Development in Asia: A Dim View
- WSWS : News & Analysis : Asia
Asian growth rates rise but employment problems deepen
By Nick Beams
9 May 2006
Despite relatively high levels of growth, Asia is
heading for an
employment crisis with far-reaching social and
That is the conclusion which emerges from a new book
on the region's
labour markets published by the Asian Development Bank
(ADB) last month.
"The outlines of an Asian employment crisis are
already taking shape,"
the ADB's chief economist Ifzal Ali said at the book
economic growth alone will not solve the problem. Even
that have achieved relatively high growth rates of
growth has been disappointing. "
The ADB study notes that, although the region has made
in the reduction of poverty over the past two decades,
billion people still live on less than $2 a day,
either unable to find
work or earning too little from the employment they do
The bank pointed to a "huge global oversupply of
from the integration of China, India and Russia into
the world economy.
"Asia's success will sooner or later be eclipsed by
the pressures of a
huge `reserve army' of unemployed and underemployed
workers who are
constantly driven to seek out employment at
sub-standard wages in
order to survive," Ali said.
"The potential of developing Asian economies is widely
unless Asian governments make job creation a central
objective backed by time-bound, feasible, credible and
policies, the region may well remain plagued by huge
underemployment and povertyand all the challenges
One of the most significant findings of the ADB study
is that the
percentage increase in employment during the 1990s for
percentage point growth in the gross domestic product
(GDP) was lower
than in the previous decade. The largest fall was in
fastest growing economywhere growth of 3 percent in
produced a 1 percent increase in employment, while a
growth rate of
almost 8 percent was needed to achieve the same result
in the 1990s.
The problem appears to be worsening. In 2006, it is
about 25 million new urban jobs need to be created in
accommodate new entrants to the labour market, rural
workers laid off from state enterprises. But according
to the latest
estimates, only 11 million new jobs will be generated.
The ADB has found what it calls "disappointing"
results so far as
income inequality is concerned. In China, the Gini
provides a statistical measure of inequality, rose by
points between 1981 and 2000. Inequality has also
increased in India,
both between urban and rural areas and within urban
The ADB study also found that employment in the
sector, where productivity is very low and little
capital is employed,
is "either on the rise or remains persistent. In
India, where per
capita GDP growth was close to 5 percent between 1993
and 1999, the
share of the informal sector in non-agricultural
from 80.5 percent to 83.2 percent.
Informal employment was also on the increase in China
and Vietnam as a
result of layoffs in state-owned enterprises and an
rural-urban migration. The study also found a
"dramatic" rise in
informal employment in Indonesia following the Asian
of 1997-98, with increases also recorded in the
Philippines and Thailand.
Moreover, the nature of employment is also changing.
formal sector employment was synonymous with `regular'
which among other things offered considerable job
security, this is
increasingly not the case. A survey of formal sector
the Philippines shows that the proportion of
nonregular workers in
total employment increased from about 20 percent in
1991 to about 28
percent in 1997."
In examining the causes of these phenomena, the study
noted that the
increase in the effective size of the global labour
force had not been
accompanied by a surge in capital for investment.
At the same time, while the relative labour abundance
countries would suggest the use of more
labour-intensive methods in
the formal industry and service sectors, this was not
the case and the
"formal sectors of developing countries are not very
those of industrial countries in terms of capital
A study conducted at an Indian motorbike and scooter
example, found that while 810 workers produced 244,000
units two years
ago, after the introduction of greater automation and
changes on the
shop floor, the factory is turning out nearly three
times as many
motorbikes with just 90 more workers. "As executives
manufacturing plants explain, the introduction of
techniques is deemed essential for achieving
The ADB study called for "significant increases" in
the demand for
labour in the formal sector. Not only did aggregate
production have to
increase but this expansion had to be labour
intensive. But policy
prescriptions to make this happen are another
question. After calling
for policies to "promote diversification of production
new areas, facilitate restructuring of existing
activities, and foster
coordination between public and private entities", it
that, while such measures might alleviate some of the
associated with the adoption of new technologies and
competition between firms, they would not eliminate
them. "In other
words, it is quite likely that unemployment driven by
the adoption of
new technologies and heightened competition among
firms will continue
to be serious problems."
Just how serious was underlined in a recent speech by
the head of one
of India's leading industrial and engineering firms.
Hatfield lecture at Cornell University last month,
Ratan Tata, the
head of the Tata Group, pointed out that of India's
population 20 percent are under the age of 20. By the
year 2040 the
country would have the world's largest working-age
surpassing even that of China.
"These young Indians want a place in the sun, an
education, a job, the
kind of life they know exists from television," he
said. "Will there
be jobs for them?" If not, he warned, the country may
see "the makings
of a revolution."
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