Death of manufacturing has created zombie towns, Productivity Commission report shows

Wednesday, 16 October 2019

The way we work is changing, and that's meant the fortunes of some towns have fallen dramatically.

Auckland may have powered ahead but smaller centres have been gutted as the way New Zealanders work has turned on its head, a new report from the Productivity Commission shows.

The report, on the evolution of work in New Zealand cities and towns, is based on Census data and shows that between 1976 and 2013, the proportion of New Zealanders employed in manufacturing declined from 25 per cent to 10 per cent of the workforce.

Census data shows Christchurch's population has grown in six years, with neighbouring districts also rising at a fast rate.

At the same time, there was significant expansion in the number of people employed in professional services, health and education, accommodation, hospitality and financial services.

While 280 per cent more people now work in professional services than did in 1976, there are only about 40 per cent as many in manufacturing.

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As the workforce has changed, more people have moved away from smaller centres to Auckland, and - to a lesser extent - Wellington and Christchurch.

Two-thirds of the national increase in employment in the finance sector between 1976 and 2013 took place in Auckland, even though Auckland started with just over a third of the financial sector workforce at the start of this period.

Invercargill employment lifted just 1 per cent between 1976 and 2013.

'Sectors that have expanded nationally, such as the finance or the professional services sectors, have disproportionately expanded in Auckland,' the report said.

'In theory, accountants could have displaced manufacturing workers in Whanganui, Invercargill, or Napier.

A quarter of us used to work in manufacturing. Now it's one in 10.

'In practice, they have not, because accounting firms prefer to be located in Auckland. Since the work of many of the new expanding industries is best done in big cities, the sectoral shift of the economy has made it difficult for many small and medium-sized urban areas to expand.'

The report said, for smaller cities and towns, the presence of good amenities, such as a good climate or attractive scenery, became more important as manufacturing and primary production became smaller shares of the economy.

The number of people working in Tokoroa dropped by 44 per cent in the period.

Some towns have experienced serious job losses.

The number of people working in Tokoroa dropped by 44 per cent between 1976 and 2013, Greymouth by 7 per cent, Whanganui by 5 per cent and Oamaru by 2 per cent. Levin experienced no growth and Invercargill lifted just 1 per cent.

But nine urban areas had employment growth of more than 65 per cent.

Queenstown's shot up 261 per cent, Tauranga 176 per cent, Rangiora 147 per cent, Kāpiti 129 per cent and Taupō 81 per cent.

Auckland was up 79 per cent.

Productivity Commission economics and research director Patrick Nolan said the economies of most cities and towns had become less reliant on specialist industries and more like each other.

As migration between areas was easier when all areas had similar jobs, the reducing importance of city-specific industries might have encouraged the shift of jobs from slow-growing areas to climate-favoured fast-growing areas.

'By studying the past this research provides lessons for the future. There is much that can be done to help New Zealanders adjust to changes in work and employment and this is something that the commission is investigating.'