Hospo 'addiction' to cheap migrant labour could force the closure of businesses unable to afford NZ workers
Friday, 23 July 2021
Large scale closures of unprofitable cafes, bars and restaurants may be in the offing if hospitality businesses addicted to cheap migrant labour cannot afford to pay Kiwis higher wages.
That’s the warning from senior lecturer at AUT’s school of hospitality and tourism David Williamson who says migrant labour is the equivalent of cocaine for the sector, and businesses that cannot cope without it may have to shut their doors.
“Perhaps it is good for this country to lose a third to a half of the bottom part of the market who simply are not good enough to generate sufficient value and profit to pay competitive wages.”
The Restaurant Association has estimated it will need an additional 20,000 workers over the next four years, and over the past 12 months the Ministry of Social Development has poured more than $1.5m into trainingschemes to recruit and retain hospitality staff.
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But Williamson, who had been a restaurant owner, argues training alone will not solve the labour shortfall because hospitality is competing with other industries offering higher pay and more attractive conditions.
“This industry still has the highest turnover rate and the lowest hour pay rate out of any measured sector in the economy.
“It doesn't matter how many locals you jam in through training, if your business model can’t produce enough profit to pay people a competitive salary, you’re not going to be able to survive.”
Williamson questions whether more choice is always better.
“I personally think that fewer options providing better conditions and better quality is a good thing.”
Hospo’s productivity problem
Economist Benje Patterson says people in hospitality work hard, but productivity is a challenge because of the sector’s low margins, and the way businesses are structured.
“There’s a lot of times during the day when they’re not so busy, and the actual economic value they add, their profitability per job, ends up being substantially lower than other industries.”
Stats NZ figures show return on equity for hospitality businesses fell from 21 per cent in 2017 to 16 per cent last year.
Patterson says that is a significant drop and shows how rising costs, and resistance to price increases by consumers, are putting the squeeze on business owners.
He concedes that introducing efficiencies in such a labour-intensive industry is challenging, but suggests sharing workers between businesses with different peaks in demand is a possibility.
“A business might be able to use workers during the coffee rush, and then during quiet periods they could move on to help prep at a neighbouring café or restaurant for evening service.”
Restaurant Association chief executive Marisa Bidois says accessibility has always been a hallmark of the industry, and opinion is sharply divided over the merits of limiting new business openings, for example by limiting liquor licences.
“One [camp] agrees with that, others say that is basically tampering with the free market, which means businesses are more innovative, and we are spoilt for choice.
“Around the country for a good majority, trading is slightly above where they would normally be at this time of year, there’s some real optimism out there, but the skill shortage is really slowing down the industry at the moment.”
Bidois says many of the association's 2500 members pay living wage or above, other than for entry level positions, and migrant workers numbers have halved to about 15 per cent of the labour force.
More than 400 employers applied for the $932,000 Springboard training programme run by the Ministry of Social Development in partnership with the Restaurant Association and Hospitality NZ.
It aims to up-skill 150 existing staff with the ministry paying a wage subsidy of $2600 to $5200 per worker for three to six months on-the-job training, plus up to $1400 for formal course costs.
The Restaurant Association’s Hospostart scheme has run in Auckland for some years and also receives government funding.
This year it will be extended to Waikato, Christchurch, Gisborne, Nelson, Hawke’s Bay and Northland, providing three weeks introductory training for 84 hospo newbies.
It might seem a drop in the bucket, given the size of the shortfall, but Bidois says they are grateful for the support, and of the 260 who completed Hospostart over the past two years, about 80 per cent remained in the industry.
Hospitality NZ has also introduced online training readily accessible via mobile phones, and chief executive Julie White says the platform offers more than 1000 video lessons on everything from how to make coffee, and prepare food, to reading a profit and loss sheet.
White does not believe that reducing the number of hospitality outlets will solve anything.
“The ensuing over supply in hospitality workers if there are mass closures will likely drive wages down, not up. We take the view that retaining and building for the future is the best.”
Finding new recruits
Hospostart graduates include 23-year-old, Faye Lam Sam who has worked at Auckland’s Soul Bar & Bistro since 2017, beginning at the bottom clearing tables, and working her way up to a position liaising between the kitchen and wait staff.
Lam Sam, who had studied travel and tourism, was on the job seeker benefit and her only brush with hospitality was as a casual usher at events.
The Hospostart training and work experience taught her basic skills and led to her current job where she is happy with the pay and conditions, which includes free staff meals and a paid day off on her birthday.
“I thought I’d just do it for a year or two, but I enjoy it, it’s fast-paced … if I was an office receptionist I’d get really bored.”
Soul operations manager Geeling Ching is about to list three jobs with the ministry and she says it can be a bit of a lucky dip.
“If they show up for the interview that’s a win, and if they show up for their shift that’s an even bigger win.”
Which is why she is keen on Hospostart because it offers on-going support from the ministry, as well as the initial training that helps new recruits hit the ground running.
“I’m willing and able to take on Kiwis, but where are they?
“If they’re smart, and they want to learn the skills, they can move up the ladder quite quickly.”
Assistant manager at Christchurch’s Austin Club Britney Parker is well into her 26-week Springboard course.
Despite nine years industry experience in New Zealand, Australia and Britain, this is her first significant management level training, and she says she has learned a lot about managing staff, handling work stress, and food costing.
Future goals may stretch to opening her own venue one day. “It was always way out of my league, but looking at what happens behind the scenes it’s not that intimidating.”
Parker’s boss, Nick Inkster, who also owns Christchurch’s OGB bar, says his work force was half-and-half Kiwis and migrant workers, and he sponsored many of the latter.
However, with the border closed, the struggle to replace high calibre staff prompted him to invest in training existing workers like Parker, so they had the skills to step up.
“I’ve put Britney through this because I could see her becoming operations manager for the group.”
Losing the war on talent
Go With Tourism job-match website director Matt Stenton says the staffing squeeze is acute for middle management level positions, many of which were wiped out last year, and they are proving hard to refill now the migrant tap has been turned off.
To attract and keep Kiwis, he says businesses must be flexible, and prepared to train up their current workforce.
“There’s a war on talent and tourism and hospitality are losing because they’re not stepping up to the mark.
“We’re competing with other industries that are paying better, have more hospitable hours and better conditions that come with their contracts, such as health care.”
Williamson says research into the career paths of AUT hospitality management graduates over the course of a decade showed that within two years, half had quit hospitality for other sectors.
“To be able to hang onto staff you need to treat them like gold.”
He says current graduates are now in the running for jobs previously considering well above their level of experience.
“We’re telling our students this is probably the best six to 12 months in the labour market you will ever have because the opportunities are out there, and you can jump on them.”