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Where have all the good Asian jobs gone?

Emerging nations struggle to follow Japan and China up employment value chain

| Southeast Asia
Policies are needed to raise employment at smaller companies, which employ most of Asia's working population.   © Reuters

Two unhappy visions haunt labor markets around emerging Asia. On the one hand we are often warned that automation augurs a new era of jobless growth. On the other there is the "gig economy," which creates jobs, but at the cost of tethering often unhappy workers to precarious new technology platforms.

Yet neither of these quite captures the true employment conundrum affecting poorer Asian economies, as they struggle along the path of economic modernization. Rather than a lack of jobs, they risk creating too many of the wrong kind, specifically insecure, poorly-paid positions stuck in the informal sector.

Take the example of three of Asia's most successful lower-middle-income economies: Cambodia, Myanmar and Vietnam. All three Mekong region nations are fast-growing, expanding by between 6% and 7% during 2017. All have been exemplars at attracting foreign direct investment too, some of it drawn in as cost-conscious global manufacturers move facilities away from China.

Vietnam, in particular, stands as an exporting paragon of the global era, with a ratio of trade to gross domestic product which nudged above 200% last year, the highest level ever achieved by a country with a population of 50 million or more.

It is certainly hard to spot the specter of joblessness here. Labor-force participation rates for Cambodia and Vietnam are "among the highest in the world" with Myanmar not far behind, according to the authors of a new World Bank report from October, examining labor markets in all three nations.

Yet while basic employment is bountiful, most jobs remain low-quality. Roughly three quarters are stuck in informal sectors, from farming to construction. Just a tenth require much in the way of skills. Too few jobs are not the issue. The challenge is to "create better jobs," the World Bank authors argue: "Even among the 'good' jobs in foreign-owned factories, job quality does not reach those of most comparator countries."

This is worrying because it suggests a breakdown in an old model of Asian globalization. The region's glory years produced swathes of manufacturing jobs, propelling countries like Japan, South Korea and Taiwan toward rich economy status, with China not far behind.

That positive pattern now seems less clear, with research suggesting poorer Asian and African nations are now less able to turn higher levels of trade into higher quality employment.

Those nations which started later on the global road face stiff competition from those who set out earlier. Rather than developing domestic exporting industries in sectors like electronics and semiconductors, as Japan and South Korean did before them, the likes of Cambodia have picked up bits and pieces of global supply chains, winning far fewer good blue-collar jobs.

This trend is doubly true in South Asia, with India a particular case in point. Prime Minister Narendra Modi has pledged to create 10 million jobs a year, as his country races to become the world's largest labor force over the next decade. A fierce debate now rages about how far this target is likely to be missed.

Yet even those who argue that India is managing to create employment opportunities for its burgeoning population of young people struggle to claim that they are good quality -- a fact born out by the huge numbers who regularly scramble to secure menial public sector roles.

The Times Of India recently reported that 93,000 candidates, more than half of whom had degrees, applied for 62 posts as unskilled police delivery men in the northern state of Uttar Pradesh. A second World Bank report earlier this year, with the gloomy title "Jobless Growth?", suggests such examples reflect a wider pattern, in which too many private sector jobs remain precarious and low paid.

Across developing Asia, economic expansion is producing fewer jobs. A recent analysis by academics at Azim Premji University in Bangalore showed India failing to translate its impressive growth into employment. In the 1980s India's GDP expanded by only around 4% a year, but employment grew steadily at around 2%. Now a 10% GDP increase pushes employment up by just 1%.

Automation is a tempting scapegoat here, but so far neither industrial robots nor clever algorithms have been widely deployed in such low-end sectors. The World Bank's recent report specifically downplayed the risks from so-called "sew-bots," or job-destroying robots that might replace humans in garment-making in countries like Vietnam.

Instead, Asia's job's conundrum is linked more closely to changing patterns of global manufacturing, especially as companies in emerging markets connect to international supply chains only in piecemeal fashion.

This is not to suggest that global integration itself is problematic: A retreat from globalization, driven in part by disruptions from the ongoing U.S.-China trade war, would do countries like Vietnam little good. But globalization on its own is no longer enough to deliver high-quality employment. Countries like India and Myanmar are building economic models that lift up fewer workers than their Asian predecessors, especially among vulnerable groups like women and the elderly.

Fixing this requires a raft of changes. Labor market reforms should make it easier to hire formal workers, rather than relying on dispensable short-term contract labor, a trick often used by factory owners in India. Investment in basic skills is needed too: only one fifth of workers in Cambodia, for instance, manage to finish high school. Helping marginalized workers should be a third focus, in particular women, who too often struggle to find a place in emerging Asian labor markets.

A better balance of investment is also required, with policies that both attract foreign factories while also supporting often-neglected small domestic companies, which employ large numbers of workers but struggle to expand. Put another way, as emerging Asia seeks to grow, it can no longer rely on foreign direct investment alone.

A generation back, a small number of eastern Asian nations managed to pull off an economic miracle, passing many of its benefits to their workers. For those now trying to follow the same path, this looks like a trick that will be hard to repeat.

James Crabtree is an associate professor in practice at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is author of "The Billionaire Raj."

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