The New Zealand immigration system uses a point system to determine the eligibility for permanent residency of skilled migrant applicants. Applicants are allocated points that associate with their age, qualifications, work experience and their ties with New Zealand (in particular employment or an offer of employment). At present applicants are discouraged from applying if their point total is less than 100, while applicants with a points total in excess of 140 are given the impression that acceptance of their application is virtually guaranteed.
The point system also includes bonus points for migration applicants who have qualifications and work experience in occupations that have been identified as being in “absolute shortage” within New Zealand. The concept behind the skill shortage list is that migrants to New Zealand are likely to add more value to the nation’s welfare if there is both a strong demand for the skills that these migrants bring with them and if their skills complement, rather than compete with, the skill set possessed by New Zealand residents.
However, identifying which occupations should be added or removed from this list is not a straightforward task. Objective data on the supply and demand for different skill sets is typically incomplete. An alternative is to canvas perspectives from interested parties. Unfortunately sector interests can distort the reliability of subjective information about skill shortages (self interest will influence the perspectives of different groups). Finally even in situations where an absolute skill shortage is identified it may not necessarily follow that immigration is the appropriate policy response, as better outcomes might result from capital substitution, reallocation of output across industries or though more training activity.
The objective of the study reported here is to foster a better understanding of which indicators provide useful information about the presence of skill shortages and how such indicators should be interpreted when developing immigration policy advice. We adopt a general to specific approach. The first step is to develop a conceptual framework for assessing what constitutes a skill shortage that should or could be addressed by skilled immigration. Within this conceptual discussion we spend a bit of time defining what we mean by skills, the types of skill gaps that can develop and discuss the immigration policy issues that arise when skill gaps are identified.
The next section attempts to identify the ‘ideal’ set of indicators that would inform an assessment of skill shortages. We identify a suite of seven types of indicators:
- Vacancy fill rates
- The relative volume of vacancies
- Evidence of excessive wage pressures
- Assess the occupations exposure to product and labour market competition
- Evidence that the current demand for the skill will be sustained
- Evidence about the length of time it might take for the New Zealand education system to address identified skill shortages
- Evidence about the degree of specialisation in different occupations
The first three set of indicators are our recommended prime means for identifying the presence of skill shortages, which should be used to monitor as many occupations as possible on an ongoing basis. The next three indicators are more about identifying in which of the cases of skill shortage might an immigration intervention be appropriate. Finally, indications of occupational specialisation can provide a list of occupations where skill shortages are more likely to occur and potentially would have disruptive impacts.
We finish with a discussion of the sources of information on each of the proposed indicators and practical issues that might limit either the construction or interpretation of indicators.