Skills Challenges Report – New Zealand’s skill challenges over the next 10 years
Forecast demand for skills
This section covers the changing demand for skills based on forecasts of changing prospects for employment in industries and occupations along with forecasts of the changing qualifications profiles within occupations. Technical notes about the forecasts provided below are included in Appendix A.
The key drivers of economic growth that are used in the general equilibrium model are as follows:
- World demand growth (by commodity)
- Change in world export prices (by commodity) - i.e. world price of products against which New Zealand producers are competing
- Change in world import prices (by competing industry) - i.e. world price of imported products against which New Zealand producers are competing
- Labour productivity growth (by industry) - i.e. gross output per unit of labour input
- Capital productivity growth (by industry) - i.e. gross output per unit of physical capital input
- Demographics - Labour Supply
The model also estimates, implicitly, the impact of changes in the balance of investment and consumption within the economy, for example due to the Government's infrastructure investment plan.
The Department sets each of these drivers based on an analysis of forecasts from government agencies and other reputable commentators.
Table 9 below shows the outcome of this modeling in terms of the shift in the GDP share and the employment share for each industry. As with the historical data presented in Table 4 we see that the changes in GDP share tend to be smaller than the changes in employment share, due to the different productivity growth in each industry group.
No industry group increases its GDP by more than one percentage point, indicating that the forecast model does not project substantial structural change in the economy over the next 10 years. Implicit in the settings used for the modeling is the market's assessment of changes in the world and domestic economy, including the impact of announced Government decisions.
| 2009 | 2019 | |||
|---|---|---|---|---|
| Industry | GDP share | Employment share | GDP share | Employment share |
| Agriculture Forestry and Fishing | 6.5% | 6.6% | 7.2% | 7.1% |
| Mining and oil & gas | 1.7% | 0.4% | 1.9% | 0.4% |
| Manufacturing | 13.7% | 11.7% | 13.3% | 11.3% |
| Electricity, gas, water and waste | 2.6% | 0.5% | 2.7% | 0.5% |
| Construction | 5.6% | 8.8% | 5.5% | 8.2% |
| Wholesale trade | 5.6% | 5.9% | 5.5% | 5.8% |
| Retail trade | 6.6% | 11.9% | 6.8% | 12.2% |
| Accommodation, restaurants, cafes, and bars | 2.1% | 4.8% | 2.2% | 5.0% |
| Transport & storage | 4.3% | 4.3% | 4.6% | 4.4% |
| Communication services | 3.4% | 1.3% | 2.9% | 1.2% |
| Finance & Insurance | 6.8% | 3.6% | 6.8% | 3.5% |
| Real estate | 4.6% | 2.2% | 4.4% | 1.9% |
| Equipment hire & investments in other property | 0.9% | 0.5% | 0.9% | 0.6% |
| Scientific research & computer services | 3.6% | 3.6% | 3.7% | 3.6% |
| Other business services | 6.7% | 7.8% | 6.7% | 7.9% |
| Govt admin | 5.4% | 4.8% | 5.5% | 4.8% |
| Education | 4.1% | 7.1% | 4.2% | 7.2% |
| Health | 6.2% | 8.3% | 6.2% | 8.5% |
| Personal, cultural, recreational and other community service | 3.8% | 5.8% | 3.8% | 5.8% |
Forecasting employment demand
Table 10 below shows the Department's forecast changes in employment for key industries[31] between 2009 and 2019.
| Industry | Forecast employment | Employment growth 2009-2019 |
|---|---|---|
| 2019 | Annual % change | |
| Agriculture / Forestry / Fishing | 178,000 | 1.6 |
| Mining and quarrying | 9,000 | 3.5 |
| Manufacturing | 265,000 | 0.4 |
| Electricity, gas and water supply | 11,000 | -0.0 |
| Construction | 178,000 | 0.4 |
| Wholesale and retail trade, accommodation and restaurants | 569,000 | 1.1 |
| Transport and storage | 97,000 | 1.3 |
| Financial, insurance, property, business and communications services | 458,000 | 0.9 |
| Health, education, govt admin and other services | 628,000 | 1.1 |
| Total | 2,393,000 | 1.0[32] |
The private sector service industries[33] are forecast to expand and produce approximately 108,000 new jobs in the next 10 years (49% of the total number of new jobs). This is consistent with the growth we have witnessed in these industries in recent decades.
Public and community services (health, education, govt admin and other services) are projected to grow by 65,000 jobs. Almost half of these will come in health and community services, driven by the ageing population. Employment in education services is forecast to grow more slowly as the share of the population aged 20 years and under is projected to fall from 30% in 2009 to 27% in 2019. Employment in government administration and defence is also forecast to grow even more slowly.
Auckland is projected to dominate New Zealand's population growth over the next 10 years, with 59% of the total population growth forecast to occur in the Auckland region. Auckland's population growth between 2001 and 2021 is projected to average 1.5% per year, with the next fastest growing region being the Bay of Plenty at 0.8% per year. While the projected employment growth for Auckland over the next 5 years is expected to be sufficient to absorb this population growth, many other regions face very slowly growing, or even declining working age populations (aged 15-64 years) and may struggle to fill available vacancies as the economy recovers.
While employment in the primary sector contracted in New Zealand's recent history, it is forecast to increase over the next 10 years by 26,000 new jobs. The reason for this is significant demand growth for New Zealand's agricultural products, particularly dairy products, which more than makes up for the relatively high level of productivity growth we have assumed will occur in the primary sector.
Occupational projections
The next table highlights the projected levels and growth rates forecast for high-level occupation groups over the next 10 years.
| Historical | Forecast | ||
|---|---|---|---|
| 2009 | 2019 | ||
| total number of workers (000) |
total number of workers (000) |
annual % chg |
|
| Managers | 343 | 405 | 1.7% |
| Professionals | 379 | 437 | 1.4% |
| Technicians and Associate professionals | 282 | 321 | 1.3% |
| Clerks | 239 | 241 | 0.1% |
| Service and Sales workers | 299 | 328 | 0.9% |
| Agriculture and Fisheries workers | 137 | 148 | 0.8% |
| Trades workers | 184 | 183 | -0.1% |
| Plant and machine operators | 176 | 193 | 0.9% |
| Elementary occupations | 133 | 136 | 0.2% |
| Total | 2,173 | 2,393 | 1.0% |
Key points about occupational projections
- Management occupations are projected to grow most rapidly over the next 10 years, in both absolute (62,000) and relative (1.7% per year) terms.
- Professional occupations are expected to grow by 1.4% per year (58,000) followed by Technicians and Associate Professionals (1.3% or 39,000).
- Clerical occupations are expected to remain at their current level, which will continue the long-term decline in the share of clerical jobs in the labour market.
- The number of trade workers is projected to remain flat, reflecting slow growth in employment in manufacturing and construction.
The changing nature of skills required
Overseas analysis[34] also notes an expected increase in demand for more highly skilled occupations. It also notes that there will be greater emphasis on skills associated with "knowledge work" (for example cognitive skills such as abstract reasoning, problem-solving, communication and collaboration with clients and colleagues).
At the lower skilled as well as higher skilled end of the labour market, jobs will become less physically demanding and repetitive but more knowledge-intensive. Personal traits such as communication skills and attitudes are therefore going to be increasingly important. A higher proportion of jobs (including lower-skilled jobs) will require regular upskilling (largely on the job). One implication of this is that people out of the labour force for long periods may find it more difficult to return even to lower skilled jobs. On the plus side, a more communication oriented workforce in some ways suits an ageing workforce, as older workers are less able to endure physical work but cognitive and communication skills generally improve from middle through to older age groups.
Forecasts of demand for qualifications
Projected changes in demand for qualifications with each occupation group are shown in Table 12 below[35]. Some of the growth in demand for formal educational qualifications occurs within occupations as well as resulting from an increasing number of people employed in higher-skilled occupations. Some of this qualification demand shift has been related to changes in policy, for example greater certification requirements in areas such as adventure tourism, social work, security services and childcare provision. Other major changes include movements from certificates to degrees as more common qualifications for an occupation (such as in nursing or primary school teaching). The forecasts implicitly assume that this trend towards formal occupational requirements will continue.
| No quals | School quals | Basic vocational | Skilled vocational | Inter-mediate vocational | Degrees and advanced vocational | Total | |
|---|---|---|---|---|---|---|---|
| Managers | -6.7 | -2.4 | 2.6 | 6.8 | 7.8 | 2.2 | 1.7 |
| Professionals | -2.2 | -6.3 | -1.5 | 6.3 | 7.7 | 1.2 | 1.4 |
| Technicians and Associate professionals | -2.0 | -4.6 | -2.9 | 5.9 | 6.5 | 2.1 | 1.3 |
| Clerks | -2.6 | -2.9 | 0.9 | 6.5 | 4.9 | 2.8 | 0.1 |
| Service and Sales workers | -0.7 | -1.4 | 0.8 | 6.2 | 4.7 | 3.4 | 0.9 |
| Agriculture and Fisheries workers | -1.5 | -2.3 | 1.9 | 5.7 | 6.5 | 2.6 | 0.8 |
| Trades workers | -4.1 | -6.7 | -1.8 | 3.8 | -11.7 | 2.0 | -0.1 |
| Plant and machine operators | -0.5 | -2.2 | 3.2 | 6.7 | 2.6 | 2.1 | 0.9 |
| Elementary occupations | -1.6 | -1.5 | 3.0 | 6.3 | 3.2 | 3.1 | 0.2 |
| Total | -1.9 | -2.9 | 0.9 | 5.7 | 6.0 | 1.8 | 1.0 |
Key points about qualification demand projections
- The strongest growth is indicated for skilled (5.7% per year) and intermediate (6.0% per year) level vocational qualifications over the next 10 years.
- For intermediate vocational qualifications, the growth in demand is driven by management and professional occupations, while the growth in demand for skilled vocational qualifications is spread more widely across occupation groups.
- Growth in demand for degree holders is driven by management occupations, where retiring cohorts of managers will be replaced by new managers who are more likely to have degrees. While a strong relative increase (3.1%) is projected for elementary occupations, the current number of degree holders is very small.
Demand for workers with either no educational qualifications, or with only school level qualifications is likely to fall sharply by 2-3% per annum.
Footnotes
[31] ANZSIC96 Industry Classification
[32] Note that the overall labour demand growth forecast is slightly higher than that show for the labour supply forecast (0.8% per year). This does not indicate an overall undersupply of labour, as the demand model incorporates the overall growth in the labour supply. Rather, it is the result of the different types of models used and differences in the base data sources,
[33] Trade, accommodation, cafes and restaurants, transport, communications, finance, insurance, properties and business services.
[34] Leitch. S. Skills in the UK: The long-term challenge, Interim report, Leitch Review of Skills, December 2005. and Karoly, L.A. and Panis, C.W.A. The 21st century at work- Forces Shaping the Future Workforce and Workplace in the United States, Rand Corporation, 2005, retrieved from http://www.rand.org/
[35] The highest qualification shares of the various occupational groups and their changes over time are estimated using Census data showing changes in qualification shares within occupations between 2001 and 2006.
[36] Note that degree holders and those with advanced vocational qualifications are combined. This is because in the 2006 Census, people who held advanced vocational qualifications that were at degree level (NCEA level 7) were included in with degree holders. This appears to have considerably inflated the growth in degree holders and restricted the growth in advanced vocational qualifications, so the two have had to be combined.
