Human resources

A special report

Asurvey of human resources in Papua New Guinea has found that the country could make big gains by using its people better. But there are significant skill shortages, especially in management and the professions.

The survey, entitled Fulfilling the land of opportunity: How to grow employment in

Papua New Guinea, was conducted jointly by Deloitte and the United Nations Development Program (UNDP). It has identified key areas where PNG has an opportunity to improve.

“It is estimated that some 2.5 million people work in the informal economy, compared to only around 500,000 in the formal sector. Transferring even a modest share of those in the informal sector to the formal sector would create considerable economic gains, in terms of productivity and tax revenue,” the report says.

“Second, PNG has an extremely large and growing young population, with over 40 per cent of the population under the age of 15 and thus expected to enter the labour market in some form (be it formal or informal) within the next decade.”

The report says that women are under-represented in the labour force, only making up an estimated 27 per cent of the total. “For an economy to thrive, women must be given the opportunity to excel,” the report says. “PNG is rich in culture and social diversity. This diversity, when fused and endowed with sufficient capacity, will be able to spur innovation, creativity and problem solving.” The report found that 51 per cent of businesses are currently hiring, although 60 per cent do not expect their headcount to increase in a year’s time. Nearly 40 per cent of businesses who reported they were hiring staff do not expect their headcount to increase over the next year.

“In other words, 40 per cent of staff recruited today will make no net addition to headcount in 12 months’ time, as they are either replacing staff who have already left (or are intending to leave in the next 12 months), or they themselves are expected to leave within 12 months,” the report says.

“This can broadly be considered as PNG’s turnover rate.”

The report estimates that, nationwide, staff turnover is 38 per cent. This compares with 16 per cent in Australia. It says high turnover rates are a considerable cost to business and to the broader economy.

“Businesses need to invest resources into hiring staff, and having to repeat the process reduces capacity and incentive to hire new staff.

“High turnover rates also affect the willingness of companies to invest in staff training, due to the concern they will not be able to retain the staff for long enough to capture the gain.

“This was confirmed by training institutes that noticed a preference by some

Papua New Guinean talent at management level is under increasing demand. Salaries are being reviewed upwards as the competition for local talent increases.

companies to recruit already qualified individuals rather than invest in developing one.

“This behaviour can cause a race to the bottom, whereby incentives to delay, or simply not provide, training at a firm level can lead to sub optimal outcomes at an economy wide level.”

The report looks at sector-specific issues. Eighty per cent of businesses surveyed identified skill shortages as a reason not to hire. In the wholesale, hospitality and retail sectors, however, the level was 93 per cent.

The report found that jobs in management and professional services are the most difficult to fill. It says the more specialised and highly skilled an occupation is, the more difficult it is to find that occupation in PNG.

“While larger firms can get around skills shortages by importing labour, small firms are more constrained by the local labour market.”

There are also some geographical differences, the report says. “At present, Port Moresby based businesses are unambiguously more inclined to hire than businesses based outside of Port Moresby, and white collar businesses are unambiguously more inclined to hire than blue collar businesses.”

Boosting locals is vital over time, the report says. “In the short term, the use of foreign labour is essential to the continuation of Papua New Guinea’s growth and development agenda.

“However, in the long term, it is critical to ensure that only those skills for which there is no local equivalent are brought into the country. Developing a national skill needs list is a key first step in this regard.”