Melanesia, given its large land endowment in per capita terms, is a natural candidate for the import rather than the export of labour.

Dr Satish Chand
The push for unskilled workers from the Pacific Islands into Australia and New Zealand once again resurfaced at the Pacific Islands Forum leaders meeting in Nadi last month.

While not a new debate, the battle lines were drawn when Grand Chief Sir Michael Somare and Honourable John Howard, the Prime Ministers of Papua New Guinea and Australia, respectively, debated this touchy issue at last year’s leaders meeting.

The easing of restrictions to Pacific workers into Australia and New Zealand, in my opinion, is only a matter of time: not because the Grand Chief would have won but only because Howard would have succumbed to the domestic economic imperatives for the above. Such easing, even when it does eventuate, however, will not allay all of the existing economic ills of the region. There are no known examples of countries that have become rich simply by exporting their workers.

Importantly, the hype on allowing temporary access to unskilled workers from the Pacific for fruit-picking jobs in Australia and New Zealand has ignored the many risks of a poorly managed guest worker programme. Pacific islanders should be the last to ignore this given the bitter memories of the ‘black-birding’ experience of the late 1800s when some 63,000 (unskilled) workers from Kiribati, New Caledonia, Papua New Guinea, Solomon Islands, Tuvalu, and Vanuatu were ‘recruited’ (allegedly, many were kidnapped) by plantation owners between 1863 and 1904 to work as indentured labourers in the Queensland (and later in the Fiji) sugar industry.

These ‘recruits’ did most of the back-breaking work, suffered many of the racial prejudices of the time, earned wages that were substantially lower than that of their local (white) counterparts, and were confined to agricultural ‘field work’. They delivered hefty profits to the plantation owners but then were repatriated unceremoniously following the cessation of the scheme at Federation.

These arguments do not nullify the case for labour mobility: to the contrary, they strengthen the case for easier access to Pacific Islanders (as against the rest), and suggest that careful consideration must be given to the design of a scheme that minimises the identifiable risks. Easing restrictions for unskilled workers from the islands into Australia and New Zealand, thus, is not a simple route to prosperity nor is it necessarily a ‘one-way street’.

Melanesia draws its name from the dark skin colour of its inhabitants. Polynesia and Micronesia, the other two groupings of Pacific Islanders, have people with lighter coloured skin. Coincidentally, Polynesians have had relatively easy access into New Zealand while the majority of the Micronesian states have had similar access into the USA via their Compact of Free Association. On the surface, the historical lack of access of Melanesians into industrial country markets has a black-white stink; this view is mistaken, however.

Melanesia, given its large land endowment in per capita terms, is a natural candidate for the import rather than the export of labour.

The lack of employment opportunities in these resource-rich economies, therefore, is principally due to the absence of growth-promoting policies at home. This policy-resource mismatch must be fixed if inroads are to be made into rising levels of poverty in several of the islands. Availing land for long-term investment remains the core challenge.

This labour mobility debate is heating up with one regional commentator alleging that the Australian government has hired Australian National University (ANU) academics as ‘propaganda machines’ to discredit the virtues of freer flows of people from the region. Such an accusation is most unfortunate (in addition to being false) as it undermines the very strong economic case for relaxation of rules for workers into Australia and New Zealand.

Resource mismatch

Furthermore, there are many within the ANU, and Australia and New Zealand more generally, who have argued long and hard for greater access to Pacific labour. Additionally, several senior Australian public servants have told me in private of course, that not allowing Pacific islanders to come and work in Australia ‘is simply nuts’.

While the politics of this debate may appear at first glance to be colour conscious, rest assured the economics of this debate is clearly colour-blind.

The economic arguments for freer flow of goods, services, and factors of production are compelling without having to resort to either mercantilist or other reasons. Absent externalities (that is, spillovers) from freer trade, voluntary exchange between parties, be it across individuals or nations, is to the benefit of all. Even externalities such as the potential adverse effects on domestic production and/or wages from freer trade do not justify a trade ban but call for interventions specifically targeted at the particular adversity.

If freer flow of unskilled labour, for example, lowers the unskilled wage in Australia and New Zealand, then assistance targeted at raising the existing skills within those countries, together with a strengthened social safety net, would be a superior intervention to a ban on inflows of unskilled workers. In the current climate of an acute shortage of unskilled workers in Australia and New Zealand, and with a rapidly aging population, the domestic imperatives for easing labour restrictions will only rise.

Continued growth in these countries, moreover, will only strengthen the case for easier access to workers from the neighbouring region. The economic arguments against labour mobility are tenuous at best. The economic case for a ban on import of workers of any skill category is justified only when the costs of allowing workers in is simply prohibitive. Letting in potential terrorists, for example, could be argued as justifying such actions.

Even in this extreme case, improved vetting would be the better strategy as it is more targeted than a blanket ban. Terrorists, in any case, are unlikely to be stopped by a ban on inflow of unskilled workers.

The present debate has been passionate, but short on the reasons as to why such access should be: temporary; only for unskilled workers; and, only to those from the Pacific islands. While professional and technical workers from anywhere may qualify to migrate to Australia and New Zealand on their existing points system, it would be wrong to suggest that all skilled workers are able to do so.

A highly skilled bus driver, for example, would not qualify under the existing scheme. From a pure trade point of view, the arguments for freer access to the ANZ market holds for all forms of labour and from every source.

Why then open the market selectively to unskilled workers from the Pacific Islands rather than indiscriminately to the rest of the world? In terms of costs and productivity, labour from Asia would probably out-compete those from the Pacific islands. One has to invoke the ‘good neighbour’ responsibilities of Australia and New Zealand and appeal to the small size and historical links of the Pacific Islands to their industrialised neighbours to defend any claims for preferential treatment.

Labour mobility will not be the panacea to the economic problems of the Pacific: the experience of the Micronesian state of Marshall Islands is most instructive in this regard.

Being in a Compact of Free association with the USA, workers from Marshall Islands have free and unfettered access to the US labour market. The majority of those that have emigrated have taken up 3-D jobs: that is, jobs that are difficult, dirty, and often dangerous.

One need only talk to, for example, the security personnel from Fiji currently employed in Baghdad for further convincing on this point. More convincing evidence is provided by data collected from a survey conducted in 2003 of some 2000 Marshallese workers living in Hawaii. They lived in poverty, thus had a choice between being poor at home or abroad.

The poor in Hawaii have an income higher than that of the poor in Marshall Islands. But the differences are not all that great; particularly after the differences in the costs of living is factored in.

This, however, is not a case against labour mobility but evidence in support of the proposition that higher income requires skills, and particularly those in demand.

Thus, the current poor unskilled workers may emigrate in search of work abroad, but they will need better skills to earn incomes sufficient to remit to their home countries and lift their families and extended kin out of poverty.

Pacific governments can do a lot more in strengthening the case for greater access to their unemployed into Australia and New Zealand. As a start, restrictions on labour mobility amongst the islands can be eased. This would be a major step in the right direction since labour laws in many of the islands are a lot more restrictive than those in Australia and New Zealand: try applying for a work permit in any of these countries and you will know what I mean. While such restrictions may allow better utilisation of idle resources within the islands, it will also present a stronger moral case for relaxation of entry of Pacific workers into Australia or New Zealand. The quality of training and transportability of skills could also be improved considerably.

A number of commentators pushing for greater access to Australia and New Zealand’s labour markets for unskilled workers from the Pacific islands have presented this as a quick fix to most of the economic ills of the region.

Such trust, as shown by the experiences of the Pacific nations that already have such access, is misplaced and has the potential to do damage by deferring much needed reforms for growth of domestic production. Labour mobility is just one of several instruments that could be used to accelerate growth of income within the Pacific region: on its own, it will not be enough.

To sum up, there is no simple, single quick fix to the current problems of rising poverty in several of the Pacific islands economies.

There isn’t a substitute for policies targeted at raising domestic investment and employment. While room to expand domestic employment opportunities may be limited, the challenge in much of Melanesia is to draw idle resources (land and unskilled labour in the main) into production. Allowing unskilled workers to earn an income abroad would be a good first step if it enables them to upgrade their skills and those of their kin so as to position themselves for better jobs and higher incomes down the track.

The Pacific Islands nations can make the first move by easing restrictions on mobility of workers amongst themselves. They could also present a proposal for domestic reforms in exchange for access to unskilled workers; something that both Australia and New Zealand will find hard to ignore.

• Dr Satish Chand is Director of the Pacific Policy Project, Crawford School of Economics and Government, ANU College of Asia & the Pacific.