Musing on the death of Prince Philip
Covid & misinformation unnerve us in PNG

Social safety net saves us, but we need more

PNG consumer price index  2018-21
PNG consumer price index 2018-21


PORT MORESBY - Ten years ago, a bag of 10kg rice cost something like K20. Today, stores sell a 10kg rice bag for between K31 and K35.

Ten years ago a live chicken cost K20. Today it’s K40. By the look of things, the price of live chickens will go all the way to K50 - my prediction for 2023. And we probably wouldn’t notice it.

That’s the way of things in life. The price of goods and services always goes up.

Ten years ago, the bus fare for municipal stops in Port Moresby was 50 toea. Today, anywhere you want to go, short or long, one kina.

Seldom do prices go down. The best we can hope for is that prices will remain steady as long as possible.

The chart above shows the Consumer Price Index (CPI) over a four year period in Papua New Guinea.

In simple terms, the CPI measures the cost of living. This chart shows you what you already know. The cost of living is increasing quite steeply.

To appreciate the impact of increases in cost of living consider this. The Teaching Services Commission payroll covers around 85,000 employees, the biggest payroll in PNG.

Add this figure to the employees of all government agencies and the total is around 200,000. This government payroll consumes around 30% of the PNG national budget every year.

Including the private sector, the total workforce in formal employment in PNG is about 300,000 which is just 3.3% of the total population of about nine million.

So you can see how many people are left – they’re either babies, at school or in the informal economy.

People in the informal economy don’t have a guaranteed income. Price increases affect all of us, but informal economy workers are the most vulnerable ofall.

So the question is: how can the government help the majority of Papua New Guineans meet the demands of the increasing prices of goods and services?

For me, there are a number of ways to do this. The first one is through the minimum wage, which in July 2016 was set at K3. 50 an hour, meaning take home pay is around K280 a fortnight.

Now 2016 was five years ago and while I support the responsible government agency for pushing ahead with a review, the minimum wage cannot be increased in isolation: it will cause employers to pass on the costs in the form of increased prices or reducing their payroll costs by cutting jobs.

Such an outcome would not be beneficial to anyone. So I have another view. PNG is blessed not only with resources but also with a culture in which family and tribal bonds (the wantok system) are still strong.

Overall, I see it as a strength rather than a weakness. Many countries in the developed world have 'social security' to support those who cannot fend for themselves. It’s a government funded safety net to support people living in poverty.

But for PNG, the fabric of society is centred on maintaining extended family relations and tribal obligations. That is a powerful safety net that no government in the developed world can beat.

So we need to take advantage of this cultural strength and use it to supporting people who earn an income below the threshold to pay tax. If we support them, the benefits translate to the wider population.

Without having a social security policy in place, the PNG government is already providing something of a safety net to the greater population by funding the minimum wage policy in the knowledge that the wantok system is also at work.

The second way of coping is for the government to implement the Cottage Business Activities List proposed in the IPA Act of 1992.

For example, one of the items listed was to reserve certain activities (such as stalls, tucker shops and markets) for PNG citizens. But it seems that 90% of tucker shops are owned by foreigners. It might be that Papua New Guineans are not competent to run tucker shops or that authorities turn a blind eye. I don’t know.

We have a steady influx of foreign workers into jobs that are reserved for our people and it seems we have come to accept it. Maybe that’s the way we want to carry on in our country?

You can see Indians and Chinese operating tucker shops or trade stores. Truckloads of Chinese are brought into construction zones. And there’s an increase of Filipinos in service industries.

It was great that the Marape government budgeted K80 million for the SME sector. We need to be be told how this is going. But we also need the implementation of that legislation on reserved activities that will grow our own jobs and increase money into our households.

The third way of supporting wages is through the tax system that enables the government to redistribute income. Papua New Guineans employed in the formal economy pay income tax and GST, use their wages to meet their family needs and on top of that respond to extended family and tribal obligations like haus krai, compensation and bride price.

I have just described the basics and there is more to be done across the board. For example, Governor Gary Juffa has championed the issue of translating more of the profits derived by extractive industries into tax.

That PNG has significant social resilience has been that employment has been relatively stable despite the Covid-19 pandemic. The effects have been not so harsh because 80% of our population is based in rural PNG and are subsistence farmers.

Nonetheless, we know that the market economy of PNG must diversify and that more technical expertise will be needed if we are to accelerate development and real growth.

What I have argued in this article is not a panacea to solving PNG’s cost of living problems. It must be done in tandem with other strategies that the government is already employing.


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Vue Thomas

PNG is part of the Melanesian society with a sharing culture which may not be compatible with capitalism.

This culture, known as the 'wantok system', involves reciprocity of benefits between people of the same kinship, clan or tribe.

The wantok system even extends further to include other clans and tribal allies and acts as a safety net in a traditional, socio-centric context.

Scholars argue that with the building of modern society and the introduction of modern money and wealth, this system has taken a new phase, diminishing the feature of sociality.

In our forefathers' time, this social safety net worked in such a way that 'you have my back – I have your back'. In the contemporary era, whoever is the breadwinner foots all the bills – this is not our forefathers' way but a reactive culture as resilience against capitalism and neoliberalism.

Scholars argued that local cultures have become not only comprehensible to, but also controllable by, outsiders.

Care must be taken not to swiftly draw conclusions based on the contemporary or reactive cultures of the Melanesian society as these reactive cultures are not representative of the true traditional cultures that existed before the introduction of Western ideals and capitalism.

The UN’s measure of dependency ratio (in PNG, 60% young and 6% old) is not fitting to describe the kind of dependency that is stressing PNG in this contemporary era.

Taxes are meant to ease our collective welfare obligations. Interestingly, personal income tax represents about 30% of total tax revenue.

Taxes are welfare payments pooled together, a form of welfare transfer from the “do wells” to the “not doing so wells” in the broad welfare-economic definition of taxes.

Besides paying taxes in the interest of social welfare, one has to spend again on the welfare of his or her extended family, clansmen, tribesmen, etc who are not doing well (coping up with capitalism).

It is really challenging to be a personal income taxpayer in PNG or the Melanesian society for that matter where you chip in formally to support welfare (taxes) and informally (cultural obligations and dependencies).

Another interesting observation is that, from the 3.3% working class, the remaining proportion (mostly unemployed and illiterates) actively influence government formation and tax policies – the very people who become really active and in extreme case become violent during election period.

Because of this interesting observation, it is not fitting for PNG to have a strong labour movement unlike other developed parts of the world.

On prices, wage increases would in theory lead to demand-driven inflation. In thinking about prices, our rational mind seems to allow the value of currency to slip through.

Price control may not help when the purchasing power of the kina is declining. Perhaps the government should increase the wage rate, improve the purchasing power of the kina and reduce personal income taxes.

Households are double-paying for welfare in a society like PNG where cultural obligations which is abusing our traditional social safety net, and our dependency rate is outrageously high and has little to no relevance with the UN definition.

Our economic struggles is the manifestation of the reaction of the Melanesian culture to capitalism and Western ideals of development.

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