[This article is part of a series on foreign labour schemes, remittance and the Pacific]

Pros and cons of labour schemes

A recent Asia Development Bank (ADB) blog casts concerns on the trends and consequences of foreign labour schemes and remittances relating to the Pacific.  The two—labour schemes and remittances—are intertwined, of course. 

Prominent among the labour schemes is Australia’s  PALM (Pacific Australia Labour Mobility).  Participating countries include Fiji, Kiribati, Nauru, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu, and Vanuatu—that’s easily over 95 per cent of the Pacific population.

The ADB blog notes several pros and cons of schemes like the PALM. Among the pros are that outward remittances “fund the costs of daily living, home improvements, and education for many households. Remittances also go towards supporting churches and civic organizations as well as disaster assistance” back home.

The cons include “depleted local labour markets, weighing down prospects for sustainable economic recovery in the Pacific”.  The situation is likely to worsen with “possible permanent residency and permission for workers’ families to join them abroad”.

What about financial capability?

This article looks at another inherent challenge of labour schemes and remittances—financial capability.  Since money or finance is at the centre of remittances, adequate financial capability is critical for meaningful outcomes—for both the seasonal worker and families back home. Financial capability may include “not only the knowledge needed to make sound financial decisions, but (also) a combination of financial knowledge, skills, attitudes, and confidence that leads to positive financial behaviours and money management decisions that fit the circumstances of one’s life”. Financial capability is among Australia’s key National Strategies, founded on the premise that “Australians who are financially capable make financial decisions and engage in behaviours that are in their own best interests and that help them achieve a financially secure future”. 

Are Pacific seasonal workers and their families back home adequately capable, financially?

Globally, the levels of financial capability of the migrant and seasonal worker populations have been generally low. While little is known about the financial capability levels of PALM seasonal workers and their families back home, related and anecdotal evidence suggests it may be low as well.

Moreover, if even in the 2020s, financial capability remains a challenge in a developed country like Australia, what more can be said about small, developing island nations of the Pacific. A recent survey finds: (i) 17 per cent of Australians are not very confident or not confident at all about their ability to hit a financial goal; (ii) while 94 per cent of young Australians agreed or strongly agreed that it’s important to learn how to manage their money, only 42 per cent felt confident or very confident doing so; (iii) many Australians, particularly, younger and women, find dealing with money stressful and overwhelming; (iv) young Australians and women did not perform as well on average on financial literacy and did not rate their own overall knowledge and understanding of financial matters as highly as older Australians and men; (v) many Australians approaching retirement age do not have a financial plan for retirement and older Australians are not as comfortable learning online financial technology as younger Australians.

The 2030 Agenda for Sustainable Development consists of 17 goals and 169 targets aimed at eliminating extreme poverty and ensuring sustainable development. In the absence of adequate financial capability, the challenges of the poorer developing economies, including poverty and inequality, may not be properly addressed. Late bill payment, credit denials, increased applications for hardship, as well as other social and economic disadvantages are common challenges at the household level.

Further, having large debts can make unforeseen events especially hard to navigate, like job loss, divorce, and illness. High debt has been linked with financial stress, anxiety and depression. Financial stress also has a negative impact on academic performance. In aggregate, high debt can have negative consequences on productivity and economic growth. Research has even linked poor financial capability skills to the Global Financial Crisis (GFC), with misunderstanding economic uncertainty and with poor numerical aptitude.

Policy implications

In light of the foregoing, it is equally concerning that Pacific seasonal workers and their families may not be adequately equipped to understand and manage their finances; that they may not be sufficiently capable financially. Thus, for purposes of wellbeing and welfare, which participating governments, including Australian, exert a high priority on, some form of intervention may be required such as on-going training on financial capability of workers and their families.

Financially trained seasonal workers will help transfer skills and knowledge back home and thereby progressively enhance the region’s overall financial capability levels. Investing in human capital is crucial for sustainable growth and poverty reduction. Increasing their ability, knowledge, skills and health can make people more productive and innovative.

The evidence suggests a direct causal link between financial education and outcomes; it indicates that improved levels of financial capability can lead to positive behaviour change. Recognising the increasingly global nature of financial literacy and education issues, in 2008 the OECD created the International Network on Financial Education (INFE) to benefit from and encompass the experience and expertise of developed and emerging economies. 

Thus, systematic understanding and sustainable training of both the seasonal workers and families back home appears to be a well-being responsibility of a foreign labour scheme’s recipient country.


Dr Parmendra Sharma is the Founding Program Director of the Pacific Island Centre for Development Policy and Research and member of the Griffith Asia Institute.