Turn on the news these days and you’re likely to be confronted with articles about worker shortages. Nurses, cooks, construction workers, accountants, care home employees, all seem to be in demand throughout high-income countries. Despite this need, these countries currently do very little to attract migrants with vocational skills, hoping that local workers, automation, and offshoring will reduce the need.
The Center for Global Development (CGD) recently published two studies that explore this dynamic in Australia. The first outlines the demand for these “mid”-skill workers in Australia through to 2050, finding a gap of two million roles unlikely to be automated or offshored. Those won’t be met through local labour supply unless Australians work at jobs below their skill level. The second study details how this vocationally-skilled migration could be facilitated from the Pacific Islands, through a new Pacific Skills Visa (PSV).
An eternal frustration in calculating the demand for immigration is understanding what the gap truly is. It’s not enough to know the extent of the labour shortage, now and in the future: you also need to know how much of this labour shortage will be met by training local and how many roles will be automated or offshored. The difference could be considered the demand for migrant workers.
In our first paper, we built a simple model to distinguish between falling relative demand for some tasks that do not require a university education – those that are being automated or offshored – and those with stable relative demand. These we call fundamental workers, professions such as carers, carpenters, chefs, and hairdressers. We find a large gap between the demand for fundamental workers and local supply, reaching roughly two million by 2050.
Sustained economic growth requires highly educated workers, who in turn require fundamental workers to do their jobs. In a hospital room, for example, the surgeon works together with a nurse’s assistant, a building cleaner, a food service worker, and an electrician to bring the patient back to health. No hospital room could function without the labour of all of these, and other, workers.
If historic economic growth is to continue, the gap between demand and supply of fundamental workers will exceed one million slots in the labour force by roughly 15 years from now. This estimate takes into account trends in technological change (automation of vocationally-skilled roles) and trends in Australian’s educational choices (affecting the supply of local vocational skill).
Australian demand for fundamental workers is fairly constant, but the number of locals who have the qualifications for these roles is declining (Figure 1): within a few years, more than half of all vocational-level work in Australia will be filled either by migrants or locals with more education than is needed to perform their jobs. Managed migration will be needed.
Figure 1. Changing supply of local workers by task group
In theory, Australia could get these workers from anywhere, but the greatest opportunities lie in the low- and middle-income nations of the Pacific Islands. These countries have long provided labour to Australia through seasonal agricultural programs. But the rates of migration remain very low; almost none of the work-based migration to Australia has come from the Pacific, at any level (Figure 2).
Figure 2. Immigrant fractions by task and education
This highlights a major opportunity. Nearly every Pacific Island country has a large and increasingly skilled youth population, but struggles to generate the quantity and quality of jobs needed. This population could be trained in skills in demand in Australia and other high-income nations across the Pacific Rim.
One benefit to training these workers in the Pacific is cost. In our second paper, we outline the costs of training for three “mid”-skill professions: accountants, computer science graduates, and chefs. These costs are all much lower within local Pacific institutions than in comparable centres in Australia and New Zealand, despite the quality of the final degree being similar.
So how could these “mid”-skill workers be trained in the Pacific, and then have their migration facilitated to Australia? To date, Australia has relied on supporting graduates from their Australia Pacific Training Coalition (APTC), a vocational training institution operating throughout the Pacific Islands, to access the Pacific Labour Scheme (PLS). While the scheme is growing efforts have been slow and limited (total numbers remain low; just 2,537 people by the end of May this year), and are less preferable than a more market-driven scheme.
We outline such a scheme in our paper. The “Pacific Skills Visa” (PSV) is a regional application of CGD’s Global Skill Partnership model, combining investments in technical and vocational education and training (TVET) throughout the Pacific, with migration opportunities to the signatories of PACER Plus, a regional trade agreement. Effectively, it comes as close as possible to creating a single labour market between the countries of the Pacific.
Our proposal is to allow APTC graduates automatic access to the PSV, with the same access granted to accredited institutions throughout the Pacific Islands. This would encourage competition between these institutions to lift their standards, improving overall education quality.
Two other features distinguish the PSV from existing mobility schemes. Firstly, it would be open to all PACER Plus signatories, realising the commitment to “progressively liberalise the movement of natural persons among the Parties.” Secondly, unlike the APTC which hinges on an unsustainable financial pipeline (Australian aid funding), the PSV would rely upon a loan scheme (Figure 3).
Figure 3. The PSV income-sharing model
The design details of such a loan scheme, and other particulars of the PSV, would need to be developed through a working group made up of government actors, training institutions, employers, and migrant rights associations. The PSV could then be trialled through a three-year pilot which would then be evaluated.
The potential benefits of expanding “mid”-skill migration between the Pacific Islands and Australia are vast. Continuing long-term trends in prosperity for Australians will require roughly two million foreign-born fundamental workers in Australia by 2050. If properly facilitated, the youth population of the Pacific Islands could help meet this need, with these countries supported to improve their own training institutions and boost supply of skills at home, addressing fears of “brain drain”. All that remains is to create the enabling structures to make it happen.
The authors’ would like to acknowledge the generous support of the Australian Department of Foreign Affairs and Trade (DFAT) in the support of this work, as well as comments and feedback from attendees at two events organised by the Development Policy Centre: the Pacific Migration Research Workshop (June 2021) and “How to meet Australian demand for Pacific foreign vocational workers” (August 2020).
This blog reflects the views of the authors, drawing on prior research and experience in their areas of expertise.
Thanks for your considered reply.
To put my argument another way, I would advocate looking at the bigger picture, not in an econometric modeling sense but by studying the rich experience of the real world in the PICs. In my experience, beyond the confines of the interests of IMF Article IVs, the real world has long outfoxed computer-based models of PIC economies. But we can look to the “success” stories of societies that have accepted institutional change to favor domestic growth.
Domestic labor as other factor markets are generally weak in the PICs, little contributing to domestically generated growth. However, there are exceptions and opportunities.
No empirical example is complete. They are all at-best work-in-progress. But I’d suggest that the governments and societies of the Cook Islands, Palau and Samoa have, at various times, managed to embrace the growth of the domestic private sector when many PICs have not. Some societies and their governments have managed to embrace improved public service management leading to improved public service performance (including Fiji and Tonga). Some societies and their governments have even tried to introduce institutional change to their land markets, not always successfully, however. Much of this institutional change is comparatively recent but still highly significant for the PICs.
Improved governance and public sector performance, together with supportive private sector institutions and policies that are accompanied by access to land, labor and capital has enabled some PICs to build their national economies. This has likely led to greater domestic multipliers than the receipt of remittances, which despite good examples to contrary, are still frequently quickly spent on imports with no lasting benefits.
I do not see migration and labor schemes being a primary driver of growth within societies, governments, economies, and the political economies that are primarily rent seeking as many are in the PICs. They are more likely to sustain under performance. However, some labor migration could contribute when domestic institutions are well in place to support domestically generated growth.
Satish, Michael, Helen, Ryan, Scott and Stephen,
This exchange is worthwhile.
The proponents of the Pacific labor schemes should, I suggest, try to understand the schemes’ greater ramifications and impacts. It is not all gain. This was one reason why David Abbott and I penned those two blogs on MIRAB (https://devpolicy.org/mired-in-mirab-migration-and-remittances-20200302/ and https://devpolicy.org/mired-in-mirab-aid-and-bureaucracy-20200303/).
The policy discussion should at some time confront the plethora of development partner documentation (including ADB and World Bank project and policy program evaluations), blogs (my last one on lessons unlearned: https://devpolicy.org/pacific-aid-ineffectiveness-lessons-unlearned-20200915/) and other work that have focused on the lack of capacities (individual, organizational and institutional) in the Pacific. As a development practitioner I come across the issue of domestic capacity shortages in almost every Pacific Island Country (PIC) development project and policy program. This was the reason for the major ADB study on capacity development back in 2007 (https://think-asia.org/bitstream/handle/11540/2523/learning-success.pdf?sequence=1)
While, from an individual perspective exporting labor may lead to private benefits and can certainly be of great value for those individuals and their families, I believe the greater question, most especially for development policy analysts and policy think tanks should be how to fashion PIC domestic social and economic growth that can build capacities that are strong enough to withstand individual losses.
The labor schemes may alternatively be politically expedient, avoiding the domestic sensitivities of further developing the domestic private sector and improving public service performance, more readily creating jobs overseas rather than at home, and therefore a vote winner. But some PICs have worked towards a better development model.
I’ll reply just briefly here, as you probably understand my views from other posts. One para for each of yours, as was was considering your comment also when replying to Scott.
I’m a migration proponent, scheme and non-scheme, and am acutely aware of actual and perceived costs and distributional aspects, but it’s because my reading of the serious quantitative evidence that the net effects are firmly in the positive, for individuals, senders, and receivers. I also do tend to favour individual agency (revealed preferences I referred to below) when in comes to migration, given the immense inequality associated with place of birth, so, when evidence is thin, I find it helpful to defer to such principles in the first instance and trust peoples’ own judgement. Countries and firms don’t own their citizens and workers, after all.
Very much agree with you on capacity and institutional issues. One paradox more recently though is that there doesn’t appear to be particularly returns to skills in the region (voc ed; uni has high returns), which indeed points to limited jobs rather than skills, as we should see a strong still premium.
I also support your view that we should better understand domestic/national social and economic development and that national development around a nation state is still important. My view is that labour mobility very strongly helps with these goals. Countries with better indicators in this regard in the region do indeed have much higher emigrant shares, and again, with net gains, I would not frame it as withstanding individual losses, but perhaps understanding and minimising costs and distributional issues to maximise the gains.
I don’t have much to say on your last point, and don’t believe there is one good or bad development model. I will be the first to admit that economists, let alone anyone else, really don’t know how to magically create economic growth with one simple recipe. Agree on the jobs and service delivery imperatives, but mindful that this is a very difficult challenge where there is no simple answer, especially if we expect government to do it. In the meantime, we do have some evidence and at least theoretical expectations that labour mobility money may increase domestic demand say through consumption linkages and investment, in addition to simply providing a little extra income to reduce hardship. Time will tell though.
Apart from having fuelled years of commentary, and even some policy, brain drain is a thing, where thing neatly captures class prejudice, as if some humans use their brains to labour and others do not. Having performed both agricultural and academic labour, I can assure you that both used these capacities. The descriptions, unskilled-not trained for the specific task in which employed, semi-skilled-received on the job training, and skilled-formally trained, as in medical training for a doctor, are preferable.
Secondly, demand should never be separated from supply, except in the fantasies of some. They are a unity of and for accumulation. In a capitalist world, both are produced, subject to capital. In Richard Curtain’s often cited PhD thesis on under-development in the Sepik of PNG, migration of male workers out of the region for waged and other employment, mainly agriculutural crops for international markets occurred at the same moment as consumer goods produced globally were transported into their villages and households. Demand for these goods assisted in the production of the supply of male migrants leaving and also denuding households and villages of their presence. With males absent, females from the households and others, usually the elderly of the extended families, had to lengthen their working days to compensate for the lack of domestic support. Thus was the next generation of workers produced. Parts of the region became labour reserves, the effects of which are still obvious today in one of PNG’s poorest areas.
So the myopia continues: `Australia needs more Pacific mid-skill migration’. And the needs of South Pacific countries? Certainly not economists funded by DFAT.
Couldn’t possibly be these needed in SP countries either: `Sustained economic growth requires highly educated workers, who in turn require fundamental workers to do their jobs. In a hospital room, for example, the surgeon works together with a nurse’s assistant, a building cleaner, a food service worker, and an electrician to bring the patient back to health. No hospital room could function without the labour of all of these, and other, workers.’ Try telling this to Goroka hospital and others in PNG battling an epidemic clearly out of control.
When will the DevPolicy Centre turn its analytic skills to investigating the human capital conditions in SP countries, including what part international policy has played in the non-development that has reigned over the last forty or so years in the region? Does development policy mean litle more than advocating out-migration to Australia and New Zealand?
Scott, I fully agree with you. The DevPolicy blogs on the Pacific Labour Scheme all seem to be arguing that the needs of the Pacific Island Countries must be subservient to the needs of Australia (and New Zealand).
This is part of a larger development picture that also needs to be better understood, as David Abbott and I argue in the following blogs:
Hi Stephen P,
Your accusation that we argue for Pacific subservience is ridiculous, as is the argument that Pacific islands should not embrace the labour mobility opportunities available to them. But we welcome a range of views on the Devpolicy Blog. We’ve published 13 by you.
Regards, Stephen H
Thanks for reading our blog, and for your interest in our research.
Most evidence suggests brain drain isn’t actually a thing, as I’ve explained elsewhere on the blog. In health care, for example, this often leads to more domestic production of nurses or other professions in demand abroad, boosting domestic supply. And in the Pacific, the issue is not a lack of workers or skills. It is a lack of jobs (demand). For a worker, a job abroad is better than a job domestically (pays more, workers preferences clearly reveal this and should be respected) and a job domestically is better than no job. Outmigration also tends to spur positive impacts for those “left behind”.
Migrating is the simplest way for someone to lift their living standards and the most powerful poverty reduction tool we have, so I welcome it playing a greater role in development policy.
For Devpol research on human capital in PNG, see our large project on rural health and education facilities under our PNG Promoting Effective Public Expenditure Project which we aim to replicate in the coming years if possible.
We also published a report last year on PNG health.
A lot of our ongoing and planned research, including that on labour mobility, is focused on health, education, and child development. You’ll see more of that on the blog in the coming months and years. In the meantime, if you use the search function on the blog there is already a lot there on human capital and we have plenty of discussion papers and other publications on related issues.