Can Overseas Jobs Become a Long-Term Engine of Skills, Investment and Growth for the Pacific?

Temporary labour mobility can help Pacific Island Countries reduce youth unemployment, increase remittances and generate growth, but weaker education outcomes risk eroding long-term gains. Stronger education, skills, remittance-investment and private-sector policies could turn migration into a sustainable engine for jobs, productivity and inclusive growth.

Migration is becoming an important economic tool for Pacific Island Countries, but its success will depend on whether governments can turn overseas employment and remittances into better education, stronger skills and productive jobs at home. An International Monetary Fund working paper by Ruifeng Zhang and Yue Zhou finds that temporary labour mobility can reduce youth unemployment, increase household incomes and limit permanent brain drain. However, weaker school enrolment among some migrants' children could reduce these gains over the longer term.

Pacific economies have particularly strong incentives for migration because domestic employment opportunities are limited while overseas wages are substantially higher. More than 80% of Pacific emigrants are of working age, compared with about 64% across Asian economies. In selected Pacific countries, earnings in Australia can be seven to 14 times domestic GDP per capita.

Remittances have consequently become a major economic lifeline. In countries including Tonga, Vanuatu and Samoa, they can account for around 20–40% of GDP. These flows provide foreign exchange, finance household consumption and help families cope with economic shocks and natural disasters.

Temporary Migration Could Turn Unemployment into Income

The expansion of Labour Mobility Arrangements with Australia and New Zealand offers governments a different approach from traditional permanent migration. More than 88,000 workers participated in the major schemes examined by the IMF, including around 60,000 under Australia's Seasonal Worker Programme, 9,000 through the Pacific Labour Scheme and 19,000 under New Zealand's Recognised Seasonal Employer scheme.

Participants are mainly young workers, particularly those aged 20–34, and fewer than 20% remain overseas after completing their contracts. This means temporary migration can create employment without permanently removing large numbers of skilled workers.

That is particularly important where domestic economies cannot provide enough jobs. In Vanuatu and Kiribati, unemployment among people below 35 reached double-digit levels in 2021 and was more than twice the overall unemployment rate. Labour mobility therefore provides an outlet for underused workers while generating remittance income for their families.

IMF simulations suggest the economic effect can be meaningful. Cumulative GDP gains remain positive across the scenarios examined, with median gains peaking at around 3%. Economies with higher initial youth unemployment could benefit most because overseas employment converts unused labour into income.

Remittances Need to Become Development Capital

The challenge is ensuring that overseas earnings produce benefits beyond immediate consumption. More than 90% of participating households reported using remittances for everyday expenses, while only around one-quarter used them for children's education. Fewer than 2% reported using remittances to start a small business.

Governments and development partners could therefore encourage households to convert more remittance income into education, savings and productive investment without undermining the essential role remittances play in meeting everyday needs.

This creates opportunities for banks, fintech companies and other financial-service providers. Lower-cost digital remittances, migrant savings products and financial-literacy programmes could help families manage overseas earnings more effectively. Development institutions could support financial inclusion and programmes connecting returning workers with business finance.

Children's Education Is the Biggest Warning

The strongest concern identified by the IMF is the effect on human capital. After accounting for observable household differences, participation in labour mobility arrangements is associated with an average decline of about three percentage points in children's school enrolment. In Tonga and Kiribati, the estimated gap is around five percentage points.

The problem is particularly visible among children of lower-skilled migrant workers. Parental absence can disrupt supervision and caregiving, while children may also see high overseas earnings from elementary jobs and question the value of remaining in school.

Over time, relatively small education losses can become economically significant. IMF simulations suggest the skilled share of the workforce could decline by around four to six percentage points over 20 years across Tonga, Vanuatu and Kiribati.

Governments should therefore treat education protection as part of labour-mobility policy. Targeted school support, childcare arrangements, attendance monitoring, education-linked remittance programmes and assistance for families with parents overseas could help protect children from dropping out.

The potential economic return is substantial. The IMF simulation finds that if labour mobility is accompanied by improved education outcomes among migrants' children, cumulative output gains could exceed 10% of GDP over 20 years.

Can Returning Workers Create Better Jobs at Home?

The final challenge is turning migration experience into higher productivity. Temporary overseas jobs provide income, but many are elementary occupations and offer limited formal skill upgrading. Pre-departure training, certification of skills acquired overseas, recognition of work experience and better job matching after workers return could increase the development impact.

Private companies could benefit by recruiting experienced returnees, while financial institutions could help workers transform savings into businesses and investments. Governments must simultaneously improve the domestic business environment so returning migrants have reasons to invest and work at home.

For international development partners, labour mobility should therefore be linked with education, vocational training, financial inclusion, migrant protection and private-sector development.

The central policy message is straightforward: Pacific countries do not need to choose between migration and domestic development. Properly designed temporary migration can generate jobs, remittances and growth while limiting traditional brain drain. But the strongest results will come when governments, development partners and businesses ensure that overseas earnings are converted into better education, stronger skills, productive investment and higher-value jobs at home.