The Pacific has two different faces

The new guest worker scheme announced by the Australian Government on Monday is being billed by many Pacific governments, aid organisations and the World Bank as a development policy to displace the demonstrable failure of aid. But will it be enough to ease the enormous employment pressures that have been building in the region?

Australians have become accustomed to bad news from the Pacific Islands. Conflict in Solomon Islands, coups in Fiji, murders by raskol gangs in Papua New Guinea and the burning of Chinese businesses in Nuku'alofa in Tonga are evidence of an arc of instability on our doorstep.

Unemployment and underemployment are at the core of the Pacific's instability, and its cause. Without employment-led growth, crime, civil disruption and corruption undoubtedly will worsen. With substantial criminal interests operating in the region, the Pacific is also developing its comparative advantage as a location for international crimes such as people-smuggling, drug production and arms trafficking.

Most working-age women in the Pacific are employed in gardens and household care. The problem comes from more than two million men – four out of five – who are unemployed in towns or underemployed in villages. More than 100,000 men join the labour force annually with little chance of finding work. Most will never work and never earn an income. Every day, men and boys can be seen languishing in villages and towns and by the roadside, bored and frustrated.

PNG alone has nearly 1.5 million unemployed and underemployed men, and is adding about 75,000 to this number annually. By 2030, PNG could have a population of nine million to 10million, depending on the progress of HIV-AIDS, and the Pacific's population could be more than 13 million.

The entire region seems to present a bleak picture. But look a little closer and there appears to be two Pacifics.

One group of islands has managed to grow, if not at the speed of East Asian economies, at least modestly. It includes the Cook Islands, French Polynesia, New Caledonia, Samoa, Tonga and others that have reasonable education and health services, with modest socioeconomic outcomes for their people.

A second group of islands, including Fiji, PNG, the Solomons and Vanuatu, have stagnated at best.
In some cases they have become poorer.

In these islands, governments are largely absent from the day-to-day lives of individuals.

For most families, this means no electricity, no running water, no sanitation and little health care. For women, it means giving birth without medical attention. Many villages lack institutions of law and order, and receive scant attention from political elites, who squander public revenues.

The problem for the region, and hence for Australia, is that the second group of countries includes the largest, most populous islands. About 80 per cent of the Pacific's population is found in the low-growth group of islands, where employment is rare and living standards are not rising. High mineral and timber incomes have not translated to better services or economic growth. These islands will decide the future stability and prosperity of the region.

In fact, the Pacific is bipolar. The two groups of islands display markedly different demographic characteristics and different employment, social and educational outcomes. Whereas one group of islands has moderate population growth and reasonable education, the other experiences some of the highest population growth rates in the world and high levels of illiteracy.

Permanent migration can continue to be a safety valve for the Pacific, particularly for its small countries, easing labour-market pressures, adding remittances to income and contributing to political maturity.

Some Pacific Islands, however, may wish to maintain a better balance between their island population and emigration than those that have many more nationals residing abroad than at home, such as Tonga, Niue, the Cook Islands and Tokelau.

A guest worker scheme no doubt would benefit the individuals lucky enough to be selected to participate in it, but it is not a development solution for the Pacific.

The present Australian guest worker target of 25,000 workers a year would do nothing to ease the employment problems of PNG, Fiji and Solomon Islands.

The Pacific can avoid looming economic, social, and political crises only if its large economies dramatically reform their policies to encourage substantial employment creating growth. Otherwise, it will be only a matter of time before the growing army of unemployed and underemployed turns from restless to violent.

Gaurav Sodhi is an economist at the Centre for Independent Studies.