JVMP Reports
INFORMATION TECHNOLOGY PROFESSIONAL:
OCCUPATIONAL SKILL SHORTAGE ASSESSMENT
Current situation: Genuine Skill Shortage
Short term outlook: Genuine Skill Shortage
Executive Summary
Results from the Survey of Employers who have Recently Advertised indicate that a shortage of Information Technology (IT) professionals in New Zealand has continued in 2005. Employers of IT professionals were only able to fill 64% of their advertised vacancies. The average number of suitable applicants per vacancy was 1.9.
| Fill Rate | Average Number of Suitable Applicants | |
|---|---|---|
| IT Professionals | 64% | 1.9 |
| All Professionals Surveyed | 54% | 2.0 |
The demand for IT professionals has grown rapidly since 2001. The number of employed IT professionals has increased from approximately 8,400 in June 2001 to over 28,000 in June 2006. Employment growth of IT professionals of 27.3% per annum was well above 2.8% growth for all occupations. On average, about 4,000 new IT jobs were created each year between June 2001 and June 2006.
About 1,300 degrees and postgraduate diplomas with an IT major were awarded in 2005. This was 24% lower than in 2003, when qualification achievements peaked. A comparison of the number of degree and postgraduate diplomas awarded, with the number of employed IT professionals yields a training rate of 5.1% in 2005. This has declined from 12.4% in 2000. The number of students enrolled for IT degrees declined by 44% between 2001 and 2005. This indicates that the number of IT graduates is likely to continue declining in the next few years. Since 2002 permanent and long-term migratory flows of IT professionals have made a small but positive contribution to the supply of IT professionals in New Zealand.
The growth in demand for IT professionals has significantly exceeded the growth in supply since the upturn of the IT market in early 2001. Due to the ongoing disparity between levels of supply and demand, the Department of Labour has assessed the IT professional occupation as experiencing genuine skill shortage. Demand for IT professionals will continue growing in the short to medium term. With the number of new IT graduates expected to decline over the next few years the shortage of IT professionals is expected to continue in the short to medium term.
IT Technicians
Over the last five years, demand for IT technicians has fluctuated, but overall employment has fallen by nearly 1% per annum. Supply growth on the other hand, has been strong. Supply through training has grown by an average of 10% per annum over the last five years. Retirements and net migration have had a minimal impact on supply.
At an aggregate level, the excess of supply growth over demand growth indicates that there should not be a shortage of IT technicians. This is in part confirmed by the high fill rate for computer support technicians (84%), which comprise about 40% of IT technicians. However, the occupational category IT technician is diverse and we do not know the extent to which the IT diplomas included in our supply analysis meet all the skill needs of the various occupations within the IT technician category. Without fill rates for all of the occupations we cannot be sure that there are not pockets of shortage within the broader category of IT technician.
Introduction
This report investigates skill shortages for IT professionals in New Zealand and provides a supplementary analysis of IT technicians (Appendix 1).
The following section presents key findings from the Department of Labour’s (the Department’s) Survey of Employers who have Recently Advertised (SERA). This survey provides an indication of employer’s success in filling advertised vacancies for IT professionals as well as other information on their recruiting experiences. The next two sections investigate trends in the demand for, and supply of, IT professionals. The penultimate section presents some of the issues that arise from the matching of demand and supply in the labour market, such as wage rates. Finally, the ‘Assessment’ section considers all the information presented in the report and provides a view on whether the occupation is in shortage, and if so, the type of shortage being experienced. A short-term outlook for the shortage situation is also offered.
Note that the Department conducts an annual survey of IT Recruitment Agencies to identify which IT specialisations are shortage. The results of the 2006 survey will be published in mid December 2006.
Further background to this occupational report, including a discussion of the methodology; a glossary of terms; and an overview of the Department’s Survey of Employers who have Recently Advertised, including the survey questionnaire, can be found in the Background and technical note.
IT Professionals in New Zealand
This report examines occupations falling within the broader category of IT or Computing Professionals (NZSCO minor group 213)1 . IT professionals perform analytical, conceptual and practical tasks which support the efficient and secure provision of information technology to government, commercial and industrial organisations, and individuals. Occupations in this group include: business and systems analysts, multimedia specialists, web developers, software engineers, database and systems administrators, network professionals, and support and test engineers. The majority of occupations in this group have a skill level which is commensurate with a bachelor degree or higher qualification.
The IT professional category does not include ‘IT technicians’ (such as computer programmers, computer systems technicians, and computer support technicians). However, a separate labour market assessment report for IT technicians is available as Appendix 1 to this report.
Survey of Employers who have Recently Advertised
This section presents the key SERA findings of employers’ experiences in recruiting IT Professionals.
The SERA allows the Department to gain insights into skill shortages by investigating how difficult it is for employers to fill vacancies. A ‘fill rate’ is calculated for occupations with adequate sample size – the fill rate being the proportion of vacancies included in the SERA sample which were filled with an adequately qualified and experienced person within ten weeks of advertising. Occupations with fill rates lower than 80% are typically regarded as being in shortage, while fill rates lower than 40% usually indicate that the occupation is in acute shortage.
| Number of Employers | Number of Vacancies | Fill Rate1 | Average Number of Suitable Applicants per Vacancy1 | |
|---|---|---|---|---|
| IT Professionals | 49 | 73 | 64% | 1.9 |
| All Professionals Surveyed | 855 | 1236 | 46% | 1.7 |
1. The ‘All Professionals Surveyed’ fill rate and average number of suitable applicants per vacancy figures were both weighted to compensate for any under or over sampling of individual professional occupations in the 2005 survey.
Employers interviewed in the SERA filled only 64% of their vacancies within ten weeks of advertising (Table 2). There were 1.9 suitable applicants per vacancy. Table 2 shows that employers recruiting for IT professionals had greater success in filling their vacancies than did the total sample of employers attempting to fill professional positions in the SERA (46%).
Demand for IT professionals
This section investigates trends in the demand for IT professionals and the factors underlying them. Demand is measured by the number of IT professionals required by employers at current wage rates.
Historical demand
Demand for IT professionals has grown rapidly in the last five years (see Figure 1). Employment surged from approximately 8,400 in June 2001 to over 28,000 in June 2006 (see Table 3). During this period IT professional employment growth of 27.3% per annum considerably exceeded the employment growth of 2.8% for all the occupations. An average of about 4,000 new jobs have been created each year over this period.
Figure 1: Employment of IT Professionals 1992-2006, Year to June
The recent growth in employment of IT professionals follows an eighteen month period of declining employment at the beginning of the new millennium. This resulted from the unwinding of Year 2000 compliance projects.
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
|---|---|---|---|---|---|---|---|
| IT Professionals | 9.4 | 8.4 | 14.7 | 16.4 | 21.0 | 23.5 | 28.2 |
Future demand
The strong employment growth for IT professionals experienced in the current market is expected to continue over the medium to long-term. This is based on occupational employment projections from other developed countries such as Australia and the United States of America.
The Australian Department of Employment and Workplace Relations (DEWR) projects the employment growth of Computing and IT Professionals to grow by 4.5% per annum between 2005/6 and 2010/11. Computing and IT occupations is one of the five occupational groups with the highest employment growth rate prospects. DEWR considers that the growing importance of computer applications within businesses, including Internet and e-commerce, will result in future growth in demand.
The United States Bureau of Labor Statistics (BLS) predicts that employment of IT professionals will increase by 4.0% per annum between 2004 and 20142 . This is much higher than the forecasted 1.9% per annum increase for all professionals and 1.2% per annum increase for all occupations. Network systems, software programming, and software engineering are among the fastest growing occupations in the USA. The adoption of increasingly sophisticated technologies, businesses integration of these new technologies, and the falling prices of computer hardware and software are some of the reasons influencing the BLS predictions for the strong predicted growth in the number of employed IT professionals.
Changes in market conditions3
The Department’s Job Vacancy Monitor provides an indication of the state of the IT job market by measuring the total number of vacancies advertised on two major IT job boards. Its scope is therefore broader than just vacancies for IT professionals, but nevertheless provides an indication of trends in IT professional recruitment. The number of IT vacancies has been growing strongly since the beginning of 2004 (see Figure 2). However, growth has been slower in recent months compared to the same period in the previous year. There was 11% growth in advertised IT vacancies in the 12 months to August 2006, declining from about 75% growth in vacancies that was measured in the 12 months to August 2005. The average number of advertised IT vacancies remained around 1,048 in the first eight months of 2006.
Figure 2: IT Job Advertisements, December 2002-August 2006
Supply of IT professionals
This section investigates the various factors contributing to the supply of IT professionals. Supply is measured by the number of people willing and able to work as IT professionals at current wage rates.
Tertiary Education
About 1,300 undergraduate degrees and postgraduate diplomas with an IT major awarded in 2005 by tertiary institutions in New Zealand (see Table 4). This was 23% lower than the number awarded in 2003 when the number of achievements peaked. Enrolments peaked in 2001 and since then have gradually declined. Between 2001 and 2005, enrolments declined by 44%. The declining trend in enrolments indicates that the number of degree and postgraduate achievements will decline further over the next few years.
Year |
Enrolments | Achievements |
|---|---|---|
| 2000 | 4,739 | 1,099 |
| 2001 | 5,874 | 1,208 |
| 2002 | 5,088 | 1,296 |
| 2003 | 5,125 | 1,643 |
| 2004 | 4,464 | 1,468 |
| 2005 | 3,376 | 1,272* |
* Figure was estimated by the Department of Labour because of incomplete data.
The training rates for IT professionals and all other professionals are presented in Table 5. This indicator provides an approximate measure of the rate at which the supply of fully qualified IT professionals can potentially grow as a result of training. The training rate is calculated by expressing the number of trainees achieving the relevant qualification as a percentage of total employment in the occupation. Over the last five years, the training rate for IT professionals has decreased from 12.4% in 2000 to 5.1% in 2005. The IT training rate exceeded the training rate for all professional occupations in every year between 2000 and 2004. However, in 2005 the IT training rate (5.7%) fell below the rate for all professional occupations (6.6%).
Academics and people within the IT industry believe that a negative perception about the IT profession has deterred many prosepective students from enrolling in IT courses. To date, empirical research has yet to assess potential factors contributing to the drop in enrolments.
Year |
IT Professionals | All Professionals4 |
|---|---|---|
| 2000 | 12.4% | 7.9% |
| 2001 | 11.2% | 8.1% |
| 2002 | 8.0% | 6.9% |
| 2003 | 9.0% | 7.0% |
| 2004 | 6.5% | 7.2% |
| 2005 | 5.1% | 6.6% |
Migration
New Zealand has benefited from net positive inflows of IT professionals since 20025 as long-term permanent arrivals outnumbered the departures of computing professionals over this period. The net outflows experienced in the late 1990s and early 2000s have reversed to a net inflow. Table 6 shows that New Zealand gained a net total of 921 IT professionals in the four years to December 2005. The increasing number of arrivals reflects the tightening labour market and demand for IT professionals in New Zealand.
| 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
|---|---|---|---|---|---|---|---|---|
| Arrivals | 225 | 168 | 144 | 318 | 699 | 756 | 684 | 699 |
| Departures | 354 | 352 | 325 | 386 | 463 | 445 | 478 | 531 |
| Net Migration | -129 | -184 | -181 | -68 | 236 | 311 | 206 | 168 |
A number of the recruitment agencies and employers surveyed in the 2005 SERA expressed concern about the ability of many suitably qualified immigrants to effectively function in the workplace. Employers surveyed expressed that such migrants usually have good technical skills, but often lack ‘soft skills’ such as the ability to effectively interact with customers. In addition, some employers surveyed noted that migrants from non-English background countries face communication as a barrier to employment. According to these employers IT professionals in New Zealand are increasingly required to interact directly with clients, and therefore need strong communication and client liaison skills.
Retirements
Based on 2001 Census data, it is estimated that approximately 0.3% of the IT professional workforce retires each year (assuming a retirement age of 65). This is the equivalent of about 72 IT professionals per annum. Census data shows that an ageing of the IT professional workforce occurred between 1991 and 2001 (see Figure 3). The percentage of IT professionals under 35 years of age decreased from 64.5% in 1991 to 51.7% in 2001, while the proportion in all age groups over 35 increased from 34.4% in 2001 to 48.3% in 2001. As the IT professional workforce ages, the number of IT professionals retiring each year will increase.
Figure 3: Age Profile of IT Professionals, 1991-2001
Occupational Detachment6
In the 2005 SERA survey, employers were asked if they thought IT professionals left the occupation to go and do something different more or less than in other occupations. Of the 19 employers who answered this question, five thought they left at about the same rate as in other occupations, one thought they left at a higher rate, and 13 thought they left at a lower rate. This tends to indicate that occupational detachment may not have a large impact on supply for this particular occupation. Most employers interviewed felt that IT professionals tend to stay within the information technology profession once trained.
Matching of Supply and Demand
This section considers some of the issues that arise from the labour market matching of the supply of IT professionals with the demand for IT professionals.
Salaries
Computing professionals earn above the average wage rate of all professionals. The Labour Cost Index (LCI) measured an average hourly wage of $37.62 for computing professionals in December 2005 compared with an average wage for all professionals of $33.63 (see Table 7). According to the LCI, wages of computing professionals have increased by 3.3% in the twelve months to December 2005, which is lower than the increase for all professionals (4.5%).
| Dec 2004 | Dec 2005 | |
|---|---|---|
| IT Professionals | $36.43 | $37.62 |
| All Professionals | $32.18 | $33.63 |
Assessment
This section considers all the information presented in this report on employers’ recruiting experiences, supply and demand trends, and matching issues, and offers a view on whether there is a shortage of IT professionals and the type of shortage. A short-term outlook for the shortage situation is also offered.
The demand for IT professionals has grown rapidly since 2001. The number of employed IT professionals has increased from approximately 8,400 in June 2001 to over 28,000 in June 2006. On average, about 4,000 new positions for IT professionals were created each year between June 2001 and June 2006.
The growth in supply of IT professionals as a result of education and training has not matched the rapid growth in demand since 2001. The number of students achieving a degree or postgraduate diploma with an IT major has declined from a peak of about 1,650 in 2003 to about 1,300 in 2005. Net migratory flows have added about 200 IT professionals to supply each year since 2002. The mismatch between growth in demand and growth in supply is reflected in the low fill rate of 64%. The disparity that has developed as demand has outgrown supply indicates that the shortage of IT professionals is a genuine skill shortage.
The growth in supply of IT professionals through tertiary education and migration will slow over the next few years as enrolments have been declining since 2001. In contrast demand is expected to continue to grow. Consequently, the Department foresees the shortage of IT professionals persisting in the short-term.
For queries regarding this report please contact info@dol.govt.nz.
Disclaimer: The Department of Labour has made every effort to ensure that the information contained in this report is reliable, but makes no guarantee of its accuracy or completeness and does not accept any liability for any errors. The information and opinions contained in this report are not intended to be used as a basis for commercial decisions and the Department accepts no liability for any decisions made in reliance on them. The Department may change, add to, delete from, or otherwise amend the contents of this report at any time without notice. The material contained in this report is subject to Crown copyright protection unless otherwise indicated. The Crown copyright protected material may be reproduced free of charge in any format or media without requiring specific permission. This is subject to the material being reproduced accurately and not being used in a derogatory manner or in a misleading context. Where the material is being published or issued to others, the source and copyright status should be acknowledged. The permission to reproduce Crown copyright protected material does not extend to any material in this report that is identified as being the copyright of a third party. Authorisation to reproduce such material should be obtained from the copyright holders.
Endnotes
1 New Zealand Standard Classification of Occupations 1999.
2 United States Bureau of Labor Statistics, ‘Employment by Occupation, 2004 and projected 2014’, http://www.bls.gov/news.release/PDF/ecopro.PDF December 2005.
3 Analysis of the Job Vacancy Monitor suggests that it is an indicator of change in labour market tightness, or change in the degree of difficulty of recruiting staff. An increase in vacancies typically indicates increasing difficulty in recruiting staff and vice versa. While changes in demand usually dictate changes in labour market tightness, it can also be affected by changes in supply conditions, such as a rise in net migration
4 The training rates for ‘all professionals’ were calculated by expressing the total number of bachelor degrees achieved in New Zealand, as a proportion of total employment in all professional occupations.
5 It should be noted that these estimates could underestimate the migrant flows of computer professionals, as the occupations of approximately 40% of persons entering and leaving New Zealand are not recorded or are unidentifiable.
6 ‘Occupational detachment’ refers to individuals who choose not to continue practising in their occupation but retain a connection to the occupation (e.g. move into a management or supervisory role, or retain professional registration), or who leave the occupation entirely (e.g. by changing occupation or withdrawing from the labour market).
7 The data shown from the LCI are unadjusted mean hourly rates. Caution should be taken with interpreting this information due to the relatively small sample sizes, particularly at the occupational level. Furthermore, the LCI is designed to measure changes in, rather than the actual level of, wage and salary rates.
APPENDIX 1: IT TECHNICIANS - LABOUR MARKET ASSESSMENT
A1 Role of an IT Technician
In this report, the term ‘IT technician’ refers to three occupations: Computer Systems Technician, Computer Support Technician and Computer Programmer, (NZSCO codes 31142, 31213 and 31211 respectively)A1 . These occupations cover technicians who assemble, install, maintain and repair computer hardware, software and related equipment; provide technical advice and support to users of computer software and hardware; and prepare programs to control data processing by computers. According to the 2001 Census, about three-quarters (76%) of IT technicians are male, and a much greater proportion of IT technicians are Asian (14%) compared with in all occupations (5%).
A2 Survey of Employers who have Recently Advertised
The Survey of Employers who have Recently Advertised (SERA) allows the Department to gain insights into skill shortages by investigating how difficult it is for employers to fill vacancies. A ‘fill rate’ is calculated for occupations with adequate sample size – the fill rate being the proportion of vacancies included in the SERA sample which were filled with an adequately qualified and experienced person within ten weeks of advertising. Occupations with fill rates lower than 80% are typically regarded as being in shortage, while fill rates lower than 40% usually indicate that the occupation is in acute shortage.
| Number of Employers | Number of Vacancies | Fill Rate1 | Average Number of Suitable Applicants per Vacancy | |
|---|---|---|---|---|
| Computer Support Technicians | 23 | 43 | 84% | 2.6 |
| All Technicians Surveyed1 | 497 | 748 | 46% | 2.0 |
1. The ‘All Technicians Surveyed’ fill rate and average number of suitable applicants per vacancy figures were both weighted to compensate for any under or over sampling of individual technician occupations in the 2005 survey.
The only IT technician occupation which had a large enough sample in SERA to calculate a fill rate was computer support technicianA2 . It was found that 84% of computer support technician vacancies included in the survey were filled within ten weeks of being advertised. This fill rate was considerably higher than that for all technician occupations surveyed by the Department (46%). There was an average of 2.6 suitable applicants for each computer support technician vacancy compared with an average of 2.0 for all technician occupations surveyed.
A3 Demand for IT Technicians
Employment Growth
After showing growth in the ten years to 2001, the number of IT technicians employed in New Zealand has fallen by an average of 0.9% per annum between 2001 and 2005 (see Table A2). However, within this overall trend, the number of IT technicians decreased between 2001 and 2003, before increasing in 2004 and 2005.
| 2001 | 2002 | 2003 | 2004 | 2005 | Annual Growth in Employment | |
|---|---|---|---|---|---|---|
| IT Technicians | 11,108 | 10,462 | 8,701 | 10,151 | 10,730 | -0.9% |
Employment in IT technician occupations has decreased over the last five years, in contrast to extremely strong growth in IT professional occupations (an average of over 25% per annum over the last five years). Similar trends have also been noted in the United States. Data from the US Bureau of Labor Statistics shows that employment growth for IT professionals has averaged nearly 5% per annum over the last four years, while for IT technicians, employment has fallen by 1.3% per annum.
A4 Supply of IT Technicians
Training
Nearly 800 information technology related diplomas (at levels 5 and 6 on the National Qualifications Framework) were awarded in 2005 (see Table A3). After increasing between 2001 and 2003, completions have trended downwards over the last two years. The total number of students enrolled in these courses has decreased strongly - more than halving between 2001 and 2005. This indicates that qualification achievements will continue to decrease in the future.
Year |
Completions | Total Enrolled | Training Rate |
|---|---|---|---|
| 2001 | 963 | 6,492 | 8.5% |
| 2002 | 1,002 | 4,925 | 9.6% |
| 2003 | 1,123 | 5,009 | 13.2% |
| 2004 | 959 | 3,920 | 9.8% |
| 2005 | 795* | 2,948 | 7.8% |
* Estimated by Department of Labour due to incomplete data.
The training rate indicator provides an approximate measure of the rate at which the supply of fully qualified IT technicians can potentially grow through training. The training rate is calculated by expressing the number of trainees achieving the relevant qualification as a percentage of total employment in that occupation. The training rate for IT technicians averaged just under 10% between 2001 and 2005. However, in 2005 the training rate for technicians dropped to 7.8%, down from a high of 13.2% in 2003.
Migration
Migration has not made a significant impact on the supply of IT technicians. In the five years to December 2005, there was a net inflow of only 36 computer equipment controllers (about 80% of IT technicians are in this category).
Retirements
IT technicians have a considerably younger age profile than the workforce as a whole. In 2001, 85% of IT technicians were under the age of 45, compared to 63% for all occupations. Using 2001 Census data, it is estimated that approximately 30 IT technicians retire each year, which amounts to an annual retirement rate of about 0.3%.
A5 Summary
Over the last five years, demand for IT technicians has fluctuated, but overall employment has fallen by nearly 1% per annum. Supply growth on the other hand, has been strong. Supply through training has grown by an average of 10% per annum over the last five years. Retirements and net migration have had a minimal impact on supply.
At an aggregate level, the excess of supply growth over demand growth indicates that there should not be a shortage of IT technicians. This is in part confirmed by the high fill rate for computer support technicians (84%), which comprise about 40% of IT technicians. However, the occupational category IT technician is diverse and we do not know the extent to which the IT diplomas included in our supply analysis meet all the skill needs of the various occupations within the IT technician category. Without fill rates for computer programmers and computer systems technicians we cannot be sure that there are not pockets of shortage within the broader category of IT technician.
Endnotes
A1 New Zealand Standard Classification of Occupations 1999.
A2 Computer support technicians comprise about 40% of the group of occupations included in the IT technician category used in this report.