Development and formalization in Asia: Insights from Japan, Republic of Korea and Singapore
This report examines the historical socio-economic pathways that facilitated the creation of labour markets that were dominantly formal in nature in three advanced economies – Japan, Republic of Korea and Singapore. The case studies emphasize the complementarities between national political economy and labour market dynamics and draws lessons, where possible, for the emerging economies of today that strive to accelerate the closing of formality gaps.
This report aims to provide a historical account of the critical factors that have enabled the labour market formalization pathways in Japan, the Republic of Korea and Singapore in the post-war period, and to draw lessons, where possible, for the emerging economies of today. These three countries experienced their “golden age” in the post-war period, from 1950 to 1970 in Japan and from 1960 to 1980 in the Republic of Korea and Singapore; where rapid economic growth went hand-in-hand with industrial upgrading, rising productivity and broader social development. The structural change from agriculture to manufacturing, already advanced at the time in Japan, was just starting in the Republic of Korea and Singapore. The development of large-scale manufacturing firms facilitated the absorption of day labourers into formal contract arrangements.
In addition, the shortage of skilled workers in those years, combined with extensive industrial policies (and monitoring) by government, created a system of protected employment with on-the-job training and skilling built in. As a result, firms were incentivized to retain the workers they had trained.
In addition, the shortage of skilled workers in those years, combined with extensive industrial policies (and monitoring) by government, created a system of protected employment with on-the-job training and skilling built in. As a result, firms were incentivized to retain the workers they had trained.