Government agency recruitment hurting private business, lobby group says

They say inflated rates of public sector pay are only making private recruitment woes worse.
They say inflated rates of public sector pay are only making private recruitment woes worse. Photo credit: Getty Images

By Phil Pennington for RNZ

Many government departments are expanding rapidly, raising fears they will suck staff away from private businesses.

A business lobby group says there are signs inflated rates of public sector pay are only making private recruitment woes, due to pandemic bottlenecks at the border, worse.

Public Service Commissioner Peter Hughes says the growth since 2016 is significant but required.

RNZ sought an update of official numbers from 18 major agencies that shows they have, between them, added almost 10 percent more staff in a year, and 20 percent in two years.

They now have 52,000 on their payroll, compared with 47,800 a year ago, and just under 44,000 in 2019.*

One, the prime minister's own Department of the Prime Minister and Cabinet, expanded almost 80 percent, from 186 to 332 staff in a year - though it says it will downsize again soon.

The Ministry of Social Development hired more than 3000 people in the year to April - for an actual gain of 1200 once staff leaving is factored in - and is a third bigger than two years ago.

National MP for Selwyn Nicola Grigg suggested at a recent select committee the expansion is disruptive.

"Agribusinesses find a lot of their potential workforce has been sucked into MPI [Primary Industries]," Grigg said.

"Regional councils will say they can't get planners for love nor money because they're going to MFE [Environment]."

The Big Four consultancies - Deloitte, EY, KPMG and PwC - were losing people to the likes of New Zealand Trade and Enterprise, she added.

A big employer of consultants, the Ministry of Business, Innovation and Employment, has expanded by more than a quarter in two years, to 5200.

Asked by Grigg if the government was getting the balance right, the Minister of State Services Chris Hipkins conceded that public sector recruiting created "short-term pressure".

But he told the select committee the expansion was often in uniquely Covid-19 work like border control, non-competing sectors such as at Oranga Tamariki (which added 1000 staff in two years), or is actually enabling private business to do more.

In building and construction, the education and health ministries had a huge pipeline of work "so that's, I guess, the catch-22 of extra government spending in those areas, it does create bigger opportunities for the market", Hipkins said.

"To feed those opportunities into the market, you need people to do that work.

"And so yes, we are competing in those spaces."

Executive director of Business New Zealand Catherine Beard said signs were the competition was getting out of hand.

"We're hearing anecdotally, particularly, obviously, in Wellington, because it's where government is situated, that people are leaving for higher paid government roles - and more than the private sector think those roles are actually worth," Beard said.

"When the public sector gets too far ahead of the private sector ... it's sucking resources out of the productive sector."

Data showed public pay, especially at mid-level for policy and administration or trades-type work, was getting out of sync, she said.

Beard added the government could do more to give private businesses Covid-19 work, such as in MIQ.

The recruitment drive is not letting up at agencies including the Environment Ministry or MFE, which is two thirds bigger than it was two years ago, topping 600 workers.

Planning Institute chief executive David Curtis said it was tapping the country's limited stock of planners at what he said is an unusually high rate.

"I know in their last round that MFE were looking for over 60 planners."

This was a few weeks ago in a large single intake that recognised their big work programme, including the overhaul of the Resource Management Act.

"It's fair to say while we support the government's reform programme, the current round of recruitment at MFE has certainly added to the pressures."

Curtis said planners were sought after, and pay rates high across both private and public sectors.

A record number of students were now enrolled in planning courses, which provided a hint of light at the end of a long tunnel of years of skill shortages, made worse by other countries poaching planners, he said.

Public Service Commissioner Peter Hughes said he was "very comfortable" with the expansion, up 25 percent from 2016 till last year - the commission is still crunching its figures for 2020-21 - compared to a 13 percent expansion of private sector jobs.

"We have had significant growth," Hughes told RNZ in a statement.

"We know exactly where that has happened and why it has been needed."

Key drivers were population growth - up 11 percent since 2013 - investment to implement government priorities, and responding to the pandemic and unexpected events such as the mosque attacks.

Investment included "510 case and welfare workers for housing and social service provision, 260 contact centre operators, 200 social workers, 130 corrections officers, 125 education advisors, 90 youth workers, 45 parole officers and 25 speech therapists", Hughes said.

"Extraordinary circumstances have required an extraordinary response, but I don't see that continuing too far into the future."

Various agencies listed reasons for their expansion, which included:

  • DPMC: Extra work on Covid-19, the Health and Disability System Review Transition business units, and Royal Commission of Inquiry into the terrorist attack. "The increases in staff numbers ... will be followed by subsequent decreases as their work winds down."

  • MSD: "Unprecedented demand" for income support, employment services and other payments, including the Wage Subsidy and Covid-19 Income Relief Payment.

  • MFE: "A growing work programme, including Resource Management Reform, Jobs For Nature, and Water and Land Use policy."

  • MFAT: Added 19 new hires to an APEC 21 team.

  • SIS and GCSB: Reflects government investment

  • MBIE: MIQ, plus regional economic development work.

  • Education: Added learning support coordinators and curriculum lead roles. Converted some contractors into employees.

  • Health: Covid-19

  • DOC: More staff in biodiversity and operations linked to Budget 2018-19, and Jobs for Nature team set up.

The total base salary cost in the public service increased from $4.28 billion to $4.8b, or nearly 13 percent, between 2019 and 2020.

*The agencies were asked to provide headcount figures comparable with Public Service Commission figures from mid-2020. In a few cases, the figures were roughly but not directly comparable.