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Bangkok December 1997 | |
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Twelfth Asian Regional Meeting |
Report of the Director-General |
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EMPLOYMENT, POVERTY AND HUMAN
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I |
Despite its wide diversity, with countries at different stages of development and transition, Asia and the Pacific is still the most successful region in achieving rapid economic growth and in translating that growth into an increased demand for labour. Many economies, mainly in South-East and East Asia, have in recent years moved from a situation of widespread labour surplus, low productivity and stagnant, if not declining, wages to one of rising real wages, higher levels of productivity and employment, and in some cases overall shortages of labour.
Nevertheless, developing Asia still contains more unemployment and poverty than any other region, with almost two-thirds of the world's 1.1 billion poor, mostly in South Asia. Asia includes economies in transition which face grave problems of unemployment and labour market disruption as they shift towards greater market orientation. West Asia adds its own diversity because of its dependence on labour migration and energy resources, and serious problems of stabilization in response to fluctuations in energy prices. The Asia-Pacific region also includes industrialized countries experiencing structural adjustments in their labour markets, and a large number of small island economies facing serious problems of unemployment and increasing population pressure on limited land resources.
The emerging challenge for developing Asia and the Pacific is one of ensuring the equitable distribution of the benefits of growth and the alleviation of poverty, and the narrowing of income gaps within individual countries. It is critical to success that growth translates itself into a higher demand for labour and that mechanisms and institutions are in place that lead to remunerative and productive employment and improved conditions of work. Well-functioning and strengthened labour market institutions and respect for freedom of association and other fundamental ILO principles will go a long way towards bringing about social harmony and laying the foundation for sustained growth in the region.
The generation of productive employment is the most effective means of alleviating poverty, inequity and social exclusion, as was recognized at the United Nations World Summit for Social Development, held in Copenhagen in March 1995, when world leaders committed themselves "to promoting the goal of full employment as a basic priority of our economic and social policies, and to enabling all men and women to attain secure and sustainable livelihoods through freely chosen productive employment and work", terminology reflecting the ILO's Employment Policy Convention, 1964 (No. 122). Furthermore, the pursuit of social justice, for which the various United Nations summits and conferences were held, requires that whatever employment is generated should be of high quality, be adequately remunerated and carry a minimum of social protection. Thus, the Copenhagen Declaration and Programme of Action also endorsed a universal appeal "to pursue the goal of ensuring quality jobs, and safeguard the basic rights of workers and to this end freely promote respect for relevant International Labour Organization conventions, including those on the prohibition of forced and child labour, the freedom of association, the right to organize and bargain collectively, and the principle of non-discrimination".
Given the unprecedented growth that has prevailed in many countries of the Asia-Pacific region, a central issue is whether rapid economic growth has been translated into a rapid expansion of productive, remunerative and high-quality employment. For the region which still contains the majority of the poor in the world, and an especially high incidence of poverty, the need to identify policies that accelerate employment growth and to ensure their effective implementation holds the key to meeting the persistent challenges of poverty and underemployment.
In developing an appropriate policy response, countries need to take into account the accelerating universal trends towards closer integration of the world economy and the rapid pace of liberalization resulting in greater market orientation of national economies. Almost all Asian economies have experienced these momentous developments, together with an increasing pace and volume of intra-regional trade and investment flows as trade is liberalized within existing regional blocs, such as the Association of South-East Asian Nations (ASEAN) and the Asian Free Trade Area (AFTA), and new trading partnerships are emerging across the Asia-Pacific Rim, in the form of the Asia-Pacific Economic Cooperation (APEC). For the fast-growing economies in South-East and East Asia, these trends signify the continuation of increasing internationalization of production, whereas for the previous command economies -- most prominently China, Mongolia and Viet Nam -- they signify entirely new departures. The South Asian and Pacific island countries fall somewhere in between, with varying degrees of reforms to wean their economies away from state control and varying degrees of success in integrating into world markets. Reforms are also under way in West Asia to face the challenge of declining oil revenues. Both liberalization and globalization have been reinforced by massive inflows of foreign direct investment (FDI), to the extent that the region is now the largest recipient of FDI in the developing world. However, this inflow has been so far mainly concentrated in South-East and East Asia, with China receiving over three-quarters of the Asian total.
Rapid globalization and liberalization, and the resulting need to enhance international competitiveness, have led to increasing emphasis on human resource development (HRD) throughout the Asian region. Knowledge-based investment has become a priority equal to that of creating physical capital. Increasing investment in HRD seeks to ensure a greater stake for the labour force in the process of development by enhancing its capacity for productive work. Thus, a synergetic process is involved whereby a better fed, educated and trained and more productive workforce contributes to greater growth and receives commensurate returns from growth.
Employment and labour market trends
The Asia-Pacific region is vast and diverse, with growth and human development indicators that vary widely within the region (see annex, table A1). In examining employment and labour market trends in the region, it is useful to divide countries into distinct groupings based broadly on their structural characteristics and relative success in generating rapid and employment-intensive growth (table 1).
Table 1. Growth of employment and labour force, Asia and the Pacific,
selected countries and areas, 1978-95
(percentages per annum)
|
|
Employment, of which: |
Total
| ||||
|
Total |
Non-agriculture |
Manu- facturing |
Others | |||
|
Newly industrializing
| ||||||
|
Korea, Rep. of
|
1978-95
|
2.5
|
4.6
|
2.6
|
5.6
|
2.4
|
|
Newly emerging NIEs | ||||||
|
Indonesia
|
1978-94
|
2.8
|
4.2
|
5.5
|
3.8
|
2.7
|
|
Economies in transition | ||||||
|
China
|
1978-94
|
2.7
|
5.6
|
3.6
|
7.12
|
2.7
|
|
South Asia | ||||||
|
Bangladesh
|
1978-91
|
7.5
|
8.5
|
10.9
|
7.4
|
4.0
|
|
South Pacific | ||||||
|
Fiji
|
1978-95
|
2.2
|
2.3
|
3.8
|
0.8
|
-
|
|
1 See note 1 on p. 6. 2 Services 3 Formal sector employment.
| ||||||
In the first group are the three advanced industrialized countries, namely, Australia, Japan and New Zealand. For Japan, globalization has meant a substantial increase in the overseas activities of Japanese enterprises. Initially, they only shifted assembly processes abroad in search of lower labour costs. In more recent years, as the value of the yen continued to rise, Japanese affiliated companies abroad increasingly procured raw materials and components locally. As a consequence, Japan has seen a decline in employment in the manufacturing sector and growth in the service sector. Despite these economic difficulties, Japan's unemployment rate at 3.3 per cent is low by international comparisons but high by historical national standards, and its employment-to-population ratio is high. Both relatively young and older workers (60-64) have increasing problems in finding employment, and it is becoming imperative to seek employment in new and more promising industries requiring specialized education and training. In Australia and New Zealand, in response to liberalization and economic deregulation, the industrial structure has been significantly realigned and the industrial relations system restructured. While the primary sector has continued to play an important role, the share of manufacturing, especially in hitherto protected areas (textiles, garments, motor vehicles), has declined and the tertiary sector has been growing rapidly, particularly in tourism, finance and business services. In Australia, after a rise in the late 1980s and early 1990s, unemployment has fallen from a peak of 10.9 per cent in 1993 to some 8.5 per cent in 1996, but involuntary part-time and casual work is increasing. In New Zealand, in response to far-reaching policy shifts in recent years, the behaviour of the unemployment rate has been dramatic: it fell from 11 per cent in 1991 to some 6 per cent in 1995. Employment growth during this period has been rapid. Changes in labour market policy may have reduced the rate of structural unemployment, but the labour market situation of some ethnic and disadvantaged groups remains poor and requires well-targeted, active labour market measures.
In the second group are the newly industrializing economies (NIEs), namely the Republic of Korea, Singapore, Hong Kong(1) and Taiwan, China, some of which have already joined the ranks of developed economies in terms of per capita GDP. These economies have successfully completed the stage of export penetration through low-wage, labour-intensive methods of production and have moved to the second phase of more skill- and capital-intensive technologies and knowledge-based services. In the face of rising wage and land costs, they have increasingly shifted domestic production of labour-intensive exports to the next tier of NIEs through the export of capital and mainly low-level technology. In the NIEs the fast rates of economic growth and high demand for labour, together with a slower growth in the size of the working-age population, have contributed to labour shortages, and these are likely to persist given a further slowdown in population growth. The emerging labour shortages have led to increasing dependence on migrant workers, a significant proportion of whom are illegal.
In the third group is the fast-growing tier of newly emerging NIEs comprising Indonesia, Malaysia and Thailand to which, based on its recent economic revival, the Philippines can also be added. These countries have been recipients of high levels of foreign investment inflows, but are now also -- particularly Malaysia and Thailand -- investing in other Asian countries, especially in China and Viet Nam. Labour and skill shortages are also beginning to emerge in some of these countries. Malaysia, since the 1980s, has experienced shortages of technical workers in manufacturing, and of unskilled workers in rubber and oil-palm plantations and the construction sector. At present it has half a million documented foreign workers, mainly from Indonesia and the Philippines. In Thailand the market for unskilled workers is becoming tighter and there are shortages of semi-skilled and highly skilled workers, especially in engineering and management. The high rate of employment growth in Indonesia has put upward pressure on the low level of wages. In the Philippines, after a decade of negligible growth, the economy has begun to pick up since 1993. This has also gradually resulted in a decline in the overall level of open unemployment, which at around 8 per cent in 1996 remains high. The country is still dependent on a large continuing outflow of workers, mainly to the Middle East and East Asia, to reduce the pressure of high growth of the labour force on the domestic economy.
In the fourth group are countries in transition to a market economy comprising Cambodia, China, the Lao People's Democratic Republic (Lao PDR), Mongolia and Viet Nam. China, however, shares features common to the NIEs in terms of a very high rate of export growth and a large number of foreign-based firms, mainly concentrated in the coastal region. All these economies face serious problems resulting in large part from vast amounts of excess labour in state and collective enterprises. A major hope of increasing productive employment lies in the expanding role of private industry, especially small and medium-sized enterprises. These industries have grown in recent years, particularly in China, and further deregulation policies at the local level would greatly facilitate their development. There is growing pressure in these countries to speed up labour market reforms to ensure a more market-oriented allocation of employment. There is also a need to move away gradually from restrictions on migration from rural to urban areas and concentrate on policies that reduce differences in earnings between rural and urban areas. Programmes to help displaced workers find new employment must be developed.
Despite considerable diversity in economic structures and resource endowments amongst the economies in West Asia, their increasing interdependence over the past three decades makes a regional approach to their problems fruitful. The oil boom and resultant investment growth led to high rates of employment creation in the region as the labour-scarce oil-rich economies (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) drew on large reserves of migrant labour, mainly, in the first instance, from neighbouring countries (including Iraq, Jordan, the Syrian Arab Republic and Yemen), and this resulted in a better balance in the labour markets of labour-surplus and labour-shortage economies. With the end of the oil boom in the early 1980s, the majority of the countries faced severe foreign exchange shortages as the terms of trade for fuel exporters drastically declined, and this slowdown was transmitted to the other countries of the region through an equally drastic decline in remittances and accelerating unemployment and underemployment as their labour forces grew at extremely high rates. Employment expansion in recent years has been closely tied to adjustment programmes and measures to open up their economies. Critical concerns are finding employment for the large groups of youths and new entrants to the labour force, and adapting existing educational and training systems to the changing skill requirements of the labour market. However, several encouraging trends have emerged as a result of social and institutional changes and the movement towards peace. In particular, there has been an increase in the labour force participation of women, especially in the professional categories, the service sector and some types of industrial employment.
The countries of South Asia (Bangladesh, India, Nepal, Pakistan and Sri Lanka) continue to face daunting problems of under-employment and poverty but have fairly diverse growth experiences and varying degrees of success in opening up their economies and attracting foreign investment. Although growth picked up in a number of them in the 1980s and early 1990s, stimulated by liberalization and economic reforms, it has been neither sustained nor sufficient to reduce significantly existing high levels of under-employment and productively absorb new entrants to the labour force. The majority of the labour force in these economies is still in the agricultural sector and although there has been some shift to the service sector, and some additional informal sector and casual work, there has been no significant increase in the small share of formal sector employment. High levels of underemployment and high growth of the labour force have served as an incentive for labour to seek jobs outside the country, mainly in West Asia, but except in the case of Pakistan and Sri Lanka, this has been inadequate to affect the overall employment situation significantly.
In the last group are the Pacific island countries where the situation is vastly different from that of other countries in the region. Most of the countries are characterized by a narrow production base, a subsistence sector which supports the bulk of the population, and a small organized sector. Favourable physical environments and rich cultural traditions have endowed their populations with secure lifestyles, although concerns are emerging about environmental sustainability. But economic growth during the last decade has been very slow and volatile, reflecting, in part, dependence on a narrow range of primary export commodities which are subject to external shocks and natural disasters. In most countries the growth rate of the labour force is high, resulting in rising underemployment in rural areas and high urban unemployment. In Papua New Guinea urban unemployment in 1990 was estimated at over 30 per cent, including a large proportion of youth and educated unemployed. The employment challenge faced by these countries is to diversify the mainly rural economy into sectors of comparative advantage, such as forestry, fishery and tourism. This requires both government and donor support to facilitate private sector investment in these sectors. Increased private economic activity would also encourage the growth of small and micro enterprises (SMEs) and the informal sector, which have so far been rather limited.
Poverty and other labour market issues
A significant feature of the Asian growth experience has been its positive impact in reducing the incidence of poverty in most countries in the region. While fighting poverty in Asia remains daunting, it is important to note the nexus between employment performance and a country's success in alleviating poverty. While economic growth, especially growth in the agricultural sector, remains an essential ingredient in reducing poverty, the Asian experience again clearly demonstrates that it is not sufficient. For a number of countries employment opportunities overseas and resulting remittances have played an important role, as have government initiatives and special schemes for employment generation and poverty alleviation. In West Asia and in many Pacific island countries, as well as in South Asia, rural poverty remains a serious problem.
These observations follow from the data on selected Asian countries presented in tables 2 and 3. These data suggest four conclusions. First, the incidence of poverty has been declining in most countries, the exceptions being Nepal and to some extent the Philippines where poverty levels have only begun to fall in recent years. Second, the declining trend was not steady, and in several countries there were periods when the incidence of poverty actually increased. Third, the pace of poverty alleviation was quicker in the fast-growing economies of East and South-East Asia (China, Malaysia and Thailand, which also managed rapid growth of employment generation) than in the slow-growing economies of South Asia (Bangladesh, India and Pakistan) where employment growth has been significantly lower than the growth of the labour force. Finally, from the mid-1980s onwards, the picture becomes somewhat mixed. The slow pace of poverty alleviation in rural China is particularly striking and must be related to the changing role of the State in development. In Pakistan levels increased after 1988, when the country embarked on economic reforms and stabilization measures.
Table 2. Rural poverty in West Asia and the Pacific islands, 1988
(percentages)
|
West Asia |
|
|
Afghanistan
|
60
|
|
Pacific islands |
|
|
Fiji
|
20
|
1 Figure for 1992.
Source:International Fund for Agricultural Development (IFAD): The state of world rural poverty: A profile of Asia (Rome, 1995).
Table 3. Poverty trends in selected Asian countries, 1976-96
(selected years)
|
|
Poverty incidence (%) |
GDP growth
| ||
|
Rural |
Urban | |||
|
South Asia | ||||
|
Bangladesh |
1979
|
65.4
|
54.9
|
|
|
India |
1978
|
36.6
|
42.9
|
|
|
Nepal |
1985
|
43.1
|
19.2
|
|
|
Pakistan |
1979
|
32.5
|
25.9
|
6.41 |
|
South-East Asia | ||||
|
China |
1981
|
48.3
|
44.4
|
|
|
Indonesia |
1981
|
28.1
|
26.5
|
|
|
Malaysia |
1984
|
27.6
|
6.5
|
|
|
Philippines |
1985
|
53.92
|
--
|
|
|
Thailand |
1976
|
36.2
|
--
|
|
|
1 Data for 1979-83. 2 Total poverty. Source:ILO country studies of poverty incidence conducted under the Regional Poverty Alleviation Programme for Asia and the Pacific (RAS/95/001). Growth rates calculated from World Bank: Trends in developing economies 1996 (Washington, DC). | ||||
Analysis of poverty trends(2) identifies some key factors which have influenced the impact of growth on the alleviation of poverty in Asian countries. The first is that in the poorer countries, given that a large majority of the poor are dependent on agriculture for a living, rapid agricultural growth reduces poverty faster than rapid non-agricultural growth. Second, the employment intensity of growth is an important factor that influences the poverty-alleviation impact of growth. Asian experience shows that the former tends to be higher under export-oriented growth strategies. Third, inflation in general, and rising food prices in particular, are likely to reduce the poverty-alleviation impact of growth, especially where the rural poor must buy food and because wages in the unorganized sector, where most of the poor work, do not adjust automatically and quickly to price changes. Women are disproportionately represented among those living in poverty (see "Women's employment", below). Fourth, in a number of Asian countries (particularly Pakistan, the Philippines and Sri Lanka) dramatic increases in overseas migration in the late 1970s and 1980s, which reduced pressures on domestic employment and stimulated a large flow of remittances, played an important role in either reducing poverty or preventing its increase. Fifth, distributional changes can neutralize the poverty-alleviation impact of growth; in most countries there were phases when growth was associated with increasing income inequalities, so that the incidence of poverty remained unchanged or even increased. For similar reasons, stabilization and structural adjustment measures in some countries have tended to increase poverty. It is clearly necessary to implement policies which can restrain the growth of income inequalities so that the impact of growth on the reduction of poverty is strengthened. Finally, well-targeted micro-level interventions in the form of special employment schemes can strengthen this impact. At worst, they function as relief programmes. When properly designed and implemented, they can enable the poor to take advantage of expanding employment opportunities generated by growth.
Women in the region have experienced some improvements in terms of literacy, education and training, labour force participation and employment in a growing number of occupations and sectors. They are active agents for development, yet in many parts of the region they still remain overworked, underpaid and neglected. They also face a variety of problems arising out of discrimination in pay, unequal opportunities for HRD, unequal access to productive resources, occupational segregation, low socioeconomic status, the double burden of family and economic responsibilities, sexual harassment, limited representation in economic decision-making and in collective bargaining, and other factors. Improving their status, conditions of work, and education and skill levels could further break the grip of poverty on many countries. As stated in the Platform of Action of the United Nations Fourth World Conference on Women held in Beijing in 1995: "The release of women's productive potential is pivotal to breaking the cycle of poverty so that women can share fully in the benefits of development."
Table 4 shows the evolution of women's economic activity rates in the region as compared with men's. For Asia as a whole, women's rates as a percentage of men's have increased gradually. Changes have, however, not been uniform in the different subregions. The most dramatic increase in women's economic activity rates has occurred in Oceania, rising from 36 per cent in 1950 to 74 per cent in 1995. In East and South-East Asia, women's rates as a percentage of men's have also gone up significantly and are particularly high in East Asia. In South-Central Asia, women's rates are low and in fact have fallen since 1950. The West Asia rates remain the lowest in Asia, although women's economic activity rates rose slightly during the 1990s.
Table 4. Women's economic activity rates in Asia and the Pacific,
and West Asia, by subregion,1 1950-2010
(selected years, percentages of men's rates)
|
Women's economic activity rates as percentage of men's |
1950 |
1960 |
1970 |
1980 |
1990 |
1995 |
20002 |
20102 |
|
Asia |
61 |
62 |
64 |
67 |
68 |
69 |
70 |
71 |
|
East Asia |
69 |
70 |
73 |
78 |
84 |
85 |
85 |
85 |
|
South-Central Asia |
53 |
54 |
55 |
55 |
50 |
52 |
54 |
57 |
|
South-East Asia |
57 |
58 |
62 |
67 |
72 |
74 |
76 |
78 |
|
West Asia |
56 |
52 |
49 |
47 |
45 |
47 |
50 |
55 |
|
Oceania |
36 |
40 |
49 |
59 |
70 |
74 |
77 |
81 |
|
1 The subregional groupings do not correspond exactly to those used by the ILO Regional Office for Asia and the Pacific. Oceania includes Australia and New Zealand as well as the South Pacific countries. East Asia includes China, Hong Kong, Japan, Republic of Korea, Democratic People's Republic of Korea, Macao and Mongolia. South-Central Asia includes Afghanistan, Bangladesh, Bhutan, India, Islamic Republic of Iran, Maldives, Nepal, Pakistan, Sri Lanka, Turkmenistan and other Central Asian countries not covered by the Report. South-East Asia includes Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam. West Asia includes the Arab States covered by the Report, and a number of other countries including Israel. 2 Projected figures. Source: ILO: Economically active population 1950-2010 (Geneva, 4th ed., 1996). | ||||||||
A considerable gender gap in wages remains, although it is narrowing in many countries. As shown in table 5, there is no clear pattern between the different Asian subregions in relation to the gender gap in wages. The countries where women's non-agricultural wages are closest to men's include some industrialized countries, some NIEs and newly emerging NIEs, some economies in transition, South Asia and West Asia, while most of these groups also include countries where the gender gap in wages is greatest.
Table 5. Female-male wage gap in Asia and the Pacific, and West Asia
(selected countries and areas)
|
Country or area |
Women's non-agricultural wage as % of men's |
|
Bangladesh |
42.0 |
|
Republic of Korea |
53.5 |
|
China |
59.4 |
|
Syrian Arab Republic |
60.0 |
|
Philippines |
60.8 |
|
Indonesia |
64.0 |
|
Thailand |
68.2 |
|
Hong Kong1 |
69.5 |
|
Singapore |
71.1 |
|
New Zealand |
80.6 |
|
Jordan |
83.5 |
|
Sri Lanka |
89.8 |
|
Australia |
90.8 |
|
Viet Nam |
91.5 |
1 See note 1 on p. 6.
Note: Data are for the latest available year.
Source: UNDP: Human Development Report 1995, table 2.5.
Export-oriented labour-intensive industries (textiles, food pro-cessing, electronics, chemicals) in countries such as Bangladesh, India, Indonesia, the Philippines and Thailand have particularly opened up opportunities for women in formal sector wage employ-ment. The mobilization and integration of young women into such employment have generated unprecedented wage employment oppor-tunities, providing them with access to an independent income. Their remittances have also become indispensable in sustaining many poor urban and rural families. However, most of the female workforce is concentrated in low-skilled jobs. Furthermore, women are dispropor-tionately found in non-standard forms of employment. In Australia 72.5 per cent of the part-time workers in manufacturing were women (1991), while in Japan women are much more likely to be in non-standard employment or in part-time employment than men.(3) While many women have welcomed part-time work (especially because they continue to have primary responsibility for the household and children), the conditions under which it is offered are very often less favourable than those enjoyed by comparable full-time workers. Of special concern is the increasing use of subcontracting in manu-facturing, affecting particularly women workers. In South-East Asia flexibilization of the labour market has mainly affected women, who increasingly work as casual and temporary workers or home-based workers.
The Asia-Pacific region shows a heavy concentration of women in the informal sector. As a survival strategy, many of them resort to self-employment and work in SMEs, but they often encounter problems due to lack of skills and inadequate access to credit, training, market information and markets. In South Asia there has been a decline in the number of women in paid employment and the labour market for women is predominantly informal (see "The informal sector", below, for a discussion of these forms of work).
A striking phenomenon is the feminization of Asian labour migration. Among the main labour-sending countries, women migrants in Indonesia, the Philippines and Sri Lanka now outnumber their male counterparts. During the period 1984-94 two-thirds of the migrants from Indonesia were women. Asian women are looking for overseas employment predominantly in West Asia and in NIEs which are beginning to experience labour shortages. The relatively high female labour force participation and the active role of governments and private agencies in promoting migration flows, especially in Indonesia and the Philippines, as well as the high demand for women migrants by the labour-importing countries, have facilitated female labour migration. However, Asian women migrants are concentrated in vulnerable jobs at the bottom of the occupational hierarchy, especially in domestic service and entertainment (see "Migration", below).
While the long-term solution to the employment problem is to restore higher rates of growth of modern-sector employment, there are undeniable benefits in improving the informal sector. First, many of its activities are labour intensive. The informal sector thus provides a relatively easy way to create and expand employment, and a source of subsistence or "safety net" income for poor households. Moreover, the successful experiences of small-scale, mainly urban-based informal sector enterprises in South-East and East Asia have demonstrated that by interacting and competing with the formal sector, these small-scale or informal activities are not only a "sponge" for extra labour but also an important element of rapid growth.
In the region a large number of people are still dependent on the informal sector, mainly small-scale activities without some or all of the licences and approvals required of formal enterprises, and covering a wide range of activities, including trade, transport, con-struction, manufacturing, services and others. However, Asian cities now have the greatest concentration of people in the informal sector. As many as 50-60 per cent of the urban labour force in many Asian cities is estimated to be engaged in informal sector activities. Jobs have generally been found to be generated in the sector with minimal capital. For instance, a 1995 ILO-assisted survey in Metro Manila reported that over half (54 per cent) of the informal sector operators had less than P5,000 (US$200) as capital. As a result, in most developing countries in Asia the informal sector has been a viable source of employment for those who have been unable to find employ-ment in the formal sector. Only countries with very rapid economic and employment growth, such as Malaysia and Singapore, have experienced a reduction in this sector.
In parallel with the persistence of the informal sector, there has been a growth in the "hidden" formal sector. Increasing globalization and liberalization have placed competitive pressures on exporting subsectors of the economy, resulting in flexibilization and casualiza-tion of labour and recourse to subcontracting, including use of home-based workers, in certain manufacturing sectors. Such workers, who are predominantly women, are not truly part of the informal sector, yet they share many of the problems of informal sector workers, especially in relation to poor working conditions, lack of social pro-tection, use of child labour and low wages.
To respond to these problems, a number of responsible informal sector operators in some countries, such as India, have organized themselves into cooperatives or self-help groups. Trade unions have also become more actively involved in issues concerning informal sector workers and subcontracted homeworkers. They have initiated action programmes, for example in the Philippines, to assist informal sector workers and their families. Such initiatives are still, however, limited and sporadic. Innovative approaches, based largely on self-regulation and linking improved working conditions to enterprise development and productivity, aim to increase awareness amongst informal sector operators that it is possible to make simple improve-ments at low cost and that better working conditions can enhance their performance and livelihoods as well as their welfare. ILO initiatives in this field are described in Chapter III, under "Working conditions".
Policy-makers in the region are becoming increasingly aware of the need to promote actively the growth of the informal sector. There is need for government action, especially at the local level, to remove unnecessary regulatory obstacles to enterprise formation and growth. Unduly restrictive regulations encourage the development of an illegal sector that damages the informal sector's operations. The removal of such obstacles must, however, be accompanied by the protection of the basic rights, health and safety of workers and the progressive improvement of overall working conditions (see Chapter II, "Workers' protection", for a discussion of these issues). Since the informal sector consists of both dead-end survival activities and small-scale activities with the potential for growth and technical upgrading, the main aim of policies should be to increase the modernizing elements of the sector. This requires better supply conditions in terms of capital, technology, skills and infrastructure and improved demand conditions by building up linkages between firms, between suppliers and producers, and between local authorities and industry associations. Enterprises in the informal sector face con-siderable problems in gaining access to formal sector credit because of lack of collateral. Successful credit schemes must by-pass normal collateral requirements and provide alternatives such as group guarantees, as has been done so successfully in Bangladesh by the Grameen Bank.
The region continues to be subject to varied and dynamic labour flows. The oil boom in the 1970s and early 1980s had earlier led to a dramatic increase in labour migration to West Asia from neighbour-ing countries, and subsequently from South and South-East Asia.
Though not of the same magnitude, labour shortages emerging in the fast-growing Asian economies have been accompanied by rapid labour migration, which increased from over 1 million in the early 1980s to over 3 million in the mid-1990s. There is also continuing migration from the Pacific island countries to neighbouring Australia and New Zealand, and a large number of migrants from the region migrate permanently to the United States. Growing regionalization and the emergence of growth triangles are also increasing labour market links, especially in South-East Asia.
Not only have these cross-country flows had a major impact on the labour markets and foreign exchange position of the labour-sending countries, but the large exodus of mainly skilled and semi-skilled migrant workers has affected the entire socioeconomic and cultural environment of both sending and receiving countries. In recent years, besides the growing feminization of Asian labour migra-tion flows discussed earlier, there has been a striking increase in the flow of professional, managerial and other skilled workers accom-panying multinational companies.
Labour migration has been associated with a number of problems: growth in clandestine and illegal migration; unsatisfactory and abusive conditions of work; lack of protection for migrant workers; non-ratification of international labour Conventions on migrant workers by both sending and receiving countries; and exploitation of women migrant workers.(4) The most vulnerable groups among migrant workers are undocumented workers, female domestic helpers and entertainers. For a discussion of the workers' protection aspects of migration, see Chapter II.
The impressive results in poverty alleviation visible in much of the region, combined with achievements in education and child welfare services, have offered encouragement in the fight against child labour. However, the region still has the largest child labour population in the world, as well as some of the most extreme types of child exploitation such as children in bondage and in slave and slave-like conditions, in prostitution and in especially hazardous industries. Governments in the region are now more aware of their child labour problem. There is greater support for the development of compre-hensive national policies on its reduction and eventual elimination, and more interest in ensuring an adequate legal framework for tackling the problem. Chapter II includes a detailed discussion of the employment situation regarding child labour, and the policy options available, while Chapter III covers the ILO response.
Explaining employment performance:
lessons and policy issues
In examining the policy framework which would help ensure sustainable growth with equity in the Asia-Pacific region, this section examines selected key issues and draws some important lessons from past experience. These relate to (a) growth based on international competitiveness; (b) HRD; (c) improving the quality of employment; and (d) safety nets for vulnerable groups. This policy framework is placed in the context of the increasing pace of globalization and economic liberalization, which have had far-reaching consequences on economic performance and management in the region.
Growth and international competitiveness
Increasing globalization or cross-border production has been essential in augmenting international competitiveness, above all in East and South-East Asia. Economic momentum in these countries has been significantly generated by the investment decisions of multi-nationals and very large numbers of small-to-medium-sized Asian companies developing production across borders, wherever markets and high levels of efficiency dictate. Economic reforms, especially trade liberalization, have led to sharply higher investment and trade flows, and have helped cement the gains produced by market-driven openings. South Asian countries, over the last decade, have also pursued policies to participate more in the global division of labour and to increase foreign participation in their economies. Economies in transition from a controlled to a market-driven system are also opening up to foreign investment and introducing measures to decontrol and privatize major sectors of the economy in an attempt to build on their comparative advantage. Three features of increasing globalization have had an important impact on economic performance in the Asia-Pacific region.
The first is the remarkable growth of intra-Asian trade. The share of East Asia's and South-East Asia's exports to one another almost doubled from 21.1 per cent of their total exports in 1980 to 40.5 per cent in 1994. South Asia has participated only marginally in this upsurge. The share of Asian countries in the exports of South Asia increased only from 24.2 to 27.7 per cent between 1980 and 1994, but the share of the imports of the subregion from Asian countries increased from 20.5 to 33.4 per cent.
The second is the rise in FDI, again mainly in East and South-East Asia, which has been driven both by the phenomenal growth of the subregion and associated with a surge of trade within the sub-region. Table 6 gives some basic figures to demonstrate the growth and change in the regional composition of FDI. It should be noted that Asia has emerged as a major source of FDI, with NIEs becoming major investors not only within the region but also in other parts of the world.
Table 6. Inflows and outflows of FDI for selected regions of the world, 1983-94
(millions of US dollars)
|
|
Inflows of FDI |
Outflows of FDI | ||||
|
Developed
|
Developing
|
South, East and
|
Developed
|
Developing
|
South, East and
| |
|
Annual average
|
71 779 |
19 757 |
7 952 |
88 277 |
5 423 |
3 295 |
|
1989 |
171 722 |
28 622 |
15 537 |
202 270 |
15 586 |
12 254 |
|
1990 |
176 436 |
34 689 |
19 893 |
226 215 |
16 934 |
11 500 |
|
1991 |
115 092 |
40 899 |
20 805 |
188 257 |
10 994 |
8 195 |
|
1992 |
111 223 |
54 750 |
31 569 |
171 281 |
19 314 |
15 534 |
|
1993 |
129 073 |
73 350 |
48 463 |
192 959 |
29 136 |
27 683 |
|
1994 |
134 894 |
84 441 |
59 093 |
189 280 |
32 907 |
29 621 |
|
Annual average 1989-94 |
139 740 |
52 790 |
32 093 |
195 044 |
22 812 |
17 461 |
|
Note: The global totals of inflows and outflows do not always tally because of rounding and unreported flows. Source:UNCTAD: World Investment Report 1995: Transnational corporations and competitiveness (Geneva, 1995), annex tables 1 and 2. | ||||||
A third major element is intra-Asian labour migration, as discussed above. Labour markets are becoming more closely inte-grated in the Asian region with increasing inflows of labour, including professional workers, from the labour-surplus economies of some countries in South-East and South Asia to the fast-growing and the newly emerging NIEs.
The performance of fast-growing Asian economies which sus-tained both high economic and employment growth has become a matter of vigorous debate. It is generally accepted, however, that achieving international competitiveness largely rests on a high rate of investment, macroeconomic stability and an export-oriented policy regime. Ensuring a high rate of investment requires political and social stability, policies that encourage high savings, and confidence in the economy. At the same time, responsible macroeconomic management, particularly achieving low inflation and an appropriate exchange rate, encourages long-term planning and investment.
The overall incentive system should be consistent with the comparative advantage of the country and should not discriminate against exports or agricultural production, as happens with most import-substitution strategies. Indeed, an export-oriented policy regime is vital in countries embarking on industrialization with large surpluses of cheap labour. The active promotion of manufactured exports was a significant source of the fast-growing Asian economies' rapid productivity growth.
Rapid globalization and liberalization, and the resulting need to enhance international competitiveness, have led to much greater emphasis on human resource development (HRD). The conventional approach to employment strategies has been to promote production lines which can absorb a lot of labour. But this strategy largely utilizes unskilled labour and is vulnerable to technological and organizational changes within multinational corporations (MNCs). It is also sensitive to changes in relative wage levels between developing countries. Industrialization is primarily driven from outside and has very little innovative strength to choose its path.
In a human-resource-driven strategy, the competitive edge of the economy is neither commodities nor low-wage labour, but skills, entrepreneurship and research. This was most apparent in the fast-growing Asian economies (the Republic of Korea, Singapore, Hong Kong and Taiwan, China) as they shifted from labour-intensive to skill- and entrepreneurship-intensive technologies. The extent to which they have adopted human-resource-driven strategies varies, but it is quite clear that the move towards skills and innovation is one of the explanations for their continuing fast growth in spite of labour shortages and rising real wages. The proof of the human-resource-driven strategy is that the structural transformation of the economy is facilitated by the rising quality of labour supply and not primarily by the overseas demand for unskilled labour.
The HRD strategies which have been evolving are now core concerns of economic and social development for almost all the countries in the Asia-Pacific region. The enormous impact of HRD policies, not only on the productivity of the workforce (and hence on their international competitiveness) but also on the quality of life by virtue of their impact on issues relating to social exclusion, poverty alleviation and equity, is being increasingly realized.
Recent years have seen critical examination of education and training systems in almost all countries in the region. A number of countries (Indonesia, Malaysia, the Philippines, Singapore and Thailand) have implemented comprehensive reforms. The main focus of attention is the mismatch between employment, and education and training, i.e. the relevance of these programmes. In many countries a large number of unemployed coexist with a scarcity of workers with specific skills required by the labour market. In addition, excess labour with insufficient employment opportunities coexists with cross-border migration of highly skilled labour. Thus, it is no longer a question of upgrading the skills of the workers per se, but rather of developing appropriate versus inappropriate skills. Related to this is the issue of enhancing the efficiency of teachers/instructors through enriched training programmes that include more and longer workplace attachments.
Interlinked to the issue of relevance is increased emphasis on the "trainability" of workers. Countries have increasingly reoriented their education and training systems to be broad-based so that the core competencies of participants are enhanced and they are able to cope with changes in technology.
Another important factor is enhancing the "transferability" of skills. By and large, the system of equivalence for the qualifications awarded by academic institutions in the region and beyond is well recognized. Therefore, not much difficulty is experienced by workers in establishing their credentials on the basis of these degrees and certificates (this is particularly important in the context of globaliza-tion and cross-border migration). Yet much more needs to be done in respect of standardization of skills. Harmonization of skill standards would go a long way towards ensuring better working conditions, especially for migrant workers. Important initiatives have been taken by the Asian and Pacific Skill Development Programme (APSDEP) in collaboration with the ILO, and regional organizations, such as APEC, and these are being followed up (see Chapter III, "Human resource development"). Mechanisms therefore need to be instituted to impart greater momentum to the efforts made so far.
Reviews of the training systems in different countries in the region have highlighted the need for targeted attention, especially to address the concern of equity. Special efforts are needed to enhance training opportunities for women, members of linguistic and minority groups, workers in the informal sector, older workers and workers with disabilities. The need to strengthen training of migrant workers, taking into account not only the needs of the receiving country but also the possibility of the reintegration of these workers into their home country, is also a matter of concern.
Efforts aimed at improving education and training systems are directed towards making these systems respond more quickly to changing employment opportunities. At the same time, policy planners in the region have recognized a need to retain a longer-term perspective, in view of the fact that the labour market may reflect an acceptance of less efficient methods of production and low-quality skills in response to lack of supply of trained workers. Given the lead time involved in developing human resources, especially for meeting the demands of advanced technology industries, policy and regulatory frameworks are being reviewed in order to provide support for training/retraining of the workers in these sectors, with special emphasis on increased participation of women. Enterprises and industry associations have made significant contributions to sup-plementing the efforts made by the national authorities.
The limited availability of public funding and the growing demand for skills training have made the need for the identification of different sources of funding more pressing. This has also set in motion a process of decentralization of the planning and imple-mentation of training programmes. Together with the adoption of the participatory community-based training approach, emphasizing the use of locally available resources, this has given an impetus to vocational training programmes in the region, especially in rural areas.
In the efforts initiated by the national authorities for developing their human resources, employers' and workers' organizations have played a most constructive role. They have not only been instru-mental in implementing programmes aimed at developing workers' skills but have also contributed significantly towards making enter-prises learning organizations. Chapter II ("Developing a more effective response") considers the roles of employers' and workers' organizations in improving human resource management.
The economic success of several East and South-East Asian economies has been translated not merely into increased employment opportunities but also into improvements in the quality of employment (see Chapter II). In particular, those countries which have pursued an HRD-based strategy have consciously improved conditions of work and employment as an integral component of the process of pro-ductivity improvement, coupled with enterprise performance and income levels. Thus, improvements in the quality of employment are not due only to the replacement of "dirty" industries with more technologically advanced "cleaner" ones, but also to a more generalized effort to maximize labour productivity, including through the creation of better-quality jobs. Even in these countries, however, qualitative improvements have been uneven. For example, very little progress has been made in the protection of women workers and removal of discrimination. In Singapore the average wage of women workers in manufacturing relative to the wage of males was 55.7 per cent, and it was 50.8 per cent in the Republic of Korea. Women's share of managerial jobs in the Republic of Korea was 4 per cent (1991) and in Singapore 15.5 per cent (1991). Labour flexibilization and casualization, introduced in response to globalization and liberalization, have not only reduced job security and wages but have lowered the working conditions of large numbers of workers, mainly women (see "Women's employment", above, and the discussion of workers' protection in Chapter II).
A major element in improving the quality of employment concerns the basic rights of freedom of association and collective bargaining. Those countries which have developed more mature systems for collective bargaining and recognition of workers' rights are in a stronger position to reap the full benefits of human-resource-driven strategies. New and innovative mechanisms are needed to enhance enterprise performance and improve workers' protection, for which the support of employers' and workers' organizations needs to be enlisted.
Newly emerging NIEs, which have more recently embarked on human-resource-driven strategies, are showing signs of having learned these lessons from the first wave of NIEs, although much remains to be done. In particular, it is becoming increasingly clear that the process of transformation from low-cost, labour-intensive, export-oriented strategies to the technology-intensive strategies of NIEs is likely to be socially destabilizing without sound industrial relations and adequate labour protection.
The persistence of the urban informal sector, particularly in South and South-East Asia, poses particular problems for governments trying to improve the quality of employment. Inadequate labour inspection, trade union pressure and influence by employers' organi-zations, absence of formal employer-employee relationships in the informal sector, limited and irregular incomes, and a lack of aware-ness of the importance and benefits of a better working environment have been the major impediments to improvement. As a result, the informal sector, which includes a large number of women, is charac-terized by poor and hazardous working conditions, the absence of social protection and the prevalence of child labour.
Finally, the phenomenon of labour migration poses some special problems in relation to the quality of employment. A large number of workers -- predominantly women -- are employed in low status and vulnerable jobs, notably domestic service and entertainment, which create new problems for labour protection.
Poverty alleviation and safety nets
In countries with high levels of poverty and inequality, market reforms need to be supplemented by policies and programmes designed to strengthen the capacity of the poor to respond adequately to new opportunities. In other countries the adoption of liberalization and economic reform policies has had negative implications for employment and poverty, especially in the short term. Economic reforms can result in declining employment in protected sectors, a reduction in urban wages and increasing rural-urban migration, especially where it was earlier controlled. This can mean greater hardship for urban wage earners, compounded by a reduction of government spending on social services as a result of more stringent fiscal policies.
Such short-term adjustments may be essential to raise the economies to a high-growth trajectory. In Mongolia unemployment reached 8.7 per cent in 1994 from almost negligible levels and, contrary to trends everywhere, the economy actually "re-agrarianized", i.e. agricultural employment increased by almost 50 per cent between 1987 and 1994. Wages declined by 60 per cent in just two years after the start of the reforms. In recompense, positive growth was recorded for the last three years (average for 1994-96: 3 per cent) compared with huge declines during the first three years of reforms (average for 1992 and 1993: 7 per cent). In Viet Nam, within a space of just three years, between 1988 and 1991, over a million workers were retrenched from the state sector (equivalent to 20 per cent of the labour force) and urban wages declined by nearly 40 per cent, but post-reform growth was at least twice as high as in the immediate pre-reform period. China has so far avoided such massive disruption because of its gradualist approach, itself dictated by the magnitude of the problem. In urban areas state-owned enter-prises account for two-thirds of employment and one-third of GDP. Over one-fourth of state-owned enterprise employment is estimated to be surplus (equivalent to 25 million workers). But there are already 5 million workers openly unemployed in the towns (equivalent to 2.8 per cent of the urban labour force in 1994), there is a "floating population" of 50-100 million people, also in the towns, and massive underemployment on farms.
A major challenge facing many countries in Asia, therefore, is that of managing the reform process in a way which provides social protection and safety nets for those who are directly and adversely affected and which does not thwart poverty alleviation. With a high proportion of the labour force still employed in rural areas in many Asian countries, priority has to be given to expanding employment in both the farm and non-farm sectors. Economic reforms that remove the earlier bias of the pricing and incentive structure against agriculture can lead to an improvement in the economic position of many farmers. The reform process must, at the same time, take account of small and marginalized farmers, especially those in eco-logically fragile and remote areas, to ensure that extension services are provided to them, that their needs for inputs, including credit, are met and that they are given sufficient time to adapt to new incentives. Structural reforms that facilitate better land distribution, and fuller utilization of irrigation facilities (water is employment-friendly) that leads to increases in productivity and cropping intensity and encou-rages the use of appropriate technology, will all assist in increasing labour absorption in agriculture, as has been so clearly demonstrated in East Asia. Experience shows that public investment is critically important in infrastructure development in agriculture -- an activity which usually fails to attract private investment. Public investment, moreover, induces private investment in agriculture. Irrigation facilities developed through public investment induce investment by private farmers in fertilizers, high-yielding seeds and farm equipment.
Micro-level interventions in the form of special schemes for generation of self-employment and wage employment have constituted a central element of the anti-poverty strategies pursued in most South Asian and some East Asian countries. Such programmes have often been designed and implemented without reference to macroeconomic considerations. Consequently, they have, more often than not, served as mere relief programmes. Furthermore, programmes meant to generate self-employment have generally been credit based, though they have sometimes incorporated training and/or assistance in marketing. The main problem encountered has been that of targeting; many programmes have ended up largely benefiting people outside the target group. This is because there is generally chronic excess demand for credit, which is exacerbated if credit is subsidized. Collateral then assumes importance as a rationing mechanism, and this leads to adverse selection. Past experience of programmes for wage employment suggests first that, while providing relief to the poor, they contribute very little to the creation of durable productive assets which could conceivably provide a basis for sustainable employment. However, if asset creation were made an explicit objective, there would be a tendency to allocate more expenditure to purchase materials and equipment, recruit skilled labour, and so on. This will necessarily compromise the objective of poverty alleviation. Second, while these programmes have an advantage in that only the poor are expected to take up employment under them (and hence no serious targeting problems arise), the determination of an appropriate wage level can pose problems. If the wage is too high, the non-poor may be tempted to participate. If the wage is too low, the poverty-alleviation impact may be negligible. Furthermore, in some situations it may be desirable to use these programmes as a form of labour market intervention to raise the level of the market-determined wage.
Developments in the region concerning employment and labour market conditions also have profound implications for industrial relations and workers' protection. Employers' and workers' organiza-tions, as well as governments, are confronted with new and complex challenges as a result of globalization and increasing international competitiveness. It is essential that they should be able to contribute meaningfully to the design of integrated strategies for employment generation and HRD, and that they ensure that all such strategies are based on respect for workers' rights, including collective bargaining and the right to organize. Structures are also needed that properly involve the tripartite constituents in designing measures to redress problems of retrenchment and redeployment arising from industrial restructuring, and in developing and implementing targeted employment schemes to safeguard the employment and incomes of the poor and vulnerable groups.
The need to design new and innovative mechanisms to address issues related to improving the quality of employment is another priority issue which is inseparable from issues relating to industrial relations and workers' protection. High on the agenda must be mea-sures to remove discrimination in the labour market and promote equality of access to jobs for women in particular.
The ILO, with its tripartite membership and its international perspective and experience, is uniquely placed to play a role in facili-tating the establishment and operation of such structures and mechanisms.
1. This Report deals with the period up to 30 June 1997, during which Hong Kong was a non-metropolitan territory of the United Kingdom. On 1 July 1997 China resumed the exercise of sovereignty over Hong Kong, which became a Special Administrative Region of the People's Republic of China.
2. ILO: Poverty alleviation and macroeconomic policies: Lessons from the past experience, synthesis paper for the Asian Regional Policy Workshop on Macro Policies and Micro Interventions for Poverty Alleviation, 5-7 February 1997, Bangkok.
3. S. Tomoda: Women workers in manufacturing, 1971-1991, Sectoral Activities Programme Working Papers, p. 21 (Geneva, ILO, 1995).
4. Rashid Amjad (ILO/SEAPAT): "Philippines and Indonesia: On the way to a migration transition", in Asia and Pacific Migration Journal, Vol. 5, Nos. 2-3, 1996.
