Problems in East Asia Job Market
Recruiter Asia found an interesting article this week on the East Asia Job Market form the www.asiancenturyinstitute.com – Article below.
JOB MARKET PROBLEMS IN ASIA
A number of job market problems — like labor unrest, youth inactivity, rising inequality, skills shortages and widespread informality — are holding back East Asia’s development.
Improvements in human capital (education and health), together with urbanization and industrialization, have boosted East Asia’s productivity, and driven economic development. This has improved workers’ incomes, and led to the massive reductions in poverty in the region.
But today, a number of job market problems — like labor unrest, youth inactivity, rising inequality, skill shortages, and widespread informality — are holding back East Asia’s development, according to a recent World Bank report.
Labor unrest has been most visible in China, as the country’s reservoir of surplus labor diminishes. But there have also been increasing instances of strikes in Indonesia and Vietnam, and frequent clashes between garment factory workers and police in Cambodia.
Workers are demanding higher salaries, better working conditions and labor rights. This points to the need for labor market institutions, including trade unions, as well as regulations (especially for health and safety conditions), in order to improve the well-being from work and social cohesion.
Youth inactivity is a major problem in East Asia, as more than 30% of people aged 15-24 are not in employment, education or training. Fiji, the Philippines, Tuvalu and Vanuatu have some of the highest rates of youth inactivity in the world.
Youth inactivity is linked to violence and eroding social cohesion. It also undermines the long-term future job prospects, and ultimately the economic potential of a country. The answer lies in improving access to education and training, and providing more job opportunities.
Inequality is high and rising in much of East Asia, for instance in China, Indonesia and Laos. Much of this comes through the job market, as there is a growing premium on skilled labor. This trend also highlights the risks of social polarisation, as well as the need to improve access to education and training.
Skills shortages in many East Asian countries are also becoming a binding constraint on development. Such shortages occur when health and education systems and the existing labor force adjust slowly to the economy’s fast-evolving demand, and when the incentives for people to invest in skills, and for firms to choose technologies, are distorted by outdated policies.
A large share of Asia’s workers are employed in the “informal economy”, which means that they are beyond the reach of taxation, regulation and protection. This is not surprising in the cases of agrarian economies like Cambodia and Laos. But what is notable is that, even in middle income countries with large manufacturing and service sectors, the informal economy is still very large and has not been declining.
The informal economy can be very flexible, and can provide jobs to people who may otherwise be unemployed, especially in times of crisis. But the informal economy is also characterised by lack of labor rights, failure to comply with regulations, and low productivity. And tax evasion undermines the capacity of governments to provide necessary public goods.
All too often, informality is an unfortunate consequence of well-intentioned strict regulations for employment and social protection, and their widespread evasion. For instance, formal employment protection is highly restrictive in Indonesia, China and the Philippines. And minimum wages laws in ASEAN disproportionately lower the employment opportunities of low-skilled people, women, youth and recent entrants into the labor market.
East Asian governments face a daunting agenda in terms of providing human capital, and opportunity to all citizens, and developing labor market institutions. But this is a critical challenge in order to graduate from the phase of development based on cheap, low-skilled labor towards a human capital- and innovation-driven model. And this challenge is rendered all the more difficult by the need to generate continued high economic growth, in a world where global growth prospects remain weak.
CONNECT WITH RECRUITER ASIA