Background
At the launch of its 2023 Annual Report, the Central Bank of Solomon Islands Governor, Dr. Luke Forau, used the analogy of crossroads to describe the nation’s economic performance. His speech emphasised the urgent need to address the country’s economic challenges and highlighted the necessity of immediate actions to spur economic growth. Key issues identified included a shortage of skilled labour, inadequate infrastructure, limited access to finance, fiscal constraints, and inefficient access to land for investment. Proposed reforms to tackle these challenges included legislative reviews, infrastructure development, fiscal discipline, and effective budget management to boost the economy and improve livelihoods. Central to these issues was a focused emphasis on the labour mobility scheme – an opportunity Governor Forau highlighted as a vital driver for the country’s economic progress.
Insights and policy implications
Labour mobility schemes have unequivocally proven to be an effective short-term mechanism for absorbing excess labour, filling specific unskilled labour niches, and contributing to economic productivity and improved living standards. Not surprisingly, labour mobility has emerged as a potent stimulus for economic growth, particularly due to the abundant labour supply versus fewer job openings in the economy. This mismatch has entrenched itself in the economy, presenting significant challenges for policymakers.
Two factors are crucial when implementing labour reforms. First, addressing domestic labour market reforms requires a multifaceted approach, with policy interventions targeting both the supply and demand sides of the labour market. The process is gradual, taking years to implement reforms that result in long-term job creation and economic growth. However, the urgent need to act and remain committed to driving action as policymakers is not just important but crucial to unlocking this growth potential.
Second, shaping policies with academic rigour is paramount considering the current reform needs. Policies grounded in research are not only informed but are also effective and impactful. Finally, data availability is a crucial element in reforms and policymaking. For instance, employment data is not readily available in the Solomon Islands. Instead, the Solomon Islands National Provident Fund member contributions are used as a proxy to gauge labour conditions in the economy. While this proxy is a useful indicator, reliance on it poses challenges and can result in misdirected policy interventions. In October 2022, the Solomon Islands initiated a significant milestone project – designing a National Employment Policy to address labour market challenges and promote job creation, economic diversification, and environmental sustainability. Prioritising the progression of such policies will be the right trajectory forward for policymakers in unlocking future growth in employment and economic development.
The impact of remittances
Relatedly, there is a growing recognition of remittances from labour mobility by policymakers that remittances are not mere transactions but they are central to the improvement in living standards, typically supporting consumption essentials like food, school fees, health and household expenses that would have not been possible otherwise.
Even with limited data availability at this early stage, the positive impact of remittances is evident. To further amplify these benefits, harnessing digital tools can empower workers and their families. Implementing systems that improve data collection and analysis to inform policy is essential to supporting this development.
Recommendations
To maximise the benefits of labour mobility schemes and ensure sustainable economic growth, the following recommendations are proposed:
- Strengthen Data Collection and Analysis: Develop robust systems for collecting and analysing employment data to inform policy decisions and accurately gauge labour market conditions.
- Enhance Vocational Training and Education: Invest in vocational training and education programs to equip the workforce with the necessary skills to meet domestic and international labour market demands.
- Foster Regional and International Partnerships: Expand and deepen partnerships with regional and international organisations to create more opportunities for labour mobility and economic collaboration.
- Implement Comprehensive Labour Market Reforms: Pursue a multifaceted approach to labour market reforms that address both supply and demand aspects, ensuring a balanced and sustainable labour market.
- Promote Research-Driven Policies: Ensure that policy development is grounded in rigorous academic research to create effective and impactful solutions tailored to the specific needs of the Solomon Islands.
Conclusion
The success of labour mobility schemes in the Solomon Islands exemplifies the transformative potential of targeted economic reforms. By addressing labour market imbalances and leveraging regional partnerships, the Solomon Islands can harness its human capital to drive sustainable growth. Continued commitment to data-driven policy development and implementation will be essential in realising these goals. Through collaborative efforts and strategic reforms, the Solomon Islands stands poised to overcome its economic challenges and pave the way for a prosperous future.
Louisa Baragamu is a Griffith-Pacific PhD candidate (on study leave at Griffith from the Central Bank of Solomon Islands).
The views expressed in this article are those of the author(s) and do not necessarily represent the position of the above-mentioned institution. For more information about Pacific Island economies, visit the Pacific Island Centre for Development and Policy Research.
