Improving labour market outcomes in the Pacific Improving labour market outcomes in the Pacific POLICY CHALLENGES AND PRIORITIES Improving labour market Labour markets in the Pacific Island countries are characterized by underemployment, high levels of informality, gender disparities in employment outcomes, and a large and growing share of young people not in education, outcomes in the Pacific employment or training. Size and remoteness have hindered economic growth and limited positive labour market outcomes. A very young and growing population is both an opportunity and a concern: Pacific Island countries POLICY CHALLENGES AND PRIORITIES stand to benefit from a demographic dividend, but labour markets are simply not producing enough jobs to accommodate all the young women and men entering the workforce each year. Given the labour market challenges in the Pacific Islands, many workers have POLICY CHALLENGES AND PRIORITIES looked elsewhere for new opportunities. Emigration rates for skilled Pacific Islanders are among the world’s highest, leading to fears of a “brain drain” in many of the labour-sending countries. Meanwhile, many Pacific Islands are heavily reliant on foreign labour, driven in part by “skills shortages” at home. The challenge moving forward will be determining how to leverage the benefits of migration while mitigating its negative consequences. Looking ahead, the looming impacts of climate change and rapidly evolving technology also pose a major challenge to Pacific Island economies. This Report provides policy guidelines for improving labour market outcomes, focusing on five key areas: first, investing in underserved areas and tackling informality; second, strengthening labour market institutions to make growth more inclusive; third, adopting migration policy that works for all; fourth, addressing inequities between women and men while tackling youth unemployment; and lastly, preparing for the future of work in the Pacific, which will likely be shaped by climate change. ILO Office for Pacific Island Countries FNPF Place, 8th Floor 343-359 Victoria Parade Suva, Fiji Tel: +679 331 3866, Fax: +679 330 0248 Email: [email protected] www.ilo.org/suva Improving labour market outcomes in the Pacific POLICY CHALLENGES AND PRIORITIES ILO Country Office for Pacific Island Countries June 2017 Copyright © International Labour Organization 2017 First published 2017 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Licensing), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The International Labour Office welcomes such applications. 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Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. Information on ILO publications and digital products can be found at: www.ilo.org/publns. Layout and design by QUO, Bangkok Printed in Suva, Fiji ii Improving labour market outcomes in the Pacific: Policy challenges and priorities FOREWORD Labour markets in the Pacific Island countries are characterized by underemployment, high levels of informality, gender disparities in employment outcomes, and a large and growing share of young people not in education, employment or training. Considering that formal sector job creation remains limited, the objective of creating decent and productive employment for all, as outlined by Sustainable Development Goal (SDG) 8 (“to promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”) poses a serious challenge to countries in the Pacific. Furthermore, the global mega trends, such as climate change and technological innovation, add further complexities to the circumstances surrounding the Pacific Island countries. In 2012, the President of the Asian Development Bank (ADB) and the Director-General of the International Labour Organization (ILO) reiterated their pledge to strengthen their partnership to create decent work and address poverty, vulnerability, informality and gender disparities in Asia and the Pacific. In light of the labour market challenges in the Pacific, the ADB and the ILO worked together to prepare labour market action plans for three member countries – Fiji, Palau and Papua New Guinea – with a view to making policies more evidence-based, collaboratively determined and gender focused. This report is a synthesis of the analytical and research work that was carried out under this ADB-funded project in the Pacific. This report shows how size and remoteness have hindered economic growth and limited positive labour market outcomes throughout the Pacific Island countries. Development in the industrial sector has been uneven, but there are promising signs in the region’s growing tourism industry and niche agriculture and fishing sectors. A young and growing population is both an opportunity and a concern: Pacific Island countries stand to benefit from a demographic dividend, but labour markets are simply not producing enough jobs for all the young women and men entering the workforce each year. This report takes an in-depth look at public employment services and proposes measures to target disadvantaged jobseekers and meet the needs of employers. Persistent labour market challenges have pushed Pacific Islanders to migrate in high numbers. Enacting migration policies that lead to positive labour market outcomes requires a careful balance. While migration can contribute to positive development in sending countries, there is also a real risk of skills shortages as educated workers leave. The challenge in building good migration policy, then, is aiming for a "triple-win" scenario that benefits the receiving country, the sending country and the migrants themselves. This report concludes with policy guidelines to improve labour market outcomes in the Pacific. Several countries in the Pacific have expressed interest in building National Employment Policies aimed at achieving SDG8 – we hope this publication contributes to this effort. Lastly, we believe that this collaboration between the ADB and the ILO lays a solid foundation for further engagement between the two institutions. Mr. Xianbin Yao Ms. Tomoko Nishimoto Director General Assistant Director-General and Regional Pacific Department Director Asia and the Pacific Region Asian Development Bank International Labour Organization Improving labour market outcomes in the Pacific: Policy challenges and priorities iii CONTENT Foreword iii Acknowledgements ix Executive summary xi Abbreviations xvii Chapter 1: Employment and social trends 1 Introduction 1 A. Macroeconomic developments 1 B. Labour market trends 21 C. Concluding remarks 38 Appendix 39 References 41 Chapter 2: Labour market institutions in the Pacific 45 Introduction 45 A. Employment protection legislation (EPL) 45 B. Minimum wage 50 C. Labour organization 55 D. Policy considerations 63 Appendix 66 References 69 Chapter 3: Public employment services – A review of Fiji and Papua New Guinea 73 Introduction 73 A. The role of public employment services in the labour market 73 B. Examining existing public employment services in Fiji and Papua New Guinea 77 C. Policy considerations