New data-driven systems needed to deal with mass unemployment, report says.

The government’s online recruitment tools and Jobseeker systems may not be fit for purpose given the mass unemployment expected post-Covid, an SAP report warns.

The software company’s report, Helping Kiwis Get Back To Work, also states the construction industry needs to digitise to increase productivity and create new jobs, with even a 2% cost reduction likely to result in billions saved for the government as it embarks on shovel-ready projects.

It also flags a possible $4.4 billion saving if businesses and the government adopt e-invoicing and e-procurement, and recommends a digital health certificate be pioneered with Australia to enable borders to open sooner.

NBR was given a first look at the report, which will be shared with public agencies this week. Nick Quin, SAP NZ’s director, public sector, said the government’s online recruitment tools were designed to solve the issue of a small number of unemployed people within a tight job market.

What New Zealand faced post-Covid was totally different, with vast numbers unemployed at one time and some key industries suffering and unable to accommodate large workforces.

The Reserve Bank’s Monetary Policy Statement on May 13 forecast unemployment rates would more than double from 4% to about 9%, with models suggesting the recovery to the 4% mark would not arrive until 2022.

Quin said, as a result, government systems helping jobseekers find work needed to become more individualised, with new abilities to marry needs directly with solutions.

Too much government data concentrated on the ‘how’, and not the ‘why’, he said. Addressing the why meant collecting data on the circumstances that led to that person losing their job, the person’s intentions for the future, and any constraints in their job search, including whether they were prepared to relocate.

In response, Ministry of Social Development spokesperson Kay Read said the ministry had received $150 million over two years in Budget 2020 to scale up employment programmes to support the increased numbers expected to become unemployed.

“This will be a more diverse group, including highly skilled people who have not previously approached MSD for support before,” she said.

The funding would bolster existing programmes such as Transition to Work (a grant for items someone might need to start a job, such as clothes and living expenses) and Flexi-wage (a subsidy to help with costs for those who wish to start their own business).

“Funding will also provide for new innovative approaches to support people into work, such as short-term employment supports and services, for people new to a benefit, to enable a quick return to work,” Read said.

The ministry has also said newly unemployed workers will be exempted from the normal obligations required from those receiving a Jobseeker benefit or hardship grants for six months. That included attending meetings and job interviews when asked and accepting suitable job offers.

Construction digitisation

Productivity was widely considered sub-par in the construction sector, which is one of the least digitalised industries, Quin said.

He referenced a 2016 report by McKinsey and Company that observed “cost and schedule overruns are the norm in the construction sector”. A subsequent report in early 2017 said construction continued to show “limited improvements in technological capabilities, production methods and scale”.

Quin said digital tools that should be considered included those that enabled the digitalisation of project management and how companies planned and forecast costs.

Other digital capabilities including abilities to create ‘digital twins’ – copies of builds created on the computer that allowed builders to verify all methods and materials were up to spec and appropriate.

“These would also help you support maintenance of the build in future,” he said. The SAP report recommends choosing a public works project as a pilot to explore the application of digital tech – a suggestion supported by Infrastructure NZ chief executive officer Paul Blair.

He said of the estimated $300b of infrastructure assets in New Zealand, 80% was owned by the local or central government, so they were well placed to lead the industry in adopting digitised systems.

Infrastructure NZ – which aims at advancing best practice in transport, energy, water, and telecommunications – recently published a report called Unlocking the Value of Data, which highlighted the benefits of creating digital twins.

It found that with the right data, workers could minimise disruptions and costs, while maximising outcomes, because issues could all be worked out through pixels on a screen, rather than with hammers and tools.

Blair said the government could make it a condition of the build on new shovel-ready projects that private companies adopt digital tools and create a digital twin, thereby stimulating exploration in the sector.

The under-utilisation of digital tools in construction was a global issue, Blair said, and Kiwi companies were often unwilling to invest because they typically operated on a low margin, and the sector was prone to boom-bust swings.

“You don’t over invest in a flash new machine that give you greater productivity, you tend to put on another worker,” Blair said.

Naylor Love general manager of construction Pete Lockhart said digitisation is a huge opportunity for the construction sector. “We are making progress, albeit rather slowly.”

Key challenges Lockhart identified included there being no one product that met the sector’s needs or one that had been widely adopted.

“We remain fragmented and inconsistent from project to project as teams change,” he said. “The other key issue remains the New Zealand market’s reliance on outdated procurement and contracting models that don’t encourage true collaboration and innovation.”

He said the key would be to create integrated systems, because “time and time again, we see that there is wasted data that has been created in silos”.

Businesses were also worried about the contractual risk of providing incomplete data to other members of the supply chain, Lockhart said.

E-invoicing and e-procurement

According to MBIE figures quoted in SAP’s report, Kiwi businesses send 282 million invoices annually.

The processing cost of an e-invoice is estimated to be $7.63, compared with $23.01 for pdf paper invoices and $25.67 for a paper invoice.

This equates to an opportunity to save $4.4b annually, which Quin said would translate to companies being able to expand quicker and hire new staff.

“If you can electronically solve a problem you are going to naturally help resolve some productivity issues.”

Quin said it was time to accelerate the deployment of these capabilities, which were already being encouraged by the government, but which had to be adopted sector-wide to be fully effective.

Digital certification of wellness

The report says an open border is critical for New Zealand’s economic recovery and suggests a digital health certificate is worth exploring.

“We could understand and be comfortable if people entering our borders have had a health check,” Quin said. “We just simply have to acknowledge that opening the borders is essential for this recovery.”

The report recommends the New Zealand and Australian governments work with industry to pilot a technology solution to establish a “digital health check certificate” between trusted jurisdictions to allow border movement.

Jamie Bamford leads Customs’ work programme to develop smarter borders, and said Customs continued to work with overseas partners to refine how border security operated and how it could be strengthened.

He wouldn’t comment on whether work on a health certificate was being considered.

Article first published on The National Business Review.

To read the full SAP report -Helping Kiwis Get Back to Work – see here.

By Geraden Cann
Journalist, The National Business Review
Contact the Writer: geraden@nbr.co.nz