Review and Analysis of the Demand for Skills in the Solomon Islands Labour Market
Richard Curtain
5 December 2013
Table of contents
Executive summary
Why another report on skills in Solomon Islands?
Chapter One: Age and employment profile of the population
Attachment 1
Chapter Two: Types of skills in demand: cognitive and social
Chapter Three: Types of skills in demand: technical skills
Attachment 3
Chapter Four: Identifying skill shortages
Attachment 4
Chapter Five: Identifying the skills gap
Attachment 5
Chapter Six: Measuring the Skill gap
Attachment 6
Chapter Seven: Future skill needs
Attachment 7
Chapter Eight: Opportunities in Australian and New Zealand labour markets
Attachment 8
Chapter Nine: Temporary work in Australia and New Zealand
Chapter Ten: Current demand for skilled migrants in Australia and New Zealand
Chapter Eleven: Recommendations on how to identify skills in demand
Framework for the assessment of skills gaps across countries
Executive summary
Context
Solomon Islands, despite its larger population than other Pacific island countries, a small formal economy with only 43,500 employed in 2009. The demand for skills that meet international standards of competency in Solomon Islands is shaped by the size and nature of its formal economy. According to the World Bank’s recent World Development Report on Jobs, small island nations, especially in the Pacific, are unable to reap the benefits from a concentration of businesses and skills available to large economies because of their size and other features.
Remoteness from the main trade routes and the high cost of transport also means they cannot benefit from being close to high-income markets except through tourism. Employment opportunities in the formal economy are limited apart from working for government and in providing basic services. However, the World Bank emphasises that for these countries outmigration is a major way people can improve their living standards. Also return migration and overseas communities through remittances can boost business opportunities in the domestic economy.
Issues covered in report
This report looks at evidence about skill gaps in cognitive and social skills as well as technical skills. In terms of the latter, the report makes use of detailed 2009 census data on occupations, industry sector of employment and qualifications to identify skill shortages and skill gaps in the existing workforce. Particular use is made of data on the occupations of foreign workers to identify domestic skill shortages. The skills gap in specific occupations is measured by comparing the share of the domestic workforce with post-school qualifications with the share of foreign workers with post-school qualifications. Also presented is information from two employer surveys.
Information on overseas opportunities for employment for Solomon Islanders is another major focus of this report. This information covers the seasonal work opportunities in New Zealand and Australia. Opportunities for longer-term work in Australia are identified through a close look at the types of jobs Solomon Islands residents in Australia have, based on 2011 census data. Opportunities for skilled work in New Zealand are also highlighted by information on the occupations of migrants from Solomon Islands approved for skilled migrant entry. Other, more general information on opportunities for skilled work for Australia and New Zealand are also presented.
Key findings
The most direct and ‘hard’ measure of domestic skill shortages is a higher proportion of foreign workers in a specific occupation compared with other occupations. The presence of foreign workers is solid evidence that the domestic supply of skills training is inadequate because employers go to considerable expense to import and pay higher wages to these workers. For the occupations up to the technician & associate professional level, higher proportions of foreign workers are to be found, in rank order: machine operators & assemblers, drivers & mobile plant operators, retail & other services managers, physical & engineering science technicians, and metal machinery & related workers.
Skill shortage gaps for specific occupations have been identified by reference to the share of job holders with a post-school qualification in occupations where a post-school qualification is expected, for example, professional & technician occupations.
A specific measure used of the skills gap in an occupation is the difference between the proportion of foreign workers in with a post-school qualification and the proportion of domestic jobholders in that occupation with a post-school qualification. The occupations with the largest skills gap, based on this measure, are: life science & health professionals, extraction & building trades workers, and teachers have the next largest skills gap. Other large skills gaps are evident for retail and other services managers, science and engineering professionals, and physical & engineering science technicians.
The demand for skills to international standard is also shaped by the wage structure. Evidence from the 2006 household income and expenditure survey shows that workers with trade certificates are not paid more than workers without a certificate. Other evidence of shortages suggests that the demand for trade skills of international standard, especially in the construction sector, is low. Skills in demand, as shown in higher wages and the number of foreign workers with post-school qualifications, are more evident for jobs at the professional and technician skill levels. Nevertheless, the small numbers of jobholders in these occupations and the nature of the economy means the long-term demand for these skills is likely to be low.
If the supply of skills training is to be tied to employment outcomes, as a demand-driven training system requires, the domestic job opportunities are relatively few. Job vacancies are likely to be limited to replacement demand, based on current jobholders reaching retirement age or the small number who migrate to work overseas. Any expansion of skills training to international standards in Solomon Islands needs to focus on achieving employment outcomes in neighbouring high-income labour markets.
Short-term seasonal work in Australia and New Zealand has the potential to provide income to low-income households and communities. However, the numbers of those taking part have been low compared with neighbouring countries such as Vanuatu. From the perspective of the demand for skills training, it is low-skilled work in the sense that the skills can be learned relatively quickly on the job. Nevertheless, a reputation as productive workers has a high reward in the form of employer requests for workers to return or for others from their community to come.
Opportunities for skilled work in Australia and New Zealand are explored through the use of data from the 2011 Australian census on the occupations of Solomon Islands residents in Australia. Information on the occupations of skilled migrants from Solomon Islands to New Zealand is also presented More general information on the types of skill shortages in Australia and New Zealand is also provided.
The report concludes with recommendations on how to collect and build up a system of information to identify skills in demand. The recommended approach is a bottom-up, learn by doing approach based on local needs. This is to ensure that trainer providers and employers at are the centre of a system of data collection and feedback. The report closes with a framework showing the types of data and data sources needed to identify skills shortages and skills gaps.
The mismatch between technical skills demanded by the private sector and those supplied by the market [in Solomon Islands] is a concern. Having higher employment numbers alone will not be sufficient to drive the economy; there must also be high labour productivity. Manpower development plans must not be made in isolation from the industrial demand for labour ...[1]
Why another report on skills in Solomon Islands?
This report, commissioned by the AusAID post in Solomon Islands, is a labour market analysis which focuses on identifying the demand for skills in the Solomon Islands economy. The terms of reference for the report require that the analysis use available information across all industry sectors. The outcomes of the study are to include ‘a complete picture of the Solomon Islands labour market, based on the available research and analysis already undertaken over a number of years. The study is to identify gaps or areas of growth within the labour market that would benefit from an increase in skilled workers, and proposed steps to meet this demand. The study is also to identify gaps in available information where further labour market research is needed and to propose a methodology for undertaking this work.
Terms of Reference
- analyse labour market demand, skills gaps and shortages across all industries in the Solomon Islands;
- consider international labour markets in countries such as Australia and New Zealand and the barriers for Solomon Islanders in accessing these markets;
- to the extent possible, analyse current and planned development activities to extract projections of the likely demand for skilled and qualified labour in the period 2014 – 2020, and the level and number of qualifications needed to meet the trends identified. Such trends should be quantified, specified and disaggregated by gender;
- identify opportunities for women;
- include annexes providing more detailed break-down of skills gaps and recommended qualifications;
- specification, scope and proposed methodology for any further analysis should it be required;
- provide a 2-page Executive Summary that highlights key findings; and
- be submitted in Word format, in plain English that is easily accessible to the non-specialist reader.
The specific focus of this report is to identify the skill shortages and skill gaps experienced by employers. Particular attention is given to technical skills, usually associated with post-school qualifications below degree level. Skill shortages refer to a situation where employers are not able to recruit people with appropriate skills from the domestic labour market for jobs that they want to fill. Skills gaps refer to a situation where employers regard their workers as not sufficiently skilled to do the work required of them.
Need for this report
Why is a another report necessary? The justification for this report is twofold. Few reports have looked at the demand side of the labour market in Solomon Islands or have done so in only a partial way. The focus of most reports has been on the supply of training and plans for new training arrangements. The second justification for this report is the use for the first time of detailed 2009 census data on occupations and qualifications to provide a comprehensive profile of skill shortages and skill gaps, at a level of detail that has not been presented previously.
How to identify skills needed in the economy
The identification of the demand for skills in an economy has to start with the jobs employers are willing to fund and the services the self-employed are receiving income to provide. This information, in its most comprehensive form, is best sourced from a national census.
Benefits of using census data on occupations and qualification
The census has several advantages for assessing the state of the demand for skills. The first is that it not only covers all the adult population in employment, enabling it to collect data on small groups in the population who would be missed by a national sample survey. These groups include those working in small enterprises and foreign workers.
The second benefit of using the census is its use of a systematic way of classifying the job descriptions into categories of occupations. This means that the census potentially offers the chance to obtain specific detail on up to over 400 occupations. This level of detail is needed to understand what skills an economy needs. The data on job descriptions have to be coded at the base four-digit level so it can be aggregated to broader occupational groupings. However, for various reasons, census data on occupations are sometimes only made available at the two-digit or one-digit level. In the case of the Solomon Islands 2009 census, occupational data are only available at the two-digit level, offering detail for up to 43 occupational groups.
These data, together with information about the qualifications of job holders, provide a rich source of information about the national skills pool. They show changes in the importance and decline of broad occupational groups over time, and the changing value of qualifications to employers. Information on occupations and qualifications, based on a standard system of classifications, also enable comparisons to be made between countries, as a means of setting benchmarks for improvement.
Other data sources on the demand for skills
Between censuses, information on the demand for skills can be accessed from national or sector-wide surveys of enterprises or people in employment. The latter are directed mainly at people in the labour force, in the form of labour force survey. Data on occupations and qualifications can also be collected as part of a survey with another prime purpose such as a household income and expenditure survey.
However, these surveys need to meet several conditions. First, where they focus on individuals, they need to be based on a representative sample of the population in scope, for example all those working in the formal economy, as defined. Second, the sample needs to be large enough to provide enough useful detail about important occupations and relevant qualifications. Third, the information on people’s work description needs to be coded into a recognised system of occupational classifications such as ISCO.
Fourth, it is highly desirable to collect information on jobs, skills and qualifications directly from enterprises. Employers are the primary decision-makers about what jobs to fund and what skills are needed to perform the tasks bundled together to form a job. Fifth, if data are collected from individuals in employment through a labour force or household income and expenditure survey, then information should also be collected about the individual’s employer, such as number of employees, activities of the enterprise, and location.
Limits of this report
No information was available on the employment outcomes or wage levels of any post-school education & training graduates. Nor was recent information available on wage levels by occupation more generally in the economy. Up-to-date information on wages and occupations will be available from the 2013 household income and expenditure survey which is now in the field (August 2013). Information on occupations from the National Provident Fund is available only up to 2006 as the occupation information has not been collated since then. Information on occupations from the census is only available at the two-digit level and is, therefore, limited to some 40 occupation groups. Information on the occupations of foreign workers from their work visas was not available.
Review of existing reports
This review has consulted 15 reports written since 2007 on aspects of the skills needs of the Solomon Islands economy. These reports are listed in a separate attachment to this report, with an assessment of whether they focus on employer demand for skills, whether the report has a focus on specific occupations and qualifications, whether data are presented on the occupations of foreign workers. Other questions asked relate to the data sources used, such as census data, data on occupations and industry of employment based on the records of the National Provident Fund, an employer survey or a household income and expenditure survey.
Only one report, the 2007 World Bank study on skills in Solomon Islands, covers the national economy with a substantial focus on the demand for skills. However, this study has limitations. No data from the 1999 census on occupations were used, despite the fact that it is available to the three-digit level (up to 116 occupations in ISCO 88). Information is presented in the report on the occupations of contributors to the National Provident Fund in an appendix but no skills-based analysis of these data are provided. The study was also unable to make use of the 2006 household income and expenditure survey results.
The other reports provide a partial picture about the demand for skills in Solomon Islands. Some reports give only limited attention to skills demand in Solomon Islands as they are covering many of the countries in the region. Some reports are based on primary data collection. One survey is limited to a particular industry sector, construction and is focused on one key issue, how to promote the number of women employed in that sector. Other reports are focused on a set of occupations such as health. Reports which provide an overview of the issues related to skills are based on an analysis of secondary data, but often with no additional analysis of available data sources. A potentially important survey of the demand for skills in the private sector by Solomon Islands Chamber of Commerce and Industry (SICCI) in 2011 only includes a minority of SICCI members, only some 30 or so enterprises.