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Development in Asia: A Dim View

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  • Sukla Sen
    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
    Message 1 of 1 , Feb 3, 2007
      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
      political consequences.
      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
      launch. "Strong
      economic growth alone will not solve the problem. Even
      in countries
      that have achieved relatively high growth rates of
      output, employment
      growth has been disappointing. "

      The ADB study notes that, although the region has made
      some advances
      in the reduction of poverty over the past two decades,
      some 1.9
      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
      labour" resulting
      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
      recognised. But
      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 poverty—and all the challenges
      they create."

      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
      China—the world's
      fastest growing economy—where growth of 3 percent in
      the 1980s
      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
      estimated that
      about 25 million new urban jobs need to be created in
      China to
      accommodate new entrants to the labour market, rural
      migrants and
      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
      index, which
      provides a statistical measure of inequality, rose by
      13 percentage
      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
      so-called "informal"
      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
      employment increased
      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
      increase in
      rural-urban migration. The study also found a
      "dramatic" rise in
      informal employment in Indonesia following the Asian
      financial crisis
      of 1997-98, with increases also recorded in the
      Philippines and Thailand.

      Moreover, the nature of employment is also changing.
      "While previously
      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
      establishments in
      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
      of developing
      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
      different from
      those of industrial countries in terms of capital

      A study conducted at an Indian motorbike and scooter
      factory, for
      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
      at leading
      manufacturing plants explain, the introduction of
      techniques is deemed essential for achieving
      competitiveness' ."

      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
      activities into
      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
      the intense
      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.
      Delivering the
      Hatfield lecture at Cornell University last month,
      Ratan Tata, the
      head of the Tata Group, pointed out that of India's
      billion plus
      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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