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FEATURE STORY

Well-being from Work in the Pacific Island Countries

May 9, 2014

  • Many Pacific island countries (PICs) face important upcoming challenges in providing adequate employment opportunities to young, increasingly urban, and often rapidly growing populations. Population growth and rapid urbanization in small Pacific Island Countries is causing understandable concern in the context of weak economic and employment growth.
  • Realistic expectations are needed regarding the trajectory of development. Due to inherent geographic obstacles, PICs are unlikely to experience export-driven development and associated employment creation on the scale seen in the broader East Asia Pacific region. Employment strategies must include less conventional policy options and focus on areas where PICs have established strengths and advantages.
  • Increasing international labor mobility through the erosion of regulatory barriers and investment in transferable human capital is vital. Employment opportunities in small, dispersed and isolated economies are less extensive than those in larger, more integrated economies. Providing Pacific Islanders expanded access to larger labor markets is therefore vital. This will require both changes in the immigration policies of the nearest large economies and careful investment by small PIC governments to support the transfer of skills between the countries.
  • The positive potential of urbanization can be realized through investment in improved rural services, connective infrastructure, and improved urban administration.  Urbanization, if well-managed, can bring important employment benefits. Policies should not be biased toward employment in either urban or rural areas, but rather should seek to ensure acceptable standards of living across all communities and allow individuals to respond as they choose to the inevitable concentration of economic opportunities in urban areas. This will require (1) movement away from policies aimed at preventing urbanization; (2) sufficient public investment in infrastructure links between agricultural areas and urban areas; and (3) improved land administration and increased investment in services in urban areas.
  • Public spending can be leveraged to support new employment opportunities. Public sector employment is likely to continue to provide a substantial share of work in PICs. Policy attention can usefully focus on ensuring that such employment is productive and sustainable rather than on reducing the number of public sector jobs. Private participation can provide incentives for efficient delivery of public services, but needs to be approached carefully and selectively. Broader public sector reforms to ensure efficiency and effectiveness need to continue. Donor agencies and governments can also work to ensure that the domestic economic impact public expenditure is maximized to support creation of local employment opportunities.
  • Careful investment of rents from natural resource industries can often deliver better employment outcomes than attempts to generate employment directly in natural resource industries. Natural resource industries can flourish in PICs despite higher cost structures. But work in natural resource industries is often unsustainable and contributes little to living standards. Judgments about policy interventions to create employment within these industries should consider the quality and sustainability of the work they are likely to create. PICs might often benefit most from converting rents from natural resource industries into improved infrastructure, services, and human capital, rather than seeking to create direct large-scale employment in those industries through implicit or explicit subsidization.