Toward Higher Quality Employment in Asia

Natalie Chun Asian Development Bank September 13, 2011

Developing Asia has had high growth and low unemployment
Labor and Employment Statistics by Region

2

10

0

1

3

4

5

7

8

9

2

6

Thailand (Q4)

0.8
Singapore (Q4)

2.2

Viet Nam (annual)

2.9

Malaysia (Q3)

3.2

Hong Kong, China (Q4)

Unemployment Rate of Selected Asian Economies

Unemployment Fairly Resilient Even to Recent Economic Crisis

2007
Korea, Rep. of (Q4)

3.5

3.7

PRC (Q3)

4.1

percent (2007, 2009 and 2010)

2009
Sir Lanka (Q3) Japan (Q4)

4.7 5.0

2010
3

Australia (Q4)

5.2

Pakistan (annual)

5.6

New Zealand (Q4)

6.8

Philippines (Q4)

7.1

Indonesia (Aug)

7.1

Sizable structural transformation has occurred in Developing Asia
80 70 60 Percent 50 40 30 20 10 0

1990
66.3 54.6 31.8 17.4 16.3 31.9 36.3 26.6 18.8 7.1 61.6

31.4

80 70 60 Percent 50 40 30 20 10 0 Developing Asia Developing Europe Agriculture

2008
71.9 57.7 43.5 32.9 23.7 28 24.2 16.5 3.9
Latin America and the Caribbean Industry Services OECD

59.2

24.2

14.3

4

Informal employment in Developing Asia remains high… 1990
100 81.8 80 Percent 60 40 20 0.7 0 30.4 17.2 0.9 4.0 30.2 68.9 65.8 83.3

13.9
2.8

2008
100 82.9 80 Percent 60 40 20 3.2 0 29.8 12.1 5.0 33.4 8.3 5.2 67.0 62.4 86.5

4.2

Developing Asia

Developing Europe

Latin America and the Caribbean

OECD
5

Informal Workers

Employees

Employers

Informality uneven and persistent
Percentage of Informal Workers to Total Employment
Bangladesh (1991-2005) India (1991-2008) Nepal (1991-2001) Indonesia (1992-2008) Pakistan (1990-2008) PRC (1995-2008) Thailand (1990-2008) Philippines (1990-2008) Korea, Rep. of (1990-2008) Malaysia (1990-2008) Hong Kong, China (1990-2008) Singapore (1991-2008)
0.0

88.3 85.9 80.1 81.9 74.3 71.6 68.5 67.9 74.2 63.1 64.3 58.9 70.3 54.2 53.1

Country (years)

43.5

24.8
21.9 10.2 10.7 8.1 10.0
25.0

32.6 31.4

Year Start End

50.0

75.0

100.0

6

Informality is becoming more common even in non-agriculture jobs
Informal Sector Employment in Latin America and Asia, 1980-2008
Latin America
60 12 Per capita real GDP (2005 PPP, constant $ '000) 60

Developing Asia
12 Per capita real GDP (2005 PPP, constant $ '000)

10

10

50

8

50

8

6

6

40

4

40

4

2

2

30

0

1980-1985

1990-1995

2003-2008

30

0

1980-1985

1990-1995

2003-2008

Informal Employment (%) Per capita real GDP (2005 PPP constant $ '000)

Informal Employment (%) Per capita real GDP (2005 PPP constant $ '000) 7

Data source: ILO LABORSTA, CHIP, NSS-EUS

Employment Status Proxy for Quality of Employment
Informal employment tends to be lower quality as associated with: • Lower income and the working poor • Underemployment • Less security • Absence of social safety nets
Benefits Received by Formal and Informal Wage Workers (% of total formal/informal wage jobs with benefit)
Pension
100 80 60 40 20 0 Bangladesh Yogyakarta Armenia Banten Yogyakarta Yogyakarta Armenia Bangladesh

Sick Leave

Maternity/Paternity Leave

Vacation Leave

Bangladesh

Bangladesh

Yogyakarta

Armenia

Armenia

Banten

Banten

Banten

Formal

Informal

8

Income and stability are most important for majority of workers
Percent of Workers Reporting Certain Attributes as Most Important in a Job
Good Income
Azerbaijan Malaysia Armenia Viet Nam Philippines

Safety/Security

Indonesia
India Georgia PRC Thailand Bangladesh OECD Malaysia Kyrgyz Rep. Armenia Azerbaijan 0 20 40 60 80 0 20 40 60 80

Bangladesh
Thailand Georgia Kyrgyz Rep. India PRC Philippines

Viet Nam
Indonesia OECD

Source: Staff estimates based on unit record data from the World Values Survey, 2000 -2008 9

Quality of Employment Important for Reducing Poverty and Income Inequality
Informality, Poverty and Inequality (1990 -2008)

10

Country studies tell a similar story
Poverty Incidence by Nature of Employment Indonesia (top) and Armenia (bottom)

percent

11

Quality of Employment Enhances Worker’s Well-Being
Workforce Well-Being, Thriving Worldwide 2009-2010
Employed full time (by employer)

Employed full time (by self)
Employed part time, not looking for full time Employed part time, looking for full time

Unemployed
0 5 10 15 percent 20 25 30 35

Fully-employed workers are more likely to report the highest well-being.
12

Quality of Employment Can Enhance Firm Productivity and Profits
• Efficiency wage hypothesis implies worker effort and productivity depends positively on wages (Stiglitz 1976) • Human resource management literature provides empirical evidence that certain aspects of quality employment such as bonuses and non-pecuniary benefits lead to higher productivity and profits (Bloom and Van Reenan 2010)

13

Percent
10 12 14 16 18 0 2 4 6 8

Brunei Darussalam Singapore Japan Philippines Thailand Taipei,China Bangladesh Korea, Rep. of Sri Lanka Malaysia

Hong Kong, China
Indonesia Mongolia India Viet Nam wage 14 Labor Productivity PRC

Productivity Growth Key to Promoting Higher Quality Employment

-4

-2

Real Wages and Labor Productivity Growth
2001 to 2008

Challenges
• Restrictive labor and industrial policies • Uncompetitive markets • Demographic changes

15

Policy recommendations for lowincome countries
• Increase trade and foreign direct investment in the modern sector. • Managed migration from lower productivity to higher value added sectors. • Support productivity increase in rural non-farm activities (e.g. infrastructure development, financial markets, valueadded manufacturing) • Develop more skill-specific human capital through quality technical and vocational education. • Extend basic level of social protection to informal workers.

16

Policy recommendations for middleincome countries
• Continue to promote open trade and foreign direct investment and move into higher value added manufacturing and services. • Invest in human capital development through more general and higher quality secondary and tertiary education. • Improve social protection systems by broadening basic health care and enhancing pension systems.
17

Towards Higher Quality Employment in Asia

Thank You
www.adb.org/Documents/Books/Key_Indicators/2011
18

What does ADB do to support high quality employment? Examples:
• Technical Education and Vocational Training (TEVT) Sector Development Project in Sri Lanka TA 7746 • Trade Financing Program in provides guarantees and loans to partner banks to support SMEs in international trade TA 7380

• Infrastructure development
• Urban development project in Bangladesh to overhaul urban infrastructure and services in Dhaka and Khulna city areas TA 7415 • Social Protection Support Project in the Philippines to support conditional cash transfer (CCT) and the national household targeting system for poverty reduction TA 7468
19

Thailand’s Social Protection System
• Gradually built up as it became more wealthy
– 1990: Provide benefits for illness, maternity, disability, death, and old age. Compulsory participation of establishments (20 or more workers) – 1993: Compulsory participation (10 or more workers) – 1995: Maternity extended 60 to 90 days – 1998: Old age pensions and child allowances – 2001: 30-Baht Health Scheme provided universal health care. – 2002: Compulsory participation (1 or more workers)

20

Unemployment
Unemployment Rates
No. of countries 16 10 20 6 29 5 86 16 10 20 6 29 5 86 Unemployment rates youth 12 19.9 16.2 23.8 17.3 25.4 15.5 -0.2 1 -2.8 -6.2 3.5 -3.7 0 adult 3.6 7.9 5.6 6.1 7 11.6 5.5 0.6 0 -2.4 -2.9 1.4 -2.9 0.1 all 5.4 9.5 7.7 10 8.1 14.7 7.3 0.3 -0.1 -3.1 -4.1 1.5 -3.7 -0.2 Youth-toadult UR 3.4 2.6 2.9 4.3 2.5 2.2 3 -1.5 0.2 0.4 -0.1 -0.1 0 -0.6
21

Regions/Periods Later 2000s Developing Asia Developing Europe Latin America & Caribbean Middle East & North Africa OECD Sub-Saharan Africa ALL Changes (percentage point) Asia Developing Europe Latin America & Caribbean Middle East & North Africa OECD Sub-Saharan Africa ALL

Unemployment

Highest educational level attained No education Primary Secondary Tertiary (unfinished) Tertiary All

Youth 5.1 6.6 13.0 30.6 37.4 10.4

India Adult 2.5 2.2 3.3 8.2 5.9 3.0

Ratio 2.1 3.1 3.9 3.7 6.4 3.5

Youth 9.5 19.4 29.0 28.6 38.0 25.4

Indonesia Adult 2.4 3.9 7.9 7.8 8.2 5.6

Ratio 3.9 5.0 3.7 3.6 4.6 4.6

Youth 25.1 12.2 20.2 26.7 25.6 19.7

Philippines Adult 6.7 5.5 7.2 9.0 7.3 6.9

Ratio 3.8 2.2 2.8 3.0 3.5 2.9

22

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