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Reconceptualising Labour Markets in the South Pacific (Working Paper) [2002] JSPL 10; (2002) 6 Journal of South Pacific Law

Reconceptualising Labour Markets in the South Pacific

Anita Jowitt
Lecturer, School of Law, University of the South Pacific

Introduction

Throughout the Pacific Islands economies are attempting to undergo transition from 'primitive' subsistence agriculture to participation in the modern cash economy. Such a transition necessarily involves the creation of opporunties for earning cash, whether through the creation of jobs as employees or through the creation of opportunities for self employment. However, most developing Pacific Island countries (PICs) are struggling to manage this transition and are failing to meet their economic development goals. In many countries GDP per capita is decreasing, external debt is increasing and individual citizens, at least outside of urban areas, have not experienced any great modernisation of their circumstances.

This stagnation is becoming of more urgent concern because it now seems that a law and order problem fuelled by unemployment and/or lack of opportunity to access the cash economy has arisen. The June 2000 coup of Solomon Islands, coups in Fiji in 1987 and Fiji’s attempted coup of May 2000 have, in part, economic roots.^[1] The crime problem in Papua New Guinea (PNG) is such that victimisation rates in its cities are considerably higher than in other cities notorious for law and order problems such as Johannesburg and Rio De Janiero.^[2] As Standish says, “high unemployment and lack of economic opportunity are seen as the prime cause of crime.”^[3]

However, throughout the region there is very little discussion of the operation of the labour market beyond statements about a lack of reliable information making it very difficult to comment on the nature of the labour force and unemployment. Instead, reactive measures to improve ‘governance’ are the prime focus of government and aid donor policy. Expansion of labour demand appears to be largely conceptualised along the lines that an improvement in ‘governance’ (here used synonomously with political stability, transparency and strengthening of the rule of law) will attract direct foreign investment (DFI), which will in turn create employment opportunities within the formal private sector. Development of human capital is focussed upon formal (western) education that will, it is hoped, make people useful employees within these DFI funded enterprises.

It is my argument that such a conceptualisation of labour markets within the Pacific does not reflect their actual nature. Whilst ‘good governance’ is important and the attraction of DFI will help PICs, in itself it will not provide sufficient opportunities for access to the cash economy. Instead more careful examination of the nature of labour supply and of labour demand in these countries is required, in order to more accurately conceptualise their labour markets, and thereby provide a better model on which policies and interventions can be based.

The South Pacific Region

Figure 1: Oceania map

The South Pacific Island region comprises of 22 countries, some of which are independent, some of which are still colonised and some of which are in free association with other countries. When we talk of the South Pacific Island region as a homogeneity, just as when we talk about ‘Africa’ or ‘Europe’, a generalised or imagined conceptualisation results. Features of countries in this imagined region include that:

· they are geographically isolated

· they are comprised of internally dispersed land masses and populations

· they have small populations

· they have young, rapidly growing populations

· they are developing economies

· subsistence agriculture is significant

· they have strong traditional cultures

· governance is the major factor hindering development

These generalisations, whilst they may be appropriate for some purposes,do not provide an accurate basis for making policy decisions. For instance, looking at the size of countries and their populations, the region contains Tokelau, with a land mass of 10 sq km and a population 1,445, Tuvalu, with a land mass of 26 sq km and a population of 10,000, Solomon Islands, with a land mass of 27,510 sq km and a population of 480,000 and Papua New Guinea with a land mass of 452,860 sq km and a population of 5 million.^[4]

Of the PICs listed in the 2001 Human Development Report, human development index (HDI) rankings range from 67 for Fiji to 122 for Papua New Guinea.^[5] It should be noted that only 5 PICs have been listed in human development reports – Fiji, PNG, Samoa, Vanuatu and Solomon Islands, and in 2001 only Fiji, PNG and Samoa were included. The remaining PICs are, presumably, too small to be considered or, maybe, to be fitted comfortably into the HDI conceptualisation of countries.

To generalise about cultures in the region only makes sense if ‘traditional cultures’ are being contrasted with ‘western culture(s)’. Whilst ‘traditional culture’ is often used in this sense, ignoring the fact that western culture also is traditional and disguising implications of primitiveness in non-western cultures, it does not provide a basis for understanding culutral dimensions of PICs. Within the region there are three broad ethno-linguistic groupings – Polynesia, Melanesia and Micronesia. Polynesian countries (for instance Tonga, Samoa and the Cook Islands) are ethnically and linguistically homogeneous. This can be contrasted with the extreme heterogeneity of Melanesian countries. Vanuatu, with a population of about 200,000 has about 110 different linguistic groupings, Papua New Guinea has close to 800 linguistic groupings. Micronesian countries, whilst culturally heterogeneous, are not as extremely diverse as Melanesia.

Individual countries also have specific problems that make policy generalisations inaccurate or inapplicable. Coups in Fiji and Solomon Islands have already been mentioned as have serious law and order problems in Papua New Guinea. Low lying atoll states are at threat from global warming, with a number of countries expected to literally disappear underwater over the next century. Tuvalu has become the first country to try to evacuate because of this problem.^[6]

The first point then is that whilst generalisations about PICs may provide one with a useful place to begin to think about labour markets (or, indeed, any legal or policy interventions) in the region, these generalisations must be recognised for what they are. Given the diversity of the region a single conceptualisation of labour markets is not going to be accurate or appropriate.

Fiji, Vanuatu and Samoa

To examine labour markets it is, then, necessary to proceed by examining individual countries. The three countries I am particularly focussed on are Vanuatu, Fiji and Samoa. Fiji, despite its political problems, is the most developed of the PICs. Vanuatu and Samoa are both smaller and less developed countries, although their geographical and cultural differences make them very distinct. Whilst on a global level all are small countries, within the Pacific context all countries are sizable, so each has a recognisable labour market to examine. As labour markets are implicitly tied with economic performance we will begin our examination of these countries with an overview of their economic situations. Their geographic and demographic features also have important impacts upon labour markets, so will be briefly discussed before an overview of each country’s labour market is provided.

Economic situation

In discussing the economic situation of these countries it should first be acknowledged that fairly reliable sources such as ADB reports, UNESCAP reports, UNCTAD reports and World Bank reports all contain data discrepancies. This, in part, may be a reflection of the lack of reliability of the reports being released by the various official institutions of each country. Accepting that this data discrepancy means that the below figures can only be treated as appoximations, the table does allow us to draw a general picture of economic performance in the three countries.

Table 1: Fiji, Vanuatu, Samoa, Selected Macroeconomic Indicators^[7]

Fiji’s average annual rate of growth of GDP has been significantly affected by the attempted coup of 2000, which led to a sizable decrease in GDP for that year. However, prior to this it has not experienced consistent strong growth, so the attempted coup cannot be blamed for all of Fiji’s economic problems. Whilst it exports the most of any of the three countries it has a sizable trade deficit. As the most developed country in the region Fiji receives the least aid. In order to meet budget deficits and fund particular projects it has, instead, resorted to borrowing. All sectors were affected by the events of 2000, with tourist numbers decreasing significantly, foreign investors, particularly in the garment industry, withdrawing and the sugar cane harvest being affected.

Vanuatu’s low rate of growth of GDP over the past four years cannot be attributed to a coup or similar event. Growth has generally been low (although somewhat erratic) since independence, caused in part by instances of political instability and natural disasters. Again we can see a trade deficit, Vanuatu being reliant on importing most manufactured goods.

Samoa’s economic profile indicates similar trends, including a high level of debt and a sizable trade deficit. It has experienced the most consistent growth in GDP of all of the three countries in recent years.

The importance of agriculture to all three economies makes them vulnerable to natural disasters, including cyclones, earthquakes, and crop blights.^[8] Tourism, which is an important part of the services sector in all three countries, is also vulnerable to these natural disasters. The levels of debt of each country suggests that debt servicing is soon to become of more significance, reducing the capacity for governments to spend on infrastructure projects and the provision of essential services.

Geographic and demographic features and their impacts on consumer markets

As the table below shows, Samoa has the smallest population, but it is not widely dispersed amongst different islands so the central goods and services market located in the capital, Apia, is fairly readily accessible to the entire population. Vanuatu, on the other hand has a fairly small population that is widely dispersed amongst a number of islands, with the result that the central goods and services market, located in the capital, Port Vila, can only be readily accessed by a small number of people. Fiji’s largest island, Viti Levu, is home to about 70% of Fiji’s total population. The capital, Suva, located on Viti Levu, is readily accessible to most of this population. The second largest island, Vanuau Levu, with a population of about 130,000, is 64 kilometres to the North Est of Viti Levu, and linked by both ferries and planes. This gives Fiji a sizable fairly unified domestic consumer market, at least in relative terms.

Table 2: Population and Land Mass, Fiji, Samoa and Vanuatu^[9]

In terms of links to the rest of the world, Fiji is the central transport hub for flights between the South Pacific and the rest of the world, with its international airport having the capacity for large planes. It is also central to shipping routes. Samoa’s international airport also has the capacity for large planes. It has direct flights to the States, New Zealand and Australia. By constrast, Vanuatu only runs a 737 between Australia, New Zealand and Fiji, and has flights between Noumea and Vanuatu in a smaller plane.

Population Growth

Vanuatu in particular has a rapidly expanding population. This is particularly the case in urban areas, due to urban migration. The 1999 census showed the annual intercensal growth rate in Port Vila to be 4.2%, compared to a national growth rate of 2.6%.^[10] As undisguised unemployment and its attendant problems is primarily an urban phenomenon this rapid population growth means that unemployment poses something of an urgent challenge for policy makers in Vanuatu.

Samoa’s population has such a low growth rate because of migration to New Zealand. About 150,000 Samoans reside in New Zealand. This migration has long been recognised to be acting as a ‘safety valve’, ensuring that overpopulation and its attendant problems has not become too much of an issue. It should also be noted that due to the events of 2000 in Fiji it may be expected that migration from this country, particularly of its Indo-Fijian population, will increase, making population estimates for this country difficult.

Labour force

Just as economic data about these three countries is not entirely reliable, so too are statistics on the labour force somewhat unreliable. However, again the data allows for an approximate picture of the labour force to be drawn.

Table 3: Fiji, Vanuatu, Samoa, Labour Market statistics^[11]

All countries have a sizable subsistence sector although the number of people engaged only in the susbsistence sector is, probably, overreported. The borders between the categories ‘subsistence agriculture’ and ‘paid employment’ are somewhat blurred, as a number of people engage in informal sector activities, instead of or as well as engaging in subsistence activities but are recorded in statistics as being employed in the subsistence sector. These informal sector activities include small scale cash cropping, cottage industry and work for unregistered employers, particularly in the domestic sector. Some work is also seasonal, which can distort employment figures.

Further, the category of unemployed is also difficult. This category covers people who are not engaged in work but are actively looking for work. However, a number of people who are ‘employed’ in the subsistence sector would, if possible, engage in paid labour in addition to, or instead of, engaging in subsistence activity. These ‘underemployed’ are not indicated in official labour market statistics, but are a sizable group.^[12] It would also seem that a number of ‘employed’ people only have part time work and would prefer to work for longer hours.

In Vanuatu and Samoa there does not appear to be a similar growth in demand for labour. In Samoa the number of employers in 1991 was 410, and the estimated number of people employed in the private sector was 10,688. In March 2000 the estimated private sector workforce was 10,2712. If these estimations are correct then there has been virtually no growth in private sector employment in Samoa in the last decade of the 20th century.

Vanuatu has experienced a similar lack of growth in jobs, as the graph below indicates:

Figure 2: Vanuatu, urban population and employment 1979 – 1999^[13]

Only Fiji has experienced significant growth in the number of jobs, with paid labour being 91,000 in 1991, as compared to 112,500 in 1998.^[14] Unemployment has also remained fairly constant, staying around the 5.5 – 6% mark.^[15] However, the events of 2000 saw a fairly dramatic shift in labour demand, with some manufacturing and tourism enterprises closing. It is estimated that 7000 jobs have been lost because of these closures, and the long term effects are as yet unknown.

Labour market issues and strategies

What Vanuatu has is a situation in which the labour supply is shifting outwards rapidly, with no corresponding shift in demand. Samoa’s situation is similar, although the shift in supply is slower, thanks largely to migration. To counteract this several measures are possible, including:

1. minimising the shift in labour supply by encouraging people to remain in the subsistence sector (discouraging people from seeking paid employment),

2. trying to rechannel labour supply and shift labour demand outwards by developing local minimum capital enterprise,

3. trying to shift labour demand outwards by attracting productive DFI,^[16] and

4. allowing movement along the demand curve by minimising regulation.

Of course a shift in labour demand will only occur is there is a corresponding shift in demand for the goods and services being produced, so any labour market policies must also take the stimulation of consumer demand into account also.

Assuming that the effects of the 2000 attempted coup in Fiji have only created a temporary ‘blip’ in its labour demand, Fiji appears to be in a slightly different situation. It has to maintain the expansion of demand that it has been experiencing, whilst ensuring that ‘livable wages’ can be earned to prevent the apparent poverty problem from worsening. The range of strategies to do this are similar to those strategies that may apply to Vanuatu and Samoa although it can be noted that it has already been fairly successful at attracting DFI,^[17] so would be facing a situation of expanding DFI inflows, rather than generating new, previously unprecedented DFI inflows.

Current policy statements

The government policy statements of all three countries acknowledge the importance of both the second and third strategies in respect of generating employment. However, the main policy emphasis is on the third strategy. ‘Private sector led development’ is seen to be the key to economic growth, with foreign investment leading this strengthening of the private sector. Indeed, the development of microenterprise^[18], or ‘the village economy’ is not considered to be part of ‘private sector development’.

Looking at Samoa first, the 2000-2001 Statement of Economic Strategy^[19] (SES) aims for eight ‘strategic outcomes’, including ‘enhanced private sector growth’. Whilst this outcome could involve specific policies to develop micro enterprise, there is little discussion of this. The identified constraints to private sector growth are all linked to barriers to DFI. In turn the attraction of DFI is seen to be essential to employment:

The creation of employment opportunities through manufacturing type investment is essential for the success of the SES strategies. Increased employment has both welfare and economic growth benefits. Attracting foreign investment therefore has a high priority. Enterprises focusing on exports will be preferred. Export processing zones will be established.

There is some discussion of production within the ‘village based economy’:

The strategic direction for the village economy will be to encourage greater production in the agriculture sector and the establishment of more village-based industries and services.

Over the last 4-6 years, electricity, water, communications and tar-sealed roads have reached all but the remotest of communities. In the coming period, these remote areas, as well as more central locations, will benefit from continued efforts in road construction and improvement, water supply reticulation, communication upgrades and electrification programmes. Support will also continue to micro-level projects in areas such as education, agriculture, fisheries, youth and culture and health.

This, however, is not considered to be part of the outcome of ‘enhanced private sector growth’ but instead is seen to be part of a separate strategic outcome, that of ‘a revitalised village economy.’

Vanuatu maintains a similar position. Its Policy 2000 stresses private sector led growth through the attraction of foreign investment, in the belief that this will have a trickle down effect the ‘grassroots’. Whilst the encouragement of ni-Vanuatu business is identified, this is again separated out from ‘private sector led development.’^[20]