a profile of the food services sector · unique characteristics the food services sector has a much...

A PROFILE OF THE

FOOD SERVICESSECTOR

IN NEW ZEALAND

2014

for ServiceIQ

Authorship

This report has been prepared by:

Andrew Whiteford (Senior Analyst), Dirk van Seventer (Senior Economist) and Benje Patterson (Economist) of Infometrics.

All work and services rendered are at the request of, and for the purposes of ServiceIQ only. Neither Infometrics nor any of its employees accepts any responsibility on any grounds whatsoever, including negligence, to any other person or organisation. While every effort is made by Infometrics to ensure that the information, opinions, and forecasts are accurate and reliable, Infometrics shall not be liable for any adverse consequences of the client’s decisions made in reliance of any report provided by Infometrics, nor shall Infometrics be held to have given or implied any warranty as to whether any report provided by Infometrics will assist in the performance of the client’s functions.

This report is one of 11 Sector Profile Reports that ServiceIQ has developed about the 11 sectors in our gazetted coverage area. These reports aim to give an overview of each sector with a focus on economic contribution, characteristics of the workforce, skills and training, opportunities and challenges facing the sector and projections of economic contribution and employment over the next five years. They will be used to inform ServiceIQ’s industry and sector advisory groups and as an input into ServiceIQ’s Service Sector Workforce Development Plan.

The Sector Profile Reports were prepared by Infometrics using data from official sources including the 2006 and 2013 Census, Business Demography, and GDP and modelling based on Infometrics’ Regional Industry Occupation Model. These data sources were supplemented with desk research and qualitative information where available.

These reports should be considered alongside other pieces of work including detailed research on an individual sector, government strategies, and in-depth sector knowledge.

ServiceIQ anticipates updating these profiles on an annual basis and would like to include an increasing amount of sector-specific information as we become aware of it and as more is available.

For further information about the Sector Profile Reports, please contact:

Jenny Connor Industry Skills and Research Manager

Andrew Whiteford Senior Analyst

ServiceIQ [email protected] [email protected]

© ServiceIQ All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means including electronic, mechanical, photocopying, recording or otherwise, without the prior permission of ServiceIQ.

Industry profile: Food Services sector

1

Table of contents Key highlights ...................................................................................................... 3

Unique characteristics ......................................................................................... 3

Training ............................................................................................................... 4

Sector outlook ..................................................................................................... 4

1. INTRODUCTION .......................................................... 5

Defining the food services sector ........................................................................ 5

2. SECTOR PROFILE ........................................................ 6

Employment trends to 2012 ................................................................................ 6

Occupations ........................................................................................................ 7

Business units ..................................................................................................... 9

Size of businesses ............................................................................................ 10

Geography ........................................................................................................ 10

Economic contribution ....................................................................................... 11

3. INDUSTRY OUTLOOK .................................................12

Outlook for the New Zealand economy ............................................................ 12

Outlook for the food services sector ................................................................. 13

Sector outlook .......................................................................................... 13

Occupation outlook .................................................................................. 14

4. OPPORTUNITIES AND CHALLENGES ..........................16

Issues facing the whole sector .......................................................................... 16

Overview of outlook and background ....................................................... 16

Strengthening economy to support further growth for the food services sector ........................................................................................................ 16

Public sector spending restraint still a challenge ..................................... 16

Higher quality products to be the big winner ............................................ 16

Issues stemming from regulations .................................................................... 17

Adapting to healthy eating trends............................................................. 17

Transitioning into super city regulatory frameworks................................. 17

Liquor laws ............................................................................................... 17

Living wage debate to challenge the sector ............................................. 17

5. DEMOGRAPHICS .......................................................18

Age .................................................................................................................... 18

Gender .............................................................................................................. 19

Highest qualification .......................................................................................... 21

Ethnicity............................................................................................................. 22

Country of birth ................................................................................................. 24

Hours worked .................................................................................................... 25

6. TRAINING ..................................................................27


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Age .................................................................................................................... 27

Ethnicity............................................................................................................. 30

Level of study .................................................................................................... 31

Region ............................................................................................................... 32

Domain .............................................................................................................. 33

Provider-based training ..................................................................................... 34

7. APPENDIX A. METHODOLOGY ...................................35

Definitions of key industries and occupations ................................................... 35

Measuring employment in the food services sector ......................................... 35

Measuring demographic characteristics of sectors .......................................... 36

Methodology for estimating net demand replacement ...................................... 36

Infometrics Regional Industry Employment Model ........................................... 37

Output and employment forecasts by industry ................................................. 38


3

Executive summary

Key highlights Approximately 19,200 people were employed in the food services sector in 2012. Employment has increased in the sector each year since 2001, with growth averaging 3.1% over the ten years to 2012. Employment in the national economy averaged 1.3% over the same period.

Growth in employment in the sector accelerated during the recession. This suggests that the demand for food services rises during times of economic hardship as individuals substitute catering services for higher cost hospitality services such as restaurants.

There were almost 2,500 business units in the sector in 2012. The number of business units in the food services sector grew rapidly between 2001 and 2006 and then declined sharply from 2009.

The sector contributed $948 million to the New Zealand economy in 2012 (measured in 2010 prices). Over the ten year to 2012 gross domestic product (GDP) in the food services sector grew by 2.9% pa compared with 2.3% in the economy as a whole. The sector accounted for 0.5% of national GDP in 2012. GDP per FTE was about 60% of the national level.

Table 1. Summary indicators for food services sector

Food Services New Zealand

Number in 2012 19,245 2,199,074

% growth 2002-2012 3.1% 1.3%

Number in 2012 14,686 1,871,104

% growth 2002-2012 3.0% 1.3%

Number in 2013 2,498 507,908

% growth 2003-2013 1.6% 1.8%

Number in 2012 948 199,966

% growth 2002-2012 2.9% 2.3%

Number in 2012 64,575 106,871

% growth 2002-2012 0.0% 0.9%

Source: Statistics NZ and Infometrics

Jobs

FTEs

Businesses

GDP

GDP per FTE

Unique characteristics The food services sector has a much higher proportion of younger (15-24 years) workers than the national economy. More than 21% of the food services sector was under 25 in 2013 compared with 14% in the national economy.

Female workers predominate in the food services sector, accounting for 64.5% of workers. In the national economy, females account for 47.1% of workers.

Asians have a considerably higher representation in the food services sector than in the national economy. They account for 15.4% of workers in the food services sector compared with 11.1% in the national economy. Making up 13.1% and 8.6%


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of travel sector employees, Māori and Pacific Island peoples are also overrepresented when compared to employment across all industries (11.2% and 5.0% respectively).The food services sector employs relatively fewer New Zealand born workers compared to the national economy. Overseas born workers accounted for 33.6% of employees in food services compared with 28.3% in the national economy.

The food services sector has a large number of part time roles with 33.2% of workers employed part time. This is much higher than the equivalent rate of 21.1% in the national economy.

More than half (50.7%) of employees in the food services sector had no post –school qualifications in 2013. This was a significantly higher proportion than in the national economy (43.4%).

Training ServiceIQ had 505 food services sector trainees at in 2013, which accounted for 2.3% of all ServiceIQ trainees.

The majority (70.5%), of trainees in the food services sector are studying towards level 2 qualifications. By contrast, 63.1% of trainees across the whole of ServiceIQ are studying for level 2 qualifications. Only 17% of trainees in the food services sector are studying at level 4 and above.

Māori comprise 18.6% and Pasifika 13.5% of trainees in the food service restaurant sector.

Sector outlook Employment in the food services sector is expected to grow modestly over the five years to 2017, rising by an average of 1.1%pa. We forecast total employment in the sector to increase from 19,245 in 2012 to 20,306 by 2017. Overall, growth will be slower than over the past few years as some consumers with increasing discretionary budgets switch to higher cost hospitality services such as restaurants.

Ongoing public sector spending restraint is likely to limit profit opportunities for food services firms catering to hospitals, government departments, and other public institutions.

A key growth area for the food services sector is in food provision to rest homes. With an ageing population, there has been a growing demand for rest homes and associated services.

Employment growth will be relatively evenly spread across broad occupation categories in the sector. The broadness of this growth reflects the fact that enterprises in the industry are efficiently run after the recession has shaken out the less efficient enterprises. The surviving enterprises typically don’t have spare labour capacity, therefore any increases in business activity necessitates hiring across most business functions.


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1. INTRODUCTION

This report presents a profile of the food services sector. It describes trends in employment, the basic characteristics of the sector and its employees, and the characteristics of its trainees and learners. It also provides an insight into the future and presents forecasts of employment growth.

Unless otherwise stated this report presents data for calendar years.

Defining the food services sector Official employment data sources are typically divided by either industry or occupation, but by themselves, neither is satisfactory for defining the ServiceIQ sectors. For example, if we defined the aviation sector purely in terms of aviation related industries such as air transport services we may not capture pilots who work in the agricultural support services doing aerial spraying. We have consequently used a combination of industries and occupations to define each of the ServiceIQ sectors.

Further details of this approach are provided in the Appendix.

In this study we have defined the food services sector as follows:

1. Persons employed in all occupations in the following industries:

Catering Services (code H451300 in the Australia New Zealand Standard Industrial Classification)

2. Persons employed in other industries in the following occupations:

Chef (351311 in the Australia New Zealand Standard Classification of Occupations). Only 75.7% of chefs employed in other industries were included in the food services sector. The remaining 24.3% were shared between the clubs and cafes bars and restaurants sectors. This allocation ensured that there was not double counting of employees across sectors.

Cook (351411): 96.5%

Bar Attendant (431111): 47.6%

Kitchenhand (851311) 91.1%

Definitions of these occupations and industries are provided in the Appendix.

This definition has been chosen as it is the group of industries and occupations that most closely align with the ServiceIQ gazetted coverage of the food services sector. The gazetted coverage of the food services sector is: “food service premises, on-premises catering and food services carried out in hospitals, residential, prisons, education facilities, offices, airports, factories and other workplaces, stadium and event catering and off-premises catering”


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2. SECTOR PROFILE

Employment trends to 2012 Approximately 19,200 people were employed in the food services sector in 2012. Employment has increased in the food services sector each year since 2001, with growth averaging 3.1% over the ten years to 2012. Employment in the national economy averaged 1.3% over the same period.

Growth in employment in the food services sector accelerated during the recession. This suggests that the demand for food services rises during times of economic hardship as individuals substitute catering services for higher cost hospitality services such as restaurants. An outlook for the food services sector is provided in the section Outlook for the food services sector on page 14.

Table 2. Total employment in the food services sector, 2001-2012

FTEs Jobs Change Jobs Change

2001 10,720 13,917 1,862,895

2002 10,981 14,240 2.3% 1,923,798 3.3%

2003 11,128 14,417 1.2% 1,979,437 2.9%

2004 11,227 14,531 0.8% 2,039,390 3.0%

2005 11,859 15,348 5.6% 2,108,155 3.4%

2006 12,511 16,212 5.6% 2,142,486 1.6%

2007 12,583 16,311 0.6% 2,184,802 2.0%

2008 12,671 16,430 0.7% 2,219,403 1.6%

2009 13,520 17,608 7.2% 2,167,989 -2.3%

2010 13,920 18,166 3.2% 2,160,647 -0.3%

2011 14,371 18,797 3.5% 2,180,241 0.9%

2012 14,686 19,245 2.4% 2,199,074 0.9%

2002-2012 3.1% 1.3% Source: Statistics NZ and Infometrics

New ZealandYear

Food Services

Figure 1. Total employment in the food services sector, 2001 to 2012


0

5,000

10,000

15,000

20,000

25,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

New Zealand Food Services


7

Occupations This section examines the growth in occupations in the food services sector. By drawing on data from the population census it is possible to split out employment in the sector to approximately 1,000 detailed occupational categories. In this section we report on an aggregation of those categories into eight broad categories as well as the numerically largest detailed occupations.

Table 3 shows employment by broad occupations. The largest categories are technicians and trades workers (which include cooks and chefs), community and personal service workers (which include waiters) and labourers (which include kitchenhands). There were more than 150 new jobs created for technicians and trades workers each year between 2002 and 2012.

Table 3. Employment by broad occupation1

% of total

2002 2012 Jobs % 2012

Managers 1,414 2,371 96 5.3% 12.3%

Professionals 158 523 36 12.7% 2.7%

Technicians & Trades Workers 4,980 6,521 154 2.7% 33.9%

Community & Personal Service Workers 2,607 3,089 48 1.7% 16.1%

Clerical & Administrative Workers 213 561 35 10.2% 2.9%

Sales Workers 658 506 -15 -2.6% 2.6%

Machinery Operators & Drivers 105 298 19 11.0% 1.6%

Labourers 4,105 5,376 127 2.7% 27.9%

Total 14,240 19,245 501 3.1% 100.0%


Employment Change 2002 - 2012 paOccupation

Figure 2. Employment by broad occupation, 2002 and 2012


0 2000 4000 6000 8000

Labourers

Machinery Operators & Drivers

Sales Workers

Clerical & Administrative Workers

Community & Personal Service Workers

Technicians & Trades Workers

Professionals

Managers

2002

2012

1 This table shows change in employment between 2002 and 2012. Change is measured in per annum terms. The change in number of jobs per annum between 2002 and 2012 is equal to the difference between the value in 2012 and 2002 divided by 10.


8

Table 4 shows employment in the 20 numerically largest occupations in the food services sector. The largest occupations are kitchenhand and cook which account for 19.1% and 14.8% of employment in the sector, respectively. Collectively the top 20 occupations account for 69.0% of total employment in the sector.

Table 4. Employment of top 20 occupations in food services sector

2002 2012 Number %

Kitchenhand 3,674 4,467 19.1% 79 2.0%

Cook 2,848 3,076 14.8% 23 0.8%

Chef 2,022 3,254 10.5% 123 4.9%

Waiter 978 959 5.1% -2 -0.2%

Café or Restaurant Manager 912 1,335 4.7% 42 3.9%

Café Worker 682 1,173 3.5% 49 5.6%

Bar Attendant 552 577 2.9% 2 0.4%

Sales Assistant (General) 536 214 2.8% -32 -8.8%

Commercial Cleaner 242 575 1.3% 33 9.0%

Barista 187 161 1.0% -3 -1.5%

Retail Manager (General) 165 136 0.9% -3 -1.9%

Corporate General Manager 75 158 0.4% 8 7.7%

Hotel Service Manager 73 56 0.4% -2 -2.6%

Chief Executive or Managing Director 73 118 0.4% 5 5.0%

General Clerk 56 117 0.3% 6 7.6%

Sales Representatives nec 56 121 0.3% 7 8.1%

Baker 51 76 0.3% 3 4.1%

Personal Care Assistant 40 35 0.2% 0 -1.2%

Office Cashier 33 117 0.2% 8 13.4%

Conference and Event Organiser 33 161 0.2% 13 17.1%

Top 20 occupations 13,285 16,887 69.0% 360 2.4%


OccupationEmployment Change 2002 - 2012 pa% of total

employment,

2012


9

Business units There were almost 2,500 business units in the food services sector in 2012. Figure 3 shows that the number of business units in the food services sector grew rapidly between 2001 and 2006 and then declined sharply from 2009. This decline occurred despite the increase in employment over this period. It suggests that a consolidation of businesses occurred as struggling businesses got absorbed by stronger businesses.

Figure 3. Number of business units in the food services sector, 2000-2013

Source: Statistics NZ

0

500

1,000

1,500

2,000

2,500

3,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Table 5. Number of business units (as at February)

2003 2013 Number %

Food Services 2,127 2,498 37 1.6%

New Zealand 426,829 507,908 8,108 1.8% Source: Statistics NZ

Change 02-13 pa


10

Size of businesses On average business units in the food services sector are larger than in the national economy. Approximately 13% of business units in the food services sector had 10 or more employees in 2013, compared with 8% in the national economy. Large catering companies would account for the higher prevalence of large businesses. Small enterprises are nevertheless important with businesses employing fewer than 10 people accounting for nearly 20% of employment in the sector.

Table 6. Number of business units by number of employees

Geography Auckland is the region with the highest number of employees, accounting for 39.0% of employment in the food services sector in 2012. This was followed by Wellington (13.8%) and Canterbury (12.8%). Over the 10 years to 2012 fastest growth was measured in Taranaki (7.4%), Auckland (4.9%), and Northland (4.5%).

Table 7. Number of employees by region

% of total FTE

Region 2002 2012 2012 2012 Number %

Auckland 4,652 7,511 39.0% 5,732 286 4.9%

Wellington 2,364 2,651 13.8% 2,023 29 1.2%

Canterbury 2,390 2,461 12.8% 1,878 7 0.3%

Waikato 859 1,240 6.4% 947 38 3.7%

Manawatu-Wanganui 744 924 4.8% 705 18 2.2%

Otago 635 893 4.6% 682 26 3.5%

Bay of Plenty 688 793 4.1% 605 11 1.4%

Gis-Hawke's Bay 536 699 3.6% 533 16 2.7%

Taranaki 338 689 3.6% 526 35 7.4%

Tas-Nel-Marl 415 562 2.9% 429 15 3.1%

Northland 264 411 2.1% 314 15 4.5%

Southland 271 340 1.8% 260 7 2.3%

West Coast 84 71 0.4% 54 -1 -1.6%

New Zealand 14,240 19,245 100.0% 14,686 501 3.1%


Number Change 2002-2012 pa

Employment

Tourism New Zealand Tourism New Zealand Tourism

0-5 2,033 442,363 81.4% 87.1% 2,440

6 to 9 150 26,403 6.0% 5.2% 1,050

10 to 19 141 21,254 5.6% 4.2% 1,690

20 to 49 105 11,832 4.2% 2.3% 2,637

50 to 99 40 3,657 1.6% 0.7% 2,189

100 and Over 29 2,399 1.2% 0.5% 9,240

Total 2,498 507,908 100.0% 100.0% 19,245

Source: Statistics NZ

% of totalNumber


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Economic contribution The food services sector contributed $948 million to the New Zealand economy in 2012 (measured in 2010 prices2). Over the ten year to 2012 gross domestic product (GDP) in the food services sector grew by 2.9% pa compared with 2.3% in the economy as a whole. The sector accounted for 0.5% of national GDP in 2012.

Table 8. Contribution to GDP by the food services sector (2001-2013)

$ mill ion Change $ mill ion Change

2001 686 152,045

2002 710 3.6% 159,473 4.9%

2003 725 2.1% 166,488 4.4%

2004 741 2.2% 173,781 4.4%

2005 783 5.7% 178,428 2.7%

2006 834 6.6% 182,439 2.2%

2007 846 1.5% 188,639 3.4%

2008 847 0.1% 187,362 -0.7%

2009 885 4.5% 188,588 0.7%

2010 920 3.9% 192,015 1.8%

2011 938 2.0% 194,322 1.2%

2012 948 1.1% 199,966 2.9%

2002-2012 2.9% 2.3% Source: Statistics NZ and Infometrics

YearFood Services

New Zealand

Figure 4. Food services sector GDP ($m)


0

100

200

300

400

500

600

700

800

900

1,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2 In this profile, we present all GDP estimates in constant 2010 prices. GDP presented in constant prices is sometimes referred to as real GDP. By using constant prices we remove the distractionary effect of inflation. It enables us to meaningfully compare GDP from one year to the next. Our GDP estimates differ from those published by Statistics New Zealand which are at 1995/6 prices.


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3. INDUSTRY OUTLOOK

Outlook for the New Zealand economy Economic growth in New Zealand is forecast to average 4.2% per annum (pa) over the two years to March 2016, as activity is supported by strong export incomes, rising construction activity, and healthy domestic confidence. Chinese and Australian economic growth rates are moderating, but demand for our primary exports will remain strong as household spending continues to grow in China. New Zealand’s strong economic performance over the next 2-3 years will be accompanied by:

higher net migration – climbing above 30,000pa by mid-2014 and remaining over 20,000pa as we head into 2015

good employment growth, driving the unemployment rate down to 5.0% by the end of 2015

accelerating wage growth, lifting to 3.5%pa by March 2016

rising interest rates, with the official cash rate reaching 5.00% by the beginning of 2016

the return of inflation over 2%pa, due to the strengthening domestic economy, costs associated with the Christchurch rebuild, and a gradual lift in import prices.

Economic growth is forecast to peak at 4.4%pa in March 2015, with growth moderating over the following two years as the stimulus from high export incomes fades, rebuilding activity in Canterbury reaches its peak level, and growth in the housing market and domestic economy slow in response to the rise in interest rates that has taken place.

Figure 5. New Zealand GDP growth forecast to 2017


1.8%

1.2%

2.9%2.7%

4.2%4.0%

3.6%

1.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2010 2011 2012 2013 2014 2015 2016 2017

Forecast


13

Outlook for the food services sector

Sector outlook

Employment in the food services sector is expected to grow modestly over the five years to 2017, rising by an average of 1.1%pa. We forecast total employment in the sector to increase from 19,245 in 2012 to 20,306 by 2017. Growth will be slower than over the past few years as some consumers with increasing discretionary budgets switch to higher cost hospitality services such as restaurants.

An ageing population has also seen a significant number of rest home developments. As the number of aged care facilities increases, the demand for associated food services will pick up, boosting employment in the food services sector.

However, ongoing public sector spending restraint is likely to limit profit opportunities for food services firms catering to hospitals, government departments, and other public institutions.

Employment growth will be relatively evenly spread across broad occupation categories in the sector. The broadness of this growth reflects the fact that enterprises in the industry are efficiently run after the recession has shaken out the less efficient enterprises. The surviving enterprises typically do not have spare labour capacity; therefore any increase in business activity necessitates hiring across most business functions.

Table 9. Total employment in the food services sector, 2012-2017

Level Change pa

2012 19,245 2.4%

2013 19,416 0.9%

2014 19,547 0.7%

2015 19,805 1.3%

2016 19,804 0.0%

2017 20,306 2.5%

2012-2017 1.1%


YearFood Services


14

Figure 6. Total employment in the food services sector, 2001-2017


Forecast

0

5,000

10,000

15,000

20,000

25,000Forecast

Occupation outlook

The tables below show forecast of employment by broad occupation and the 20 numerically largest detailed occupations in the food services sector. In addition to new positions being created, positions will need filling due to replacement of existing staff as staff enter and leave occupations. The table below shows new jobs opening due to growth in employment, net positions opening due to replacement and total positions opening.

Net replacement demand is a method for estimating job openings by occupation arising from individuals leaving an occupation net of jobs taken by individuals re-entering the occupation. By netting out individuals re-entering an occupation, net replacement rates measures are a subset of more commonly cited labour turnover rates. Net replacement demand is the relevant measure for providing advice on education and training needs. Details about the method used to measure future net replacement demand are provided in the appendix.

Table 10. Forecast of employment by broad occupation, 2012-2017

2012 2017 New jobs %

Managers 2,371 2,536 33 1.4% 117 150

Professionals 523 619 19 3.4% 13 32

Technicians & Trades Workers 6,521 6,934 83 1.2% 78 161

Community & Personal Service Workers 3,089 3,312 45 1.4% 221 265

Clerical & Administrative Workers 561 630 14 2.3% 14 27

Sales Workers 506 464 -9 -1.8% 27 18

Machinery Operators & Drivers 298 312 3 0.9% 19 22

Labourers 5,376 5,499 25 0.5% 488 513

Total 19,245 20,306 212 1.1% 977 1,189


OccupationEmployment Change 2012 - 2017 pa Replace-

ment pa

Total

positions


15

Table 11. Forecast of employment for top 20 occupations.

The occupations with the largest number of positions opening over the five years to 2017 are kitchenhand (644 per year), chef (313 per year) and café or restaurant manager (189 per year).

2012 2017 Jobs %

Kitchenhand 3,674 4,562 178 4.4% 466 644

Cook 2,848 3,154 61 2.1% 71 132

Chef 2,022 3,571 310 12.1% 3 313

Waiter 978 1,067 18 1.8% 77 95

Café or Restaurant Manager 912 1,397 97 8.9% 92 189

Café Worker 682 1,197 103 11.9% 74 176

Bar Attendant 552 656 21 3.5% 53 74

Sales Assistant (General) 536 170 -73 -20.5% 15 -58

Commercial Cleaner 242 601 72 20.0% 12 84

Barista 187 201 3 1.4% 12 14

Retail Manager (General) 165 119 -9 -6.3% 4 -5

Corporate General Manager 75 187 22 19.9% 4 26

Hotel Service Manager 73 59 -3 -4.1% 2 -1

Chief Executive or Managing Director 73 120 9 10.5% 3 12

General Clerk 56 120 13 16.4% 2 15

Sales Representatives nec 56 113 12 15.3% 0 12

Baker 51 76 5 8.5% 1 6

Personal Care Assistant 40 8 -6 -27.0% 0 -6

Office Cashier 33 131 20 31.7% 4 24

Conference and Event Organiser 33 186 31 41.2% 4 34


OccupationEmployment Change 2012 - 2017 pa Net

replace-

ment pa

Total net

positions

opening pa


16

4. OPPORTUNITIES AND CHALLENGES

Issues facing the whole sector

Overview of outlook and background

Strengthening economic activity and a buoyant outlook for business and household expenditure bode well for the food services sector as a whole over the coming decade. Nevertheless, the sector will still face challenges from ongoing public sector spending restraint. There will also be changes to the types of food and services demanded by clients, as a result of concerns regarding healthy eating and increased demand for higher quality products as income growth picks up. Other challenges for the sector include the living wage debate and the potential for local government mergers to increase compliance costs during transitional years.

Strengthening economy to support further growth for the food services sector

The New Zealand economy is forecast to go through a period of above trend growth over the next three years. As a result of this rapid economic strengthening, business profit levels and household earnings will pick up. In this environment, businesses and households will become increasingly willing to spend on entertainment including catering for functions and events. However, the sector will not grow as strongly as other hospitality sectors as there is a tendency for consumers to opt for higher cost hospitality services as discretionary budgets rise.

A significant number of new rest homes are also expected to be developed over the coming decade to cope with an aging population. New rest home developments represent a significant opportunity to the food services industry.

Public sector spending restraint still a challenge

Ongoing public sector spending restraint will be a challenge to food service firms whose businesses are highly exposed to the public sector. The government is determined to return its books to surplus by 2015 and to keep a tight rein on expenditure thereafter in an effort to pay down debt and rebuild its cash buffer. In this environment, government departments and other public sector facilities and institutions have to reduce expenditure on discretionary items - including catered functions. In situations where catering is still required, such as in hospitals, spending patterns will remain frugal.

Higher quality products to be the big winner

Although business and household demand for catering will increase in general, there will also be compositional changes within the sector. For example, as households and businesses become more comfortable with their financial positions they will demand better quality products. In response to this changing demand, the food services sector will need to ensure it focusses on the quality of the food items – otherwise market share may be lost as customers fork out on higher cost options such as hiring restaurants/cafes. An increasing focus on quality will mean that the food service sector will demand higher skilled workers.


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Issues stemming from regulations

Adapting to healthy eating trends

The food services sector will have to continue evolving to meet the trend towards healthy eating and a growing awareness of food intolerance. Although the consumer demand driven aspect of this trend is relatively slow moving, the risk of sudden regulatory changes pose a challenge to the sector. It is unlikely that government would implement any of the so-called “fat taxes” that have been mooted, but there is still a risk of the imposition of additional regulatory requirements for enterprises to provide more detailed nutritional descriptions and ensure certain skill levels of staff. The Food Bill will shortly have its second reading in parliament. The Bill focuses on health and safety and will have an impact on what businesses do and what training their staff require if it is enacted.

Transitioning into super city regulatory frameworks

Another regulatory risk for the food services sector stems from proposed local government mergers and the creation of new super cities. The creation of these new local government jurisdictions would be unlikely to increase the cost of conforming to registration and food safety standards over the long-run, but the transition phase could create additional costs for businesses in the short-run as they adapt to new processes.

Liquor laws

The Sale and Supply of Alcohol Act 2012 has the potential to significantly affect the sector. The Act allows for Local Alcohol Policies (LAPs), meaning that individual areas/towns can alter factors such as allowable hours that alcohol can be served at events and facilities.

Living wage debate to challenge the sector

A bigger challenge for the sector will be responding to the living wage debate which is seeking to raise wages to about $18.80 per hour. A living wage compares to the minimum wage of $14.25 per hour applicable from 1 April 2014. Although a living wage may appear good for workers at face value, if it became mandatory the policy could cause some businesses to reduce staffing levels to reduce the effect on input costs.

It is unlikely that living wages will become mandatory, but the creation of an accreditation scheme by non-governmental organisations for living wage employers is a potential scenario. Obviously inclusion in such a scheme would be voluntary, but adoption of the practice could lead to product differentiation by some food services firms looking to target consumers seeking ethically aware choices. Furthermore, food services firms who provide to local and central government are at risk of changes to procurement policies that favour awarding contracts to living wage employers.


18

5. DEMOGRAPHICS

This chapter describes the demographic characteristics of employees in the food services sector. It draws heavily on the 2006 and 2013 population census.

Age The food services sector has a much higher proportion of younger (15-24 years) workers than the national economy. More than 21% of the food services sector was under 25 in 2013 compared with 14% in the national economy. The number of relatively low-skilled, part time jobs in the food services sector is attractive to young workers who are able to fit their jobs around study.

Table 12. Employment by 5-year age group in the food services sector

NZ % of Total

2006 2013 2006 2013 2013

15-19 1,653 1,966 10.6% 10.1% 4.8%

20-24 1,480 2,180 9.5% 11.2% 9.1%

25-29 1,291 1,577 8.3% 8.1% 9.1%

30-34 1,410 1,583 9.1% 8.1% 9.2%

35-39 1,621 1,677 10.4% 8.6% 9.9%

40-44 1,857 2,075 12.0% 10.7% 11.7%

45-49 1,905 2,090 12.3% 10.8% 11.8%

50-54 1,603 2,150 10.3% 11.1% 11.6%

55-59 1,383 1,786 8.9% 9.2% 9.5%

60-64 844 1,384 5.4% 7.1% 7.4%

65+ 478 972 3.1% 5.0% 5.9%

Total 15,526 19,441 100.0% 100.0% 100.0% Source: Statistics NZ and Infometrics

Employment % of TotalAge Group

Figure 7. Proportion of total employment by 5-year age group,


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+



19

The number of employees in the food services sector increased across all age groups between 2006 and 2013. The biggest increases were at the young (15-24) and older (50+) age groups.

Figure 8. Employment by 5-year age group in the food services sector


0

500

1,000

1,500

2,000

2,500

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

2006

2013

Gender There were more female than male workers in the sector in 2013. Females accounted for 64.5% of total employment in food services compared with 47.1% in the national economy. The share of female workers decreased slightly from 65.5% to 64.5% between March 2006 and March 2013. This may be related to the different experience between females and males during the recession following the Global Financial Crisis. Males were more adversely affected in the wider economy due to job losses in industries in which males are concentrated such as construction and manufacturing. The relative increase in availability of males may have increased the relative number of males to females applying for jobs in the food services sector.

Table 13. Employment by gender in the food services sector

NZ% of Total

2006 2013 2006 2013 2013

Female 10,169 12,537 65.5% 64.5% 47.1%

Male 5,358 6,904 34.5% 35.5% 52.9%


Gender Employment % of Total


20

Figure 9. Proportion of total employment by gender, 2013


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Female Male

Food Services

New Zealand

Figure 10. Employment by gender, 2006 and 2013


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Female Male

2006

2013


21

Highest qualification More than half (50.7%) of employees in the food services sector had no post –school qualifications in 2013. This was a significantly higher proportion than in the national economy (43.4%).

Average training levels increased between 2006 and 2013 with the number of workers without a qualification falling from 56.9% to 50.7%. At the other end of the spectrum the number of workers with a degree or higher increased from 12.9% to 16.1% over the seven year period. This may be a consequence of young graduates not being able to find suitable employment in their chosen fields and being required to accept lower skilled work in the food services sector.

Table 14. Employment by highest qualification in the food services sector

Figure 11. Employment by highest qualification, 2013

NZ% of Total

2006 2013 2006 2013 2013

No Post-school Qualification 8,837 9,852 56.9% 50.7% 43.4%

Level 1, 2 or 3 Certificate 1,133 1,138 7.3% 5.9% 3.5%

Level 4 Certificate 1,446 1,789 9.3% 9.2% 11.2%

Level 5 and 6 diploma 1,385 1,747 8.9% 9.0% 10.0%

Degrees, level 7 quals and higher 1,995 3,134 12.9% 16.1% 23.9%

Not Elsewhere Included 731 1,782 4.7% 9.2% 7.9%


% of TotalHighest qualification

Employment


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

No Qual Level 1-3 Level 4 Level 5&6 Degree & higher NE

Food Services

New Zealand


22

Figure 12. Employment by highest qualification in the food services sector

Ethnicity The majority (69.2%) of employees in the food services sector in 2013 were of European ethnicity. This was up from 65.0% in 2006. The second largest ethnic group was Asian, who accounted for 15.4% of employment in 2013, up from 11.4% in 2006. Māori accounted for 13.1% of employees in 2013, up from 12.9% in 2006 while Pasifika accounted for 8.6%, similar to the 8.5% recorded in 2006.

The decrease in employment of workers in the ‘Other’ category would have been influenced by the substantial decrease in the number of individuals who identified themselves as ‘New Zealanders’ in the 2013 census compared with the 2006 census.

Table 15. Employment by ethnicity, 2006 and 2013


0

2,000

4,000

6,000

8,000

10,000

12,000

No Qual Level 1-3 Level 4 Level 5&6 Degree & higher NE

2006

2013

NZ% of Total

2006 2013 2006 2013 2013

European 10,097 13,450 65.0% 69.2% 77.0%

Māori 1,997 2,547 12.9% 13.1% 11.2%

Pasifika 1,325 1,678 8.5% 8.6% 5.0%

Asian 1,763 2,998 11.4% 15.4% 11.1%

Other 1,876 609 12.1% 3.1% 3.4%


Ethnic Employment % of Total


23

Figure 13. Employment by ethnicity, food services sector and New Zealand, 2013

Figure 14. Employment by ethnicity, 2006 and 2013


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

European Māori Pasifika Asian Other



0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

European Māori Pasifika Asian Other

2006

2013


24

Country of birth In 2013, New Zealand-born workers represented 66.4% of the workforce in the food services sector. This is 4.8% less than in 2006. The share of workers born in Asia increased by 2.9% to 11.7% over the same period while the share of workers born in Europe increased by 0.7% to 8.5%.

The food services sector employed relatively fewer New Zealand born workers compared to all industries in 2013. These workers comprised 71.7% of all workers in all industries while they represented 66.4% in the food services sector. There are relatively more workers born in Asia working in the food services sector than in all industries.

Table 16. Employment by country of birth, 2006 and 2013

NZ% of Total

2006 2013 2006 2013 2013

New Zealand 11,051 12,910 71.2% 66.4% 71.7%

Australia 249 326 1.6% 1.7% 1.6%

Oceania 1,043 1,397 6.7% 7.2% 3.8%

Asia 1,363 2,265 8.8% 11.7% 8.6%

Europe 1,219 1,659 7.9% 8.5% 9.4%

North Africa & Middle East 56 90 0.4% 0.5% 0.4%

Sub Saharan Africa 249 375 1.6% 1.9% 2.3%

Americas 137 250 0.9% 1.3% 1.3%

Other 158 169 1.0% 0.9% 0.9%


Country of Birth Employment % of Total

Figure 15. Employment by country of birth, food services sector and New Zealand, 2013


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%



25

Figure 16. Employment by country of birth in the food services sector, 2006 and 2013


0

2,000

4,000

6,000

8,000

10,000

12,000

14,0002006

2013

Hours worked Those working 40-49 hours per week account for the highest share (34.3%) of employees in the food services sector in 2013. This share has increased since 2006 by 1.5%. Workers doing less than 30 hours represent 33.2% of the sector which rose from 31.9% in 2006. The share of very high hours worked (50 and more) decreased from 14.8% in 2006 to 12.7% in 2013.

Table 17. Employment by hours worked, 2006 and 2013

NZ% of Total

2006 2013 2006 2013 2013

1-9 1,284 1,947 8.3% 10.0% 5.0%

10-19 1,769 2,107 11.4% 10.8% 7.0%

20-29 1,898 2,407 12.2% 12.4% 9.1%

30-39 2,291 3,113 14.8% 16.0% 13.8%

40-49 5,092 6,668 32.8% 34.3% 43.0%

50-59 1,177 1,329 7.6% 6.8% 11.1%

60 + 1,115 1,141 7.2% 5.9% 8.2%

Not specified 901 730 5.8% 3.8% 2.8%


Hours Worked Employment % of Total

Compared to all industries, the food services sector in 2013 employed more part-time (less than 30 hours) workers. In all industries the share is 21.1% compared to 33.2% in food service. The share of very high hours worked (more than 50) is 12.7% which is 6.6% lower in the food services sector compared to all industries.


26

Figure 17. Employment by number of hours worked, food services sector and New Zealand, 2013


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

1-9 10-19 20-29 30-39 40-49 50-59 60 + Not specified


Figure 18. Employment by number of hours worked per week, 2006 and 2013


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1-9 10-19 20-29 30-39 40-49 50-59 60 + Not specified

2006

2013


27

6. TRAINING

This chapter describes the characteristics of individuals being trained by ServiceIQ in 2013. The data includes all individuals who were registered at some point during 2013. The last section in the chapter describes enrolments and completions in provider-based qualifications of relevance to the food services sector.

Food services sector trainees accounted for 3.1% of total ServiceIQ trainees.

Age

Table 18. Number of trainees by 5-year age group

Number of trainees Employment

Food Services ServiceIQ Food Services ServiceIQ Food Services

15-19 13 3,091 2.6% 14.3% 10.1%

20-24 56 6,997 11.1% 32.4% 11.2%

25-29 38 3,827 7.5% 17.7% 8.1%

30-34 51 2,084 10.1% 9.7% 8.1%

35-39 57 1,425 11.3% 6.6% 8.6%

40-44 55 1,214 10.9% 5.6% 10.7%

45-49 54 993 10.7% 4.6% 10.8%

50-54 64 873 12.7% 4.0% 11.1%

55-59 56 606 11.1% 2.8% 9.2%

60+ 61 479 12.1% 2.2% 12.1%

Total 505 21,589 100.0% 100.0% 100.0%

Source: ServiceIQ

% of total

Age group

With an average age of 43 years, trainees in the food services sector are on average older than in the ServiceIQ sector as a whole. The average age of all trainees in the ServiceIQ sector is 27. Approximately 86.3% of food services trainees are 25 years and over, compared with 53.3% in the ServiceIQ sector as a whole.

The age profiles of food services sector trainees and persons employed in the sector are not vastly different. While 35.8% of trainees are over 50 years of age, 33.1% of employees are in this age category.


28

Figure 19. Proportion of trainees by 5-year age group

Source: ServiceIQ

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

60+

55-59

50-54

45-49

40-44

35-39

30-34

25-29

20-24

15-19

Food Services ServiceIQ


29

Gender

Females account for a much higher proportion of trainees in the food services sector than males. Approximately 82.8% of food services sector trainees are female, compared with 53.5% in the ServiceIQ sector as a whole.

The gender profile of trainees in the food services sector is quite different to the employment profile with females accounting for 82.8% of trainees and 64.5% of employees.

Table 19. Number of trainees by gender

% of total Employment


Female 418 11,560 82.8% 53.5% 64.5%

Male 86 9,984 17.0% 46.2% 35.5%

Unknown 1 45 0.2% 0.2%

Total 505 21,589 100% 100% 100%

Source: ServiceIQ

Gender

Number of trainees

Figure 20. Proportion of trainees by gender

Source: ServiceIQ

0% 20% 40% 60% 80% 100%

Unknown

Male

Female



30

Ethnicity European is the largest ethnic group among trainees in the food services sector, accounting for 51.1% of trainees. This is a similar percentage to the European share in ServiceIQ as a whole, in which they account for 50.9% of trainees. Within the food services sector the Māori group accounts for 18.6% of trainees and Asian, 14.5%.

Table 20. Number of trainees by ethnicity

Food Services ServiceIQ Food Services ServiceIQ

European 59 10,991 59.0% 50.9%

Māori 18 2,716 18.0% 12.6%

Pasifika 13 1,629 13.0% 7.5%

Asian 6 5,381 6.0% 24.9%

Other 2 687 2.0% 3.2%

Unknown 2 185 2.0% 0.9%

Total 100 21,589 100.0% 100.0%

Source: ServiceIQ

Ethnicity

Number of trainees % of total

Figure 21. Proportion of trainees by ethnicity

Source: ServiceIQ

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Unknown

Other

Asian

Pasifika

Māori

European



31

Level of study The majority (70.5%), of trainees in the food services sector are studying towards Level 2 qualifications. By contrast, 63.1% of trainees across the whole of ServiceIQ are studying for Level 2 qualifications. Only 17% of trainees in the food services sector are studying at Level 4 and above. One of Government’s Better Public Service targets is to get 55 percent of 25-34 year olds with Level 4 qualifications and above by 2017.

Table 21. Number of trainees by level of study

% of total

Food Services ServiceIQ Food Services ServiceIQ

2 356 13,615 70.5% 63.1%

3 62 4,669 12.3% 21.6%

4 86 2,796 17.0% 13.0%

5 1 194 0.2% 0.9%

6 0 285 0.0% 1.3%

7 0 30 0.0% 0.1%

Total 505 21,589 100.0% 100.0%

Level

Number of trainees

Figure 22. Proportion of trainees by level of study

Source: ServiceIQ

0% 10% 20% 30% 40% 50% 60% 70% 80%

7

6

5

4

3

2



32

Region The majority of training occurs in the major population centres. A high proportion of food services sector trainees are located in Auckland (47.9%) which compares with 40.5% for all ServiceIQ trainees. The next highest concentrations are in Canterbury (10.7%) and Wellington (10.1%) respectively.

Trainees are slightly overrepresented in Auckland relative to employment in the region. Nearly half of all trainees are located in Auckland whereas only slightly less than 40% of food services sector employment is in that region. Trainees are most underrepresented in Otago where trainees account for 1.6% of the total compared with 4.6% of total employees.

Table 22. Number of trainees by region

Employment


Northland 25 628 5.0% 2.9% 2.1%

Auckland 242 8,748 47.9% 40.5% 39.0%

Waikato 31 1,719 6.1% 8.0% 6.4%

Bay of Plenty 26 1,548 5.1% 7.2% 4.1%

Gisborne-Hawke's Bay 10 743 2.0% 3.4% 3.6%

Taranaki 10 415 2.0% 1.9% 3.6%

Manawatu-Wanganui 32 1,077 6.3% 5.0% 4.8%

Wellington 51 1,990 10.1% 9.2% 13.8%

West Coast 0 104 0.0% 0.5% 0.4%

Canterbury 54 2,306 10.7% 10.7% 12.8%

Otago 8 963 1.6% 4.5% 4.6%

Southland 11 341 2.2% 1.6% 1.8%

Nelson-Tasman-Marl 5 1,007 1.0% 4.7% 2.9%

Total 505 21,589 100% 100% 100%

Source: ServiceIQ

Region

% of totalNumber of trainees


33

Figure 23. Proportion of trainees by region

Gisborne-Hawke's Bay

Source: ServiceIQ

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

West Coast

Nelson-Tasman-Marl

Otago

Taranaki

Gisborne-Hawke's Bay

Southland

Northland

Bay of Plenty

Waikato

Manawatu-Wanganui

Wellington

Canterbury

Auckland


Domain Domain is the lowest order of classification within the NZ Qualifications Framework and represents a cohesive cluster of similar unit standards.

The highest proportion of the food services sector's trainees is studying for qualifications in the hospitality domain (84%). The next highest concentrations are in the food and beverage service (7%) and cookery (6%) domains.

Table 23. Number of trainees by domain

Domain Number of trainees % of total

Hospitality 426 84.4%

Food and Beverage Service 33 6.5%

Cookery 28 5.5%

Non-Funded 17 3.4%

Sales 1 0.2%

Total 505 100.0%

Source: ServiceIQ


34

Provider-based training This section shows enrolments and completions in provider-based qualifications of relevance to the food services sector. It includes all fields of studies of relevance to the food services sector. This means that some fields may be of relevance to other ServiceIQ sectors and are included in the statistics provided for those sectors.

Fields of study included in the above statistics are:

Hospitality

Food and Beverage Service

Cookery

Food and Hospitality (N.E.C., mixed or N.F.D.)

There were no enrolments and completions in provider-based qualifications specifically related to the food services sector in 2013.

Table 24. Enrolments and completions in provider- based training, 2012


35

7. APPENDIX A. METHODOLOGY

Definitions of key industries and occupations Industries

Catering Services (code H451300) consists of units mainly engaged in providing catering services at specified locations or events such as airline catering. Meals and snacks may be transported and/or prepared and served on or off the premises, as required by the customer.

Occupations

Chef (351311) plans and organises the preparation and cooking of food in a dining or catering establishment.

Cook (351411) prepares, seasons and cooks food in a dining or catering establishment.

Bar Attendant (431111) prepares, mixes and serves alcoholic and non-alcoholic drinks to patrons in a bar in a licensed establishment.

Kitchenhand (851311) assists kitchen and service staff in preparing and serving food, and cleans food preparation and service areas.

Measuring employment in the food services sector Infometrics uses a time series of industry-occupation employment matrices for New Zealand in order to define and measure total employment in the ServiceIQ sectors. Table 25 shows a hypothetical industry-occupation employment matrix. A total of 216 people are employed in this hypothetical economy. The matrix divides those people across four industries and five occupations. For example 59 people are employed in Industry 1 and 6 of those 59 people are employed in occupation A.

Table 25. Hypothetical industry-occupation employment matrix

In the above example we have defined a hypothetical ITO sector (the shaded cells) as consisting of Industry 2 and Occupations C and D. Total employment in the sector-is calculated as 50+43+29=122. Total employment in each of the ServiceIQ sectors is calculated using actual industry-occupation matrices for New Zealand.

Infometrics has compiled a time series (2000-2013) of industry-occupation matrices for the New Zealand economy using 490 industries (level 5 industries of the ANZSIC06 industrial classification) and 1000 occupations (level 5 of the ANZSCO

Industry 1 Industry 2 Industry 3 Industry 4 Total

Occupation A 6 12 16 10 44

Occupation B 13 14 6 3 36

Occupation C 19 5 17 2 43

Occupation D 5 2 12 10 29

Occupation E 16 17 19 12 64

Total 59 50 70 37 216


36

occupational classification) which were used for the estimation of employment in the ServiceIQ sectors.

The following data sources were used to construct the matrices:

Infometrics Industry Occupation Model. This model provides a quarterly time series of total employment in 500 industries by region and territorial authority. The model provides more comprehensive, up-to-date and statistically robust estimates of employment than other data sources such as Business Demography. The model draws heavily on LEED quarterly data series which is the most robust source of industry employment data. The quarterly LEED series only measures employees. To account for self-employed the quarterly LEED series is adjusted upwards using industry specific self-employment rates from the annual LEED series.

Population census 1996, 2001, 2006, 2013. These censuses provide a time series of changes in the occupational composition of employment in each industry over time as well as a benchmark of total employment in each occupation in the census years.

Various industry studies conducted by Infometrics. New information obtained in industry studies regarding the occupational composition of employment in industries and how that changed over time is incorporated into our industry-occupation matrices.

Measuring demographic characteristics of sectors Employment in the food services sector is defined in terms of both industry and occupations using an industry-occupation employment matrix. After defining the sector on the matrix we sum employment across all occupations in each industry to arrive at employment by 500 industries. We can measure the demographic characteristics of employees in these industries using data from the 2006 and 2013 population census and aggregate across industries to arrive at estimate for the sector as a whole.

Methodology for estimating net demand replacement The cohort-component method developed by Shah and Burke3 has been used to estimate net replacement rates. The cohort-component method uses estimates of employment by occupation and age category at two different points in time, to establish the inflows and the outflows in each occupation in each age-cohort. Shah and Burke used annual data, however due to the lack of annual data for New Zealand, data from the 2001 and 2006 Census was used in this study, together with national level forecasts from the Department of Labour.

The net flow from an occupation was estimated as the sum of the change in the size of each age cohorts between 2001 and 2006. If the size of the cohort decreased then there has been an outflow, whereas if the cohort increased the net outflow is equal to zero. This is true if the number of people employed in an occupation is

3 Shah C and Burke G. 2001. ‘Occupational replacement demand in Australia’. International Journal of

Manpower, Vol. 22, No. 7, pp. 648-663. Centre for the Economics of Education and Training, Monash University.


37

expanding.However, if employment is decreasing then the net outflow is equal to sum of outflows less the size of the employment decline. Total net outflow from an occupation is estimated by summing the net outflow from each age cohort. The five year net demand replacement rate is estimated by dividing the total net outflow by employment in the occupation in 2001. This rate is converted to an annual rate.

The above method provides historical estimates of net replacement demand rates for each occupation over the period 2001 to 2006. In order to estimate the total number of job openings in future we have drawn on trends in national level forecasts estimated by the Department of Labour.

Infometrics Regional Industry Employment Model This study draws heavily on the Infometrics Regional Industry Occupation Model (RIOM) which provides more robust and up-to-date information than Business Demography statistics, the source used by many economic analysts for estimates of industry and regional employment. The RIOM is built on quarterly and annual LEED data extracted by special request from Statistics New Zealand at the territorial authority level. Quarterly LEED provides the number of employees in each industry for each quarter. Annual LEED provides the number of self-employed in each industry which are quarterised and added to the number of employees to arrive at total employment. The occupational dimension is added to the model using industry-occupation employment share matrices developed from successive population censuses.

The model estimates employment in recent quarters for which LEED is not available by using time series analysis. The model draws on the relationships between industry performance at the territorial authority level and national level and recent trends in industry performance.

The RIOM provides estimates of the number of people employed in 480 industries in each region and territorial authority for each quarter since March 1999.

Data from the RIOM has the following advantages over data from Business Demography.

The RIOM includes self-employment whereas it is excluded from Business Demography. The exclusion of self-employment leads to a significant undercount of employment in certain industries such as agriculture and construction. Infometrics utilises annual LEED to provide estimates of self-employment by industry.

The RIOM is benchmarked on industry employment totals from LEED, which is statistically more robust than Business Demography. LEED is designed to measure employment whereas Business Demography is designed to measure the number of establishments etc. and only measures employment as a spin off.

The RIOM measures employment in each quarter of the year whereas Business Demography provides only a single snapshot (February) each year. Providing only a single snapshot is inadequate for industries such as horticulture and hospitality which are highly seasonal.


38

Output and employment forecasts by industry The Infometrics Industry Model produces forecasts of output and employment for 54 industries using a mix of principle component and regression techniques to link macroeconomic key indicators (e.g., inflation, interest rates, unemployment, the exchange rate, business profitability etc.) to prospects for each industry. A key aspect of this approach is that it produces an outlook for an industry that takes into account the recent performance of that industry, the impact of key influences on business performance in that industry, and is also constrained to ensure that the sum of production in all industries equals our forecasts of overall economic activity. That is, an industry can only grow faster than overall economic growth if past industrial performance and business conditions indicate that it will increase its share of national output.

The main applications of principle component or factor analytic techniques are: (1) to reduce the number of variables and (2) to detect structure in the relationships between variables, that is to classify variables. Therefore, factor analysis is applied as a data reduction or structure detection method.

In the current context, principle component analysis is used to separate a panel of data into its principal cross-sectional components and their associated time domain components. For example, one might have a panel of quarterly industrial production data that has been converted into measures of each industry’s share of GDP, i.e the share for the i-th industry in quarter t can be presented as:

∑ .

Thus, one can forecast industrial production ( ) by applying forecasts of industrial shares ( ) to forecasts of total GDP (∑ ). The question then becomes one of forecasting the ’s. Principle component approaches are about reducing the scope of the forecast problem from forecasting, say, 20 inter-dependent ’s to one of diagnosing the interrelationship between each of the ’s and forecasting three or four independent time components.

Without going into the detailed mathematics, the aim of the approach is to use Eigen Values and Eigen Vectors to decompose the matrix of ’s into i independent (orthogonal) cross-sectional (I x 1) factor vectors ( ( )) each with an associated (1 x T) time-varying parameter-vector { }. If ( ) is the original (I x T) matrix of data, one can reproduce the matrix by simple matrix multiplication:

( ) ( ) ∑ ( )

The critical issues here are that each of the factor vectors ( )are orthogonal and that one can often explain most of the variation in the matrix with a small subset of the factor vectors, eg greater than 90% of the variation might be explained by 3-4 of the factor vectors. This means that once we have undertaken the principle component analysis we can obtain reasonable forecasts by concentrating on just the 3-4 key factors and conducting independent forecasts of their associated time-varying parameter-vectors{ }.

ServiceIQLevel 14Plimmer Towers2–6 Gilmer TerraceWellington 6011

E:T:W:

[email protected] 863 693ServiceIQ.org.nz

InfometricsLevel 20Plimmer Towers2–6 Gilmer TerraceWellington 6011

E:T:W:

[email protected](04) 473 0630infometrics.co.nz

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