By Dr. Odongo F Odhuno*

PAPUA New Guinea (PNG) is one of the fastest growing economies in the Pacific region. And in terms of the country’s current and future economic growth, PNG workers too expect to have a fair share of the benefits associated with the accelerating pattern of growth.

Booming Economy

Ever since the Liquefied Natural Gas (LNG) project was conceived more than five years ago, Papua New Guinea (PNG) has changed, from economic stagnation in the 1990s and early 2000 to above 5 per cent (%) rapid Gross Domestic Product (GDP) growth on average.

Although this growth is expected to slow down as the PNG LNG project construction phase winds down, the Government of PNG (GoPNG), with equity share in the project, expects to benefit in the longer-term from the higher export revenues, reported to begin in 2014, from this project.

Indeed, the GoPNG led by Prime Minister (PM) Peter O’Neill is already implementing tuition fees subsidy to ease parents’ burden of educating the country’s future workforce. The GoPNG has also moved to increase the salaries of current key workers, including the Police force and teachers, who were reported to have been awarded a pay rise in October 2013. The rest of the civil servants got their 7.5% per year pay rise agreement signed in December 2013 and is being implemented as reported since January 2014.

Low paid workers miss out

The low-paid semi and un-skilled workers in the private sector, are, however, still missing out on the country’s resource boom, thanks to the delay in the 2013 minimum wage determination.

A recent article in The National newspaper dated 22 January 2014, indicated the GoPNG is yet to present its submission to the 2013 Minimum Wages Board (MWB), which consists of representatives from the GoPNG, employers, employees, the community and church. Apparently, according to the newspaper article quoting reliable sources, the Board has also not heard or received from the PNG Trade Union Congress (TUC), Employers’ Federation or other industry councils. This “progress report” seems to suggest that both the employers’ and workers’ representatives are waiting for the GoPNG submission outlining the National Wages Policy which, according to technocrats at the MWB, “would make it easier for others to present their submissions.” But the Board already heard numerous submissions from other interested parties throughout the country. Unless the PNG TUC, the Employers’ Federation and the Rural Industry Council have become uninterested, these employers’ and workers’ representatives do not have to use the GoPNG’s position as the guide post when doing their homework, preparing and submitting their requests to the MWB.

As the minimum wage determination is established in law, the 2013 MWB is expected to announce the Determination after negotiations with the employers, workers’ union and GoPNG in February 2014. Perhaps because of their non-response to the call for submissions, the National Tripartite Council does not appear to have facilitated the major social partners – Government, TUC and Employers’ Federation – to make wage and allowance adjustments (if any) by agreement. This is no surprise, as recent history suggests.

ILO recommendation

The International Labour Organisation (ILO) recommends that the minimum wage rate should be reviewed regularly, preferably annually to keep pace with inflation or with average wages in the economy. This recommendation was followed in the 1970s and 1980s. In 1992, following neo-liberal advice from the World Bank and the International Monetary Fund (IMF), the MWB stopped indexing the minimum wage to the Consumer Price Index (CPI) which indicates the cost of a basket of goods purchased by a typical Papua New Guinean household. The agreements between the GoPNG and Public Sector Employees Association on the other hand, provide for general annual 7.5% salary increase and a threshold clause that protects the real value of the public sector employees’ earnings from being eroded as inflation bites.

In 2008 the MWB re-introduced the ILO-recommended practice but no annual review and/or deliberation were done. But the 2008 Board had also foreseen such eventualities and provided some safeguard measures. Should there be no deliberation leading to an agreement or to a disagreement among the major social partners, the Board mandated the peak Council of registered industrial organisations to refer the matter to the Conciliation and Arbitration Tribunal or any other relevant Tribunal to consider, review and make an award. It also expected the Tribunal to submit its review and award to the National Executive Council (NEC) for consideration, approval and declaration as Common Rule. All these should have happened within two months of the review being done and an award being made. Nothing happened and nobody did or said anything until November 2013 when the current MWB began public consultations and hearings.

Plight of the “working poor”

Let’s hope there is no animosity between the Government, the TUC and the Employers’ Federation. Let us also pretend that they have no misgivings about the way minimum wage rate is negotiated and subsequently approved by the NEC.

Surely the GoPNG, the TUC, the Employers’ Federation and the Rural Industries Council have no shortage of important issues for the 2013 MWB. In case they have run short of ideas, let us remind them that the plight of the “working poor” in PNG is an important issue that the MWB ought to be addressing when setting or adjusting the minimum wage rate in 2014. Let us also remind them that businesses in PNG, like businesses in America during the time of President Franklin D Roosevelt, have the moral obligation to increase workers’ wages just as they are intent on maximizing profits.

One of the most important changes to the country’s economy expected in 2014 therefore, is a decision of the Board to boost the minimum wage which has remained stagnant (at K2.29 per hour) since 2010. Ideally the minimum wage rate should be raised in consideration of the high and rising food prices and their effects on poor low-wage workers. However, while attempting to address the plight of the semi- and unskilled low-paid private sector workers, a balanced approach should be taken in determining the minimum wage rate by consensus between employers, labour union and government.

But as happened before, and going by the lackluster attendance at the recent MWB hearings, there is a possibility that the National Tripartite Consultative Council might not facilitate the major social partners – Government, PNG TUC, and the Employers’ Federation of PNG – to make wage and allowance adjustments by agreement. If this eventuates, and in the absence of meaningful submissions from other interested parties, the low-paid private sector workers might particularly pray that their PM Peter O’Neill will emulate US President Barrack Obama who, in his recent State of the Union Address, vowed to use his veto and go it alone to help low-paid Americans even if only a few hundred thousand people at best would benefit.

Final remark

As the last resort, the Prime Minister may provide the opportunity for those low-paid private sector workers who might otherwise continue to miss out on the benefits of the country’s economic growth.

After all, the 2011 – 2015 Medium-Term Development Strategy was designed to ensure that the benefits of the expected economic growth will be shared among all Papua New Guineans.

*Dr. Odongo F Odhuno is a Senior Research Fellow with the Economic Policy Research Program at the National Research Institute, and can be contacted at fodhuno@nri.org.pg