Is our tourism industry heading for trouble?

Tourism is now New Zealand's biggest earner, but remains a low-paid profession. Photo: Lynn Grieveson

Tourism is now our biggest industry, but the sector continues to be stigmatised as unattractive and lowly-paid. So why are we not moving towards a more value-added approach like some of our other big earners?

“If you receive excellent service, you should tip.”

With that one short sentence, freshly-minted Tourism Minister Paula Bennett predictably ignited a firestorm.

Bennett was confident in her call for people to tip hospitality staff more, arguing it would lead to better and more consistent service.

But ignored amongst all the social media furore and glut of opinion pieces was a question: why are those working in the tourism and hospitality sector paid so little in the first place?

One Auckland academic has attempted to answer the question, with some surprising results.

David Williamson, head of the hospitality department at AUT, has just completed his PhD on the history of employment in New Zealand’s hotel sector.

Crunching painfully through Statistics New Zealand yearbooks, Williamson compiled wage data for hourly-wage professions from the accommodation and food and beverage sectors going back to 1957.

He found that, adjusted for inflation, the average hourly wage in the sector peaked at $22.12 in 1979. In the same year (also adjusted for inflation), the average all-industry hourly wage was $27.07 and the minimum wage was $11.32.

Since then wages in the sector have failed to keep up with the national average.

While the hospitality sector paid almost twice the minimum wage in 1979, at $18.90 it’s now just 20 percent ahead of the bottom rung.

It has also fallen to about 63 percent of the average wage ($29.96), from 85 percent in 1979.

So, what happened?

Largely, Williamson lays the blame for the widening of the wage gap on legislative and economic actions of the mid-1980s to 2000.

The weakening of unions and the accompanying loss of benefits and penalty rates had an immediate impact, leading to higher rates of casualisation.

He gave an example of the Hotel Workers Union, which used to wield real muscle.

But after being destroyed by the changes, it’s membership of around 70,000 dropped to about 20,000 in less than a year and penalty rates enshrined in the collective agreement disappeared.

Williamson argues this erosion, largely driven by the Employment Relations Act in 1991, has led to low wages that, coupled with a low unemployment rate, mean it is difficult to get New Zealanders to work in the area.

Many jobs, such as chefs, are being filled by migrant workers who are happy to work for low pay so they can get experience in the industry.

“There’s lots of research that shows the more you rely on temporary migrant labour the more you suppress the wage rates because migrants are well known to work for cheaper rates and accept exploitation.”

Recent immigration tweaks announced by the Government were aimed at culling low-skilled migrants by introducing salary bands for both skilled migrants applying for residency and people applying for a temporary essential skills visa.

Bennett told Newsroom that recent analysis by the Ministry of Business, Innovation and Employment found no evidence of a negative impact on wages from immigration.

In fact, wages in the accommodation and food service industries had kept pace with several others, she says.

Bennett says the average ordinary time weekly earnings for an FTE in the sector was $700, an increase of around 42 percent compared to nine years earlier. In comparison, manufacturing grew about 35 percent, construction 30 percent, and retail trade 38 percent.

Adding value

As New Zealand looks at ways to increase its export earnings, the emphasis is on adding value as the way forward, rather than continuing to ramp up volume.

Recently Primary Industries Minister Nathan Guy said there was a limit to further dairy intensification and growing the sector depending on increasing the value of products.

But while there has been plenty of talk about this in the primary sector there has been little discussion about how to do it for our tourism industry, which has overtaken dairy as New Zealand’s largest export industry.

For the year ended March 2016, total tourism expenditure increased 12.2 percent to $34.7 billion, directly employing 7.5 percent of the country’s workforce.

Williamson believes that, while the debate about whether the country’s infrastructure can handle increasing tourism is important, more consideration is needed about how the workforce will cope.

“I think that labour is going to be a major constricting factor on that growth, while there are important issues around physical infrastructure I think our labour market has some major problems as well," he says.

“I was saying about a year ago I thought we were heading to crisis in the labour market and just pumping in cheap migrant labour was just masking that crisis.”

Despite an increase in the number of people visiting New Zealand there has not been a huge growth in the spend per head.

To rectify this, there needs to be a focus on building a highly-skilled workforce by training, paying, and retaining them to provide tourists with a great experience, Williamson says.

“I think there’s a real danger that if we keep going for the low-road bottom denominator cheap labour route that we’re not going to be capable of getting the top dollar out of the tourist.

“I get the feeling we’ve reached the end of that road, that you can’t rely on cheap, temporary labour to build a high-skilled economy, it’s just not going to work.”

Bennett is supportive of a move towards a high value rather than high volume tourism sector.

“That’s why we have been focusing on attracting those visitors who spend more, stay longer, and explore regions around New Zealand, as well as the main tourist spots,” she said.

Labour’s Immigration spokesperson, Kris Faafoi, believes there’s a need for better training and qualifications for the industry.

He says an international visitor levy, or tourist tax, is one way forward, with a proportion being pumped back into the tourism training sector.

But Faafoi also wants to see tourism businesses taking more responsibility and paying their staff more.

“The tourism industry is booming at the moment, I think we need to see employers taking some responsibility around wages as well, I think if you talk to them they’re enjoying the boom themselves.”

Comment was sought from the Tourism Industry Association, but it did not reply before the deadline for this article.