May 8, 2014
- In the last 20 years, East Asia Pacific saw rising productivity amid a brisk structural transformation, with large movements of people into cities and higher output in agriculture, manufacture and services. Countries that were poor a generation ago successfully integrated into the global value chain, taking advantage of low labor costs.
- The unprecedented economic development in East Asia Pacific has provided jobs that lifted millions of people out of poverty and has been a triumph of working people. The share of the population working or seeking work in most countries, including women, is higher than other nations with similar income levels.
- Current employment policies, though relatively stringent on paper but poorly enforced in reality, have failed to benefit most workers, favoring prime-aged men in salaried positions at the expense of women, youth and those with low skills. Empirical evidence shows that rising minimum wages in Indonesia, Vietnam and Thailand disproportionately reduce employment opportunities for women and young people.
- Across the region, more than 30% of people ages 15 to 24 are completely left out—they have neither a job nor receive any education or training. That creates labor market segmentation and exclusion, as well as a higher risk of social unrest and violence. Meanwhile, rising wages for skilled workers, which benefit from the current policies, have led to higher inequality in some countries.
- The issue has taken on more urgency recently, as the region’s economic growth is moderating and labor costs are rising. With empirical evidence presented in the report, policy makers are urged to enact labor regulations and social protection policies to benefit all workers, including those in the large informal economy.
- The region’s economic and demographic changes, as well as its relatively short labor history, present an opportunity for countries to adopt a new lower cost social protection model than countries in regions with long, established policies.
- It is now time to consolidate growth by enacting social policies that protect people, rather than any particular sector, location or profession. When well-designed, those policies should make sure social protection and labor regulations reach the most vulnerable workers in society.
- Modest, nationally-financed unemployment packages, for example, can help employers avoid costly severance schemes. They can also lower labor taxes and encourage business to become formal. Thailand’s universal health care policy, for example, is a form of social insurance that has already lowered out-of-pocket costs for patients and led to wider use of medical services.
- Of course, the East Asia Pacific region’s diverse emerging economies—from mostly rural to urbanizing and small, remote islands—defy a one-size-fits-all approach.
- For the many countries that are still mainly agrarian, policy makers need to focus on boosting agricultural productivity and encouraging non-farm enterprises.
- For urbanizing economies, governments need to focus on making cities work better by boosting infrastructure and improving services.
- More importantly, countries need to look beyond the labor market and focus on fundamentals, such as those that ensure price stability, encourage investment and innovation, and support a regulatory framework that enables small and medium-size enterprises, which employ most people in the region.