major companies or organisation that have agreed to participate) at a point in time. The occupational list uses the 40 category ANZSCO codes. The report (which will probably be completed once every two months) will provide information on the timing of demand (immediate, in three months and in nine months) and where companies expect to be able to source labour from (“fully trained New Zealanders”, “trainees”, “migrants”). There will also be an opportunity for companies to comment on any other issue relating to their labour demand.

As companies have indicated a willingness to provide this information we will initiate the process from August.