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Asian Employment Forum: Promoting productivity to benefit all

Increasing labour productivity is crucial for a country’s economic growth and overall competitiveness. It is also a vital tool for creating quality jobs and reducing poverty, since productivity gains can lead to higher wages, better working conditions and investment in human resources. These are the messages of a new ILO report prepared for the Asian Employment Forum in Beijing (13 to 15 August). ILO Online spoke with Ms. Sachiko Yamamoto, ILO Regional Director for Asia and the Pacific, about the link between productivity growth, employment creation and decent working conditions.

Article | 09 August 2007

ILO Online: Is it correct that Asia and the Pacific’s stunning growth in recent years was mainly based on productivity increases?

Sachiko Yamamoto: Labour productivity has played a leading role in Asia and the Pacific’s tremendous growth performance. The increase in the productivity of the region’s workers between 2000 and 2006 accounted for 83 per cent of the region’s total economic growth. The rest is the result of about 150 million workers joining the Asian workforce.

Productivity growth in Asia and the Pacific will be even more important in the coming 10 to 20 years. The reason is simple. As employment growth slows down, due to demographic and labour force trends, Asia will need faster labour productivity growth if it wants to maintain its recent GDP growth rates. In East Asia maintaining rapid GDP growth will require the annual rate of labour productivity growth to rise from 7.6 per cent to 8.1 per cent. In Asia’s developed economies it would require acceleration from 1.5 to 2.1 per cent.

ILO Online: What are the main challenges with respect to productivity?

Sachiko Yamamoto: The first challenge is how to accelerate productivity growth over the next decade. The second relates to the distribution of productivity gains. But both are essential for the goal of realizing decent work and ensuring sustainable development.

ILO Online: What are the sources of the region’s productivity growth?

Sachiko Yamamoto: High and increasing levels of domestic investment have fuelled productivity gains in many Asian countries in recent years. However, this source of productivity growth will have some future limitations as many countries in Asia-Pacific already have very high investment levels compared to other parts of the world.

The shift of workers out of agriculture and into industry and services has had a significant, and positive, effect on overall labour productivity growth, because agricultural productivity levels tend to be much lower than in industry and services. Indeed, between 2000 and 2006, nearly 30 per cent of productivity growth in the developing Asian economies was due to this sectoral shift.

Another important booster for productivity has been the quality of the labour force. Asia as a whole has made tremendous progress in increasing access to education, and thus the skills of its workforce.

ILO Online: Are the education systems in Asia and the Pacific of good enough quality?

Sachiko Yamamoto: Enrolment alone is not a guarantee of success. As enrolment rates increase, policies aimed at improving the quality of schools, universities and vocational training institutes become more important. Public-private dialogues and partnerships have a central role to play in ensuring that graduates have appropriate skills and qualifications that they are able to adapt rapidly to changing work environments and embrace new technology. Government policies are also critical in giving businesses incentives to invest more in training.

ILO Online: This report (Note 1) also says that improvements in working conditions could also contribute to better productivity. What is the evidence for this?

Sachiko Yamamoto: Progressive workplace practices based on good working conditions, innovations in the way work is organized, continual learning, good labour-management relations, and respect for workers’ rights are emerging as an increasingly important way of raising productivity while at the same time promoting decent work.

The ILO Factory Improvement Programme in Sri Lanka, Viet Nam and India shows that the key to the success is having the right types of workplace organization and establishing open communication channels, leading to increased engagement by workers with their workplaces. Open and honest dialogue between employers and workers maximises the chances of everyone getting the greatest benefits from productivity growth.

ILO Online: What about the distribution of productivity gains between workers and employers?

Sachiko Yamamoto: The decreasing wage share in GDP that we have seen in much of this region in recent years is a troublesome trend. There are cases where average wage growth has not been keeping pace with labour productivity growth. In China, the wage share has declined from 53 per cent in 1998 to 41.4 per cent in 2005, and over the long term Malaysia, the Philippines and Thailand also show a decline. This could imply an erosion of workers’ bargaining power, use of more capital-intensive technologies, or a combination of these factors.

ILO Online: How can we ensure that productivity gains reach those workers earning the least?

Sachiko Yamamoto: The majority of people in Asia and the Pacific, in particular the majority of the region’s working poor, still work in agriculture. If we can improve productivity in lower value-added sectors like agriculture, then this can be an important driver of productivity across an entire economy. This can also serve as a way of improving income equality.

The importance of an equitable distribution of productivity gains also applies to workers in the expanding industrial and service sectors. Obviously, wages are the most direct link between greater productivity and poverty reduction, but there are other links too.

ILO Online: Can you give some examples?

Sachiko Yamamoto: Shorter working hours for equal or greater pay can improve living standards. This is important because long working hours are normal in many parts of Asia. For example, 49.5 per cent of workers in the Republic of Korea work more than 48 hours per week. In Thailand it is 46.7 per cent and Pakistan 44.4 per cent.

It is also important to remember that companies benefit from increased productivity, because it allows them to invest and fuel the innovations needed for future growth.

To balance these needs, stronger collective bargaining systems and improved dialogue between workers and employers are needed to ensure that all sides reap the rewards of productivity improvements and so work to create growth that is both equitable and sustainable.

For further information, please contact Gyorgy Sziraczki or Steven Kapsos at the ILO Regional Office for Asia and the Pacific in Bangkok, Tel: +662.288.1234, Fax: +662.288.1735 or E-mail:

Note 1Visions for Asia’s Decent Work Decade: Growth and Jobs to 2015, International Labour Organization, Asian Regional Forum on Growth, Employment and Decent Work, Beijing, People’s Republic of China, 13-15 August 2007.

Note 2 – Sangheon Lee, Deirdre McCann and Jon Messenger, Working Time around the World: Trends in working hours, laws and policies in a global comparative perspective, Routledge, London and ILO, Geneva, 2007.