- Written by Dr. Osborne Sanida, Director, PNG National Research Institute Dr. Osborne Sanida, Director, PNG National Research Institute
This article argues the case for increasing the proportion of the “money-making population” of Papua New Guinea (PNG). Data from the 2011 PNG Population Census is used to make the point.
Money-making and non-money-making activities
Employment provides sustenance for life by providing the goods and services to meet the needs and wants of people. According to the 2011 Population Census, employment activities are broadly defined as either monetary activity or non-monetary activity. Monetary activity is employment for pay or profit. This includes formal paid job, informal economic activity, and formal business activity. Each of these activities generate incomes for participants and their dependents, and Government revenue through tax: personal and company income tax, and Goods and Services Tax (GST). Persons engaged in monetary activities are the “money-making population”. Non-monetary activity refers to employment without pay which includes subsistence activities (for own consumption) and activities that support monetary activities (like helping in a family business) without pay.
Low proportion of the money-making population
According to the 2011 Population Census, the total population in PNG was 7.28 million and 99.6 percent (7.25 million) is the total citizen population. Our discussion focuses on the citizen population. The Census data showed that the proportion of the citizen population employed was about 45 percent (3.25 million). This means that 55 percent of the citizen population depended on the 45 percent employed for either money or subsistence production.
Out of the total citizens employed (3.25 million), the majority (66.2 percent or 2.15 million) were employed in non-monetary activities while only 33.8 percent (1.1 million) were employed in monetary activities. As a proportion of the total citizen population (7.25 million), those employed in monetary activities (1.1 million) make up only about 15 percent. Out of the 1.1 million, about 370,000 (5 percent of total citizen population) is in wage employment and the remaining 730,000 (10 percent of total citizen population) is in other monetary employment. The low proportion of wage employment is a real concern given that personal income tax is the backbone of the tax system.
Benefits of increasing the proportion of the money-making population
The benefits of increasing the proportion of the money-making population is three-fold. Firstly, when the money-making population (15 percent) spends on its wants and needs, it is providing the demand that businesses need. Secondly, the income generated by the money-making population (15 percent) is also demanded and used by the remaining 85 percent of the citizen population. Finally, the money-making population contributes to government revenue via taxes paid, which is vital given that tax is the main source of Government revenue.
A strategy to increase the proportion of the money-making population
Intuitively, increasing the proportion of the money-making population would involve creating more job and business opportunities so that more people can be involved in monetary activities. But the question is how? An important intervention is to ensure that the education system must be such that a child goes through the system learn and be trained on both a potential paid job (as is currently) and a potential business start-up (through a business-oriented curriculum). This way, once a student leaves the formal education system, he or she is equipped to make a choice to become either an employee (“work for others”) or a business person (“work for yourself” and/or “others work for you”).
The above strategy would increase the proportion of the “money-making population” and the benefits thereof. The current system of education is heavily geared towards “training for a paid job”, and when the ex-student does not find a job, he or she either stays idle (thus increasing the dependent population) or gets involved in illegal activities or negative opportunities, such as crime.
In conclusion, the education system must be supported by the rest of the Government systems and private sector if the proportion of the “money-making population” is to be increased.
This article was first published in the Post-Courier’s 12 November 2020 edition and on its website’s commentaries and features page.