Demographic Changes and PNG s Labour Market Developments: Challenges and Prospects
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1 Demographic Changes and PNG s Labour Market Developments: Challenges and Prospects Manoj K. Pandey ANU Crawford School Development Policy Centre & UPNG SBPP Division of Economics 1
2 Introduction Demographic changes Labour market developments Challenges Prospects and remarks 2
3 PNG s Demographic Changes 3
4 Higher FR but Declining Trend PNG's fertility rates Year Source: United Nations Department of Economic and Social Affairs 4
5 Lowest ever MR, will bounce back later PNG's crude death rates Year Source: United Nations Department of Economic and Social Affairs 5
6 Young Population with low LE PNG's Life expectancy and Median age Year Life expectancy Median age Source: United Nations Department of Economic and Social Affairs 6
7 Growing Working and the old population, Declining Young PNG's population age structure Year Young (0-14 years) Working age (15-64 years) Older (65+ years) Source: United Nations Department of Economic and Social Affiars 7
8 PSR high but falling PNG's dependency ratios PSR ratio Year Total dependency ratio Old-age dependency ratio Child dependency ratio Potential support ratio Source: United Nations Department of Economic and Social Affairs 8
9 Summary Overall, PNG has a still high but declining fertility rates, moderate mortality rate with a tendency to bounce back later, median age lower than the world, and life expectancy increasing. As a consequence of these demographic factors, while share of young population declining, both old age and the working age population will continue to increase. Reduction in potential support ratio might start showing pressure on the economy in coming decades. 9
10 PNG s Labour Market Outcomes 10
11 LFPR remains close to 70%, E2PR to 45% PNG's labour force participation rates Rates (%) Year Employment to Population ratio Labour force participation rate (% of 15-59) Census labour force participation rate (% of 10+) Source: PNG NSO and International Labour Organisation 11
12 Subsistence employment remains high but wage employment not catching up PNG's employment and unemployment rates (%) (actual) and (forecast) Actual Forecast 0 Rates (%) Year Subsistence employment rates Wage employment rates Unemployment rates Source: PNGNSO and author's calculations 12
13 Declining GDP and Negative FE growth in recent years PNG's formal private sector employment and real GDP rates Rate (%) Year Total Formal private employment Real GDP Source: Bank of Papua New Guinea QEB 13
14 Falling employment shares for Agri, slow growth in the service & industry PNG's employment shares by sector (%) Share (%) Women dominate Men dominate 0 Men dominate Year Agriculture Services Industry Source: International Labour Organisation 14
15 Summary LFPR remains high at around 70 % Since 2014, GDP growth declined but growth in the formal sector employment has declined even more and is negative since then. Agriculture remains a major source of employment in PNG with dominance of women over men workers. Service and industry sector job providing performance remains poor 15
16 Challenges 16
17 Literacy rate catching up but mean years of schooling is below 4 years PNG's Educational performance Literacy Rate (%) Year Expected years of schooling Mean years of schooling Literacy Rate Source: UNDP Human Development Report and PNG NSO 17
18 Very low Secondary and Tertiary educational attainment PNG's highest educational attainment by sex Elementary Primary Secondary Tertiary All Males Females Source: Household Income and Expenditure Survey,
19 Is working population healthy? PNG's population with HIV and TB Year People living with HIV People with TB People living with both TB and HIV Source: WHO, UNAIDS and author's own calculations 19
20 Lost healthy life days per person PerCapita number of healthy life days lost due to TB and HIV/AIDS 2013, by gender Age group (years) Due to TB for males Due to HIV/AIDS for males Due to TB for females Due to HIV/AIDS for females Source: author's calculation based on data from various sources 20
21 Minimum Wage: Nominal-real paradox PNG's nominal and real minimum wage (Kina per week) Year Nominal: Rural Real: Rural Nominal: Urban Real: Urban Notes: Real wages data are at the constant prices 1977=100. Source: McGavin (2001), BPNG and author's calculations 21
22 Is minimum wage for all, despite low in real terms? Average gross hourly wage rate by sector July 2014 (Nominal Kina) Minimum wage line All sectors Government Private Private-informal Private-Unregulated Median wage: all Median wage: female Median wage: males Source: Jones and McGavin (2015) and author's calculations 22
23 Very low labour productivity PNG and the select Pacific countries' labour productivity Year Fiji Papua New Guinea Samoa Solomon Islands Tonga Vanuatu Note: Labour productivity is measured in terms of GDP per worker in constant 2011 international dollars in PPP terms Source: International Labour Organisation 23
24 Business Environment Obstacles for Firms Constraints for firms in PNG Access to finance Access to land Business licensing and permits 4.62 Corruption Courts 6.15 Crime, theft and disorder Electricity Inadequately educated workforce Political instability Practices of competitors in the informa Tax administration Tax rates 1.54 Source: World Bank Enterprise Survey Percent of firms (N=65) 24
25 Summary Lower educational attainment at secondary and tertiary levels-learn from East-Timore Poor health causing loss of healthy years to working population poses serious challenge to the labour market today and in near future Very low labour productivity, low-skilled workers, shortage of skilled workers Despite real minimum wage picking up in recent times, it is still same as 2010, and lower than real minimum wage. Implementation of minimum wage in the informal sector that adjusts costs of living remains a big issue. 25
26 Summary Poor labour statistics: HIES and Census. No periodic labour force survey, Business Liaison Survey for formal sector by BPNG and is very thin SME Policy 2016 is not very effective due to lack of access to finance and restrictive w.r.t foreign investment Weak formal economy: not able to generate enough formal jobs to reduce reliance on subsistence economy 26
27 Prospects and Remarks 27
28 Prospects Invest in health and education Promote skills and technology driven trainings Promote health and safety (at work & in general) Cost of living adjusted minimum wage: to incentivise otherwise low paid workers Improve law and order issues to boost investments Reduce costs of public utilities and infrastructure: roads, electricity etc. Create favourable business environment 28
29 Remarks PNG is young country with very high human capital potential But at very high risk if not properly invested in health, education and skill development Structural changes are desirable in the employment policy. 29
30 Thank you! 30
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