The Invisible Hand…

July 26, 2013
Iain MacLeod

In the mid 1700’s Adam Smith revealed what would arguably become the cornerstone of modern economics; the suggestion of an invisible hand that guided the self-interest of individuals in a society to promote the wellbeing of that society as a whole. Smith’s dictum was summed up in the following quotation from his opus, the Wealth of Nations:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest…”

This philosophy has been debated, contested and argued throughout history, but there is little denying that in a free market self-interest and self-gain within the economy will generate the highest level of productivity and arguably the best overall result. It’s when Governments attempt to steer the course of that productivity and become the (not so) invisible hand, that outcomes falter (and fail).

Whilst this might seem like the beginning of an Economics 101 lecture its actually incredibly relevant to the issues migrants face when attempting to secure Work Visas in New Zealand. For many migrants the path to Residence is bordered by the need to secure an offer of skilled employment first. This employment then gives them sufficient points to qualify for Residence as a Skilled Migrant.

The problem with this strategy is that a Residence application will take between 6 to 9 months to process to conclusion and no employer (well very few) would be willing to wait that long for the applicant to be in a position to commence their job. To overcome this situation, we routinely file temporary Work Visas for our clients which only take three to four weeks to process (all things being equal) and allow the client to start work, allow the employer to fill their staffing needs and luckily for INZ gives them the time needed to process the Resident Visa application – sounds simple enough.

There is one problem with all of that.

Skilled Migrant policy has no interest whatsoever in whether or not there might be a local New Zealand Citizen or Resident available to do the job being offered to the applicant. There is no ‘labour market test’ to find out if suitably qualified locals are available or may be readily trained. Work Visas on the other hand are a different story.

Work Visa policy has a very different agenda and, like in most developed countries, is designed to simultaneously help employers to fill their skill shortages whilst protecting ‘jobs for locals’. Immigration New Zealand does this by using two different methods. There are lists which include occupations where a shortage of supply in applicants has been identified (the Long Term Skill Shortage List and the Immediate Skill Shortage List for example), although applicants need to meet very specific qualification and work experience requirements to be eligible under these lists. For all other roles they use a series of labour market tests.

When a Work Visa application is filed for a role that doesn’t appear on any of INZ’s shortage lists, it is the responsibility of the applicant (or their advisor) to argue that there is in fact a shortage of suitably qualified people for the position and that the employer has attempted (genuinely) to find someone. If INZ are satisfied that this has been done then a Work Visa can be approved however, if INZ are not satisfied or if the role is below a particular skill level, then INZ deflects that responsibility to another branch of Government called Work & Income New Zealand or WINZ for short.

WINZ like many Government Departments in New Zealand is given multiple tasks; the first is to administer social welfare benefits to those in need and those in between employment. At the same time they are given the role of being our ‘national recruitment service’ in trying to get those unemployed beneficiaries back to work.

This is where Adam Smith’s invisible hand becomes the very visible hand of central Government interfering directly with the way the local labour market works.

Mr Smith may have been referring to Butchers, Bakers and Candlestick Makers when he outlined the theory behind economic self-interest and productivity, but he could have equally been discussing recruitment. When you are trying to fill gaps in the local labour market, you need to have an organisation or organisations that have a commercial interest in doing so. They need to be commercially driven to put unemployed people into available roles and they need to do it as if their mortgages and dinner on the table depended on it. Anything else is simply going to be lip service. We see this regularly with employers who are rail-roaded into dealing with WINZ in order to prove that they can’t find suitable staff within New Zealand; in spite of the employer having advertised their vacancy on Seek or Trademe (two of New Zealand’s largest recruitment websites). For some reason Immigration believes that active job seekers enrolled with WINZ don’t know about these websites and insist on asking WINZ to conduct labour market tests.

I cannot recall a time when an employer that I have dealt with has contacted WINZ and been given good quality people that match or even vaguely match the skills required for the role and that is if WINZ manage to understand what the role is. A couple of years back I dealt with an employer who filed their vacancy for an IT Accounts Manager with their local WINZ office. They got a lovely introductory (template) email from the WINZ ‘Work Broker’ introducing themselves and confirming that the role had been placed on the website. Ten days passed and not a whisper, let alone a suitable candidate. The employer eager to find out what was going on; contacted the Work Broker, who replied with something along the lines of “I have been unable to find any Accountants on our database”. I wouldn’t be surprised if there was a string of IT Account Managers queuing up for interviews at Deloittes.

All too often WINZ fail to deliver a suitable applicant that is if they respond at all. However, when the employer takes a proactive approach to the problem and other Government Departments are involved, then WINZ will want a slice of the action. We recently assisted an employer with an application for an ‘Approval in Principle” to hire offshore staff. Basically an Approval in Principle is a license that allows the employer to recruit foreign nationals, having already established that there is a shortage of skills. This employer had been in contact with WINZ for months before the application was filed with INZ with zero result. There was little to no follow up on the part of WINZ and no supply of suitable candidates. Although as soon as the sniff of an “Approval in Principle” application surfaced, WINZ wanted a ‘round the table, we want to get to know your business’ meeting. Too little, too late.

The fact (one that INZ seems oblivious to) is that employers given the chance will recruit locally if suitable candidates are available. When no suitable local candidates are available they will source internationally and the best judge of when a skill shortage exists is not some public servant with little to no incentive to put people in to work as long as they receive their 9 to 5 pay-check. The best judge of a skills shortage is the employer, people in the industry, people who have recruited in the industry and understand the challenges faced in finding the right staff.

Governments do have a role to play in reducing unemployment levels, but they will never achieve that with a system that employs people with no commercial incentive or profit motive to achieve those outcomes. In this writer’s opinion, the only way to realistically achieve this would be to bring back the ‘invisible hand’ and outsource the entire national recruitment enterprise to the private sector. When your livelihood rests on how many people you can place in to gainful employment you would be surprised how many people will get jobs.

Finally, leave the free market to its own devices. Employers will continue to employ locally when possible and continue to recruit offshore candidates where shortages exist. Migrants will be better placed to secure Residence and meet the Government’s demand for increasing the skilled workforce and the great divide between Temporary and Resident Visa policy will get a little smaller. And if we remove the responsibility of recruitment from the public service, we might just save ourselves a little bit of money in the process.

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