Towards full employment
The Asian Regional Consultation on Follow-up to the World Summit for Social Development, to be held in Bangkok from 13 to 15 January 1999, is being organized in preparation for a tripartite international meeting scheduled by the ILO in Geneva for late 1999. These two meetings will review action taken in response to the Copenhagen Declaration on Social Development, particularly on Commitment 3 concerning full employment and the results achieved at the national level. Its focus will include the reasons for success or failure, the factors constraining employment-intensive growth and the future course of action to speed up the process of employment generation. The meetings will also seek to identify measures to be taken at the regional and international levels to support policy and institutional reforms that may be necessary to promote the goal of full employment.
This report is intended to serve as a basic document for discussion at the Asian Consultation. The report reviews recent employment and labour market developments with a view to assessing the progress towards the goal of full employment and the promotion of social protection and basic workers= rights in the Asia-Pacific region, and identifies problem areas which future policies will need to address. It also defines future ILO support to national efforts in promoting employment-intensive growth.
Mitsuko Horiuchi
Assistant Director-General
responsible for ILO activities
in Asia and the Pacific
This report has been prepared by Mr A.S. Oberai and Mr A.K. Ghose, with substantive inputs from other members of the task force which included Mr G. Bhattacharya, Mr D. Campbell, Mr G. Finnegan, Mr G. Joshi, Mr M. Mahmood and Ms A. Reerink. Useful inputs and comments were also received from Mr M. Abella, Ms J. Ghosh, the ILO Regional Office for Asia and the Pacific and a number of ILO headquarters technical units, as well as the Bureau for Employers= Activities and the Bureau for Workers= Activities. Research assistance was provided by Ms S. Rothboeck. The editing was done by Ms R. Beattie and Ms P. Ferguson. Text processing was carried out by Ms A. Mehrotra and Ms S. Punkrasin.
This report reviews progress made towards full employment in Asia and the Pacific over the long run, as well as developments since 1995. A universal commitment to full employment was a major outcome of the World Summit for Social Development held in Copenhagen in 1995. The report also reviews the economic and social policies which influenced employment growth in the countries concerned in an effort to identify the problems which future policies will need to address.
For more than a decade now, Asia and the Pacific has been the most dynamic region of the world. Of course, the region is extremely diverse and includes a whole range of countries Cfrom the least developed to the most developed. But economic dynamism has been a characteristic shared by many countries of the region. Until 1997, East and Southeast Asian economies have been the fastest-growing economies of the world; the transition economies of East Asia have performed better than many transition economies in other regions; the growth performance of South Asian countries, though it looks poor in the Asian-Pacific context, has been quite respectable by the standards of low-income economies in other continents; and Japan's growth performance has surpassed that of most developed countries.
Despite the impressive growth performance, however, long-term employment trends in the region have not been as favourable as might be expected. Japan alone among the advanced industrialized countries of the region had sustained full employment over a long period. Rapid improvements in employment conditions occurred in just a few of the developing economies C Hong Kong Special Administrative Region of China, the Republic of Korea, Malaysia, Singapore and Thailand C which had achieved near-full employment by the mid-1990s and had become important host countries to migrant workers from other countries of the region. In the rest of the countries, overall employment conditions either remained broadly unchanged or worsened. In advanced industrialized countries such as Australia and New Zealand, high unemployment became a persistent problem and the incidence of precarious employment also increased. In a whole range of developing countries C some East and Southeast Asian countries such as Indonesia and the Philippines, the transition economies and the South Asian countries C the overall employment conditions cannot be said to have improved even though there were clearly some positive developments. Gender inequalities, child labour and poverty were declining in most of these countries. But the quality of employment was, on the whole, deteriorating.
Although employment growth generally kept pace with labour force growth so that open unemployment remained fairly stable, much of the employment growth was accounted for by growth of self-employment with a poor asset base, casual wage employment and regular but unprotected wage employment. The core problem was too slow a growth of regular wage employment (covered by existing labour protection systems).
The analysis in this report suggests that this core problem arose mainly for two reasons. Many countries pursued import-substituting growth strategies which emphasized growth of industries with relatively low labour intensity. Many countries, moreover, pursued labour policies which gave rise to significant rigidities in the organized labour market; as a result, there was an incentive to adopt capital-intensive technologies. That there was growing appreciation of these problems among policy makers in most of the countries concerned is evident from the fact that serious efforts were made to implement reforms designed to increase both outward orientation and market orientation of the economies. In designing and implementing reforms, most of these countries were actually pursuing what has come to be known as the East Asian model, the hallmarks of which are thought to be outward-oriented growth strategies, macroeconomic stability and flexible labour markets, together with emphasis on human resource development.
Recent developments, unfortunately, threaten to undo even the very modest progress towards full employment achieved in the region as a whole. The financial crisis in East and Southeast Asia (hereafter referred to as Athe Asian crisis@) has brought back problems of unemployment, underemployment and poverty in precisely the countries which had earlier made steady progress towards eliminating them. It has also led to the return of migrant workers to their countries of origin, aggravating the already serious problems of unemployment, underemployment and poverty there. Outside the crisis-affected countries, economic reforms in a context of globalization do not appear to be producing the expected employment effects. Disguised unemployment in the organized sector, carried over from the past, now threatens to become open unemployment. Pressures of global competition also seem likely to induce technological change which could conceivably slow down growth of regular wage employment even further.
Difficult situations, however, also offer opportunities. The current difficulties call for renewed focus on the need to view promotion of full employment as a central objective of development policies. The Asian crisis has alerted all Asia-Pacific countries to the risks engendered by globalization, along with its benefits. It has also brought into focus the fact that all was not well with the flexible labour markets in these countries. There are useful lessons to be drawn from these facts for all countries of the region; a modified East Asian model can now guide development policies. The importance of ratification and application of the relevant ILO Conventions also comes into focus here.
This report argues that the crisis does not invalidate the judgement that outward-oriented growth strategies, macroeconomic stability, flexible labour markets and emphasis on human resource development are the features which enabled these countries to achieve high rates of employment-intensive growth over a long period. What the crisis does demonstrate is that outward orientation and labour market flexibility need to be redefined.
In the current context of globalization, the risks associated with full capital account liberalization are now clear, but the benefits are not. Some analysts have suggested that full capital account liberalization, by encouraging short-term capital flows, generates macroeconomic instability and hence harms growth. These arguments lead to the view that openness need not necessarily incorporate full capital account liberalization; it is perhaps wise to minimize risks when benefits are not clear. According to this view, the challenge facing policy makers today is one of defining policies which discourage short-term capital flows while encouraging flows of trade and foreign direct investment.
The crisis has also highlighted the fact that sound labour market institutions and safety net systems must be viewed as essential components of flexible labour markets. Independent workers= and employers= organizations, mechanisms of tripartite and bipartite consultations, and adequate networks of active employment exchanges and skill development institutions are necessary if labour market flexibility is not to mean employment insecurity. Besides, safety nets for workers in both the organized and unorganized sectors must be in place if labour market flexibility is not to result in insecurity of livelihood for large numbers. Special efforts also need to be made to ensure that these institutions and mechanisms serve to reduce gender inequalities in employment, given the observed tendency of gender inequalities to persist even in the most developed of the countries.
While these main points emerge clearly enough from the discussions, there are also some important issues to be settled in each of these areas, and country-level specificities would have to be taken into account in settling them. In the area of social dialogue, there are questions of reaching the right balance between tripartite and bipartite institutions and choosing the proper level at which collective bargaining should take place. Ways have to be found to make employment exchanges active helpers in job search rather than passive gatherers of information. Human resource development institutions have to be made responsive to market needs and geared to meeting retraining needs. Innovative safety nets for workers, other than special employment schemes, would have to be designed. And mechanisms have to be devised to empower women as an essential step towards eliminating gender-based discrimination in the labour market.
There are also two special problems revealed by the experiences of many countries of the region. In low-income countries, small and medium enterprises (SMEs) have tended to be treated as transient forms which are important only for sustaining employment in the short run. Historical experiences of more developed economies, on the other hand, show that these enterprises can play a dynamic role in the growth process. Enabling them to play this role is important for achieving employment-intensive growth. A change of perspective is required and new types of policies and programmes of support for these enterprises need to be designed. At the same time, human resource development policies need to be geared to improving the quality of employment in these enterprises through skill development of both entrepreneurs and workers.
Another problem which has been brought into focus by the Asian crisis relates to inter-country migration of workers. This has been growing as a natural outcome of uneven development across countries. In the absence of a well-defined framework, however, many migrant workers often have the status of illegal immigrants who cannot benefit from the social protection system of the country concerned. Economic downturns, therefore, have a disproportionately unfavourable effect on migrant workers and the effect is transmitted to their countries of origin through reverse migration flows. These problems will require policy makers= attention.
Debates and discussions on this set of issues in this Asian Regional Consultation, as well as in other forums, will not only help in finding satisfactory solutions but will also provide helpful guidelines for the ILO's future work. In recent years, the ILO's work has been undergoing reorientation, with increasing attention being paid to assisting the governments and the social partners in designing employment strategies, defining labour policy reforms (including restructuring mechanisms of social dialogue, human resource development institutions and safety nets), identifying measures to eliminate gender inequalities and child labour, designing policies and programmes for SMEs, and establishing a framework for orderly inter-country migration of workers. Strengthening these lines of work will be consistent with the priorities identified in this report. The ILO's core labour standards, together with those relating to employment policy and migrant workers, can serve as effective guidelines for both national policies and ILO activities in these areas.
