Perfect population storm on horizon

Last updated 11:50 02/01/2011
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POPULATION PROBLEM: Everyone knows a Kiwi who's upped sticks and gone to Oz.

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Everyone knows a Kiwi who's upped sticks and gone to Oz, or a 20-something who went on their OE, landed a job and decided the grass was greener somewhere else.

It's such an entrenched phenomenon that a population expert is warning there's a gaping hole in New Zealand's workforce where all the 20-35-year-olds should be.

Natalie Jackson calls it the "apple core effect" – the hole left by those who've quit the country and aren't coming back.

She claims the situation is so bad that there could be little left to prop up the workforce as baby boomers start to retire.

Professor Jackson, who heads Waikato University's newly-formed Nidea, or National Institute of Demographic and Economic Analysis, says there is "virtually no understanding" of how New Zealand's age structure has changed, and what that means for the future.

Such comments have some in business bristling. The problem, say population experts, is that next year is regarded as the first in which the baby boomer generation begins to retire. Each year after that the number leaving the workforce will increase.

While that is going on there are problems at the other end of the age scale as a declining birth rate means the number of young people entering the workforce gets smaller each year. Jackson says it's a perfect storm that will continue to build, even if the boomers delay retirement.

Masking the effect is a "baby blip" of people born around 1991. They're now aged between 15-19, and the group is relatively large. "So most employers still think there is a bucket of young people coming along, and right at the moment they're correct."

But the more boomers who retire, the more competition employers will face for young people. That will push up labour costs and compromise skill levels – something businesses need to prepare for, Jackson says.

"The situation is more pronounced in some regions. Of course you can't ship someone from Auckland to Southland on a daily basis. The problem is that people remain focused on population size, positive migration and high birth rates, without an appreciation of the overall age composition. And they think in terms of the total population, without thinking about regional realities."

Between retiring baby boomers – who are expected to make up about 25% of the population by 2051 – and new workers is the "bite" in the apple core – those not being replaced by migration gains.

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Jackson says people don't realise when they hear about migration increases that there will have been gains at some ages but losses at others. "In our case losses at young ages have been concealed by greater gains of people 35-plus."

The overall effect, she says, is complacency.

But business growth centre boss Andy Hamilton sees it differently. He wants young people to go offshore and doesn't mind a bit if they stay there.

The Icehouse centre he runs is a collaborative venture between Auckland University and several large businesses. Its website says it aims to take responsibility for delivering 350 of the 2000 companies needed to get New Zealand into the top half of the OECD by 2013.

"Our vision is to be the place for turning entrepreneurial companies into international successes."

Hamilton says that's about getting alongside businesspeople to help their talent pool increase and, in turn, the nation's prosperity.

"Our thinking is that we need more New Zealand companies building global success – and we need as many Kiwis offshore as we can get to help them."

It's a view that could be interpreted as supporting the Kiwi "brain drain", but Hamilton says he's seen a lot of Kiwis come home after creating a bit of wealth offshore who are not that useful.

"They're more useful to us if they remain away."

But he also says there are some incredible young entrepreneurs in New Zealand who are creating exciting reasons for people to stay.

He's adamant business owners are grappling with the issue of an ageing workforce, but admits it's a big issue. "They will adapt – they have to."

As the workforce ages, so too does the age of business owners, who are now facing the question of who will succeed them?

"It is incredibly challenging and emotional for business owners to deal with," says Hamilton. "Succession is not a transaction. But they'll adapt, even though some people want them to do it faster."

Transition is where the Employers and Manufacturers Association comes in. As a member-based organisation, it works to develop business.

Executive officer Mike Burgess says the association is conscious of the challenges and migration doesn't hold all the answers, because some countries with large population bases don't have workers with the skills older New Zealanders have acquired through necessity.

"Our problem is where the supply of labour is going to come from. Skills are extremely important and older workers have them."

Burgess is pinning his hopes on those nearing retirement age choosing to stay in the workforce. He cites increasing life expectancy and financial reward as two motivators.

The association is also working with schools to encourage school leavers to consider the kind of skills' training employers are looking for.

"Demand for staff is picking up again so it's a matter of keeping those young people in there with life-long training."

Professor Jackson agrees that unless businesses guarantee continuous training, workforce issues will only be exacerbated.

"Our ageing population changes everything we take for granted."

- Sunday Star Times

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