2.2 Assessing progress towards full employment: Some conceptual issues
In the advanced industrialized countries of the region C Australia, Japan and New Zealand, regular wage employment in modern industries and services is the dominant form of employment. Universal welfare systems and unemployment benefits also exist in these countries, and this means that unemployment does not imply a threat to livelihood. In these circumstances, labour market conditions are reflected in the unemployment rate.
The employment structure in the more developed of the East and Southeast Asian economies C Hong Kong (China), the Republic of Korea, Malaysia and Singapore C resembles that in the countries of the Organisation for Economic Co-operation and Development (OECD). Agriculture accounts for only a small proportion of total employment (ranging from virtually 0 per cent in Singapore to 16 per cent in Malaysia) and regular wage employment is the dominant form of employment. However, these countries do not have systems of welfare and unemployment benefits comparable to those in advanced industrialized countries. Nevertheless, the formal sector is the leading employer and the rate of unemployment, consequently, is an adequate indicator of the employment situation.
Some other economies of East and Southeast Asia (Indonesia, the Philippines and Thailand), the transition economies (Cambodia, China, Lao PDR, Mongolia and Viet Nam), the South Asian economies (Bangladesh, India, Nepal, Pakistan and Sri Lanka), and island economies such as Papua New Guinea have several important characteristics in common. The share of agriculture in total employment is high, ranging from 30 to 80 per cent. Although wage employment is significant, much of this is irregular or casual in character. Regular wage employment typically constitutes 5-10 per cent of total employment and welfare and unemployment benefits are virtually non-existent. All this means that the rate of unemployment is a limited indicator of the employment situation since economic setbacks are largely absorbed through falling incomes and an increase in underemployment in agriculture and the urban informal sector. In some of these countries, open unemployment is emerging as a feature mainly because educated youth refuse to engage in agricultural or informal sector activities; but this only makes the rate of unemployment a good indicator of mismatches of skills and aspirations which affect the educated segment of the labour force.
These observations are of great relevance in interpreting the notion of full employment in the specific context of Asia-Pacific countries and in assessing the progress of countries towards achieving full employment. As already noted, in the advanced industrialized countries and the more developed East and Southeast Asian economies the rate of unemployment is a good measure of deviation of an economy from the norm of full employment. However, it needs to be pointed out that full employment has never been thought of as a zero rate of unemployment. This is because a certain amount of what is known as frictional unemployment is inevitably generated as workers from declining activities search for new jobs and the process of matching workers to jobs works itself out. Traditionally, a rate of unemployment of 2 to 3 per cent has been taken as indicating full employment.
Such a definition, however, is clearly inappropriate for developing countries. In situations where agriculture accounts for a large share of employment and where much of the labour force is either in self-employment or in casual wage employment, a low rate of unemployment does not indicate full employment. Since most people have the option of self-employment and casual wage employment at low productivity and income levels, and the context is one where unemployment benefits are non-existent, very few choose to be idle so that the rate of open unemployment is generally low. This is clear from the fact that low incomes, as indicated by poverty, characterize such economies and this means that much of the employment is not adequately productive or remunerative. Besides, there is the problem of underemployment; many of the self-employed and casual labourers do not find full-time work. In these circumstances, full employment can only be treated as a long-term goal and progress towards full employment is hard to assess. As a rough approximation, improving employment conditions can be regarded as progress towards the ultimate goal of full employment and deteriorating employment conditions can be interpreted as setbacks.
But how should one judge in such a context whether employment conditions have been improving or deteriorating over time? There is no single indicator on which such a judgement can be based. Several indicators are required; rate of unemployment, share of agriculture in total employment, level of underemployment, incidence of poverty, real wage rate B all of these are relevant.
At this point, it needs to be added that two labour market features are common to most countries of the region. First, gender inequalities in employment exist in virtually all countries. What is not always clear, however, is the extent to which these inequalities reflect direct or indirect gender-based discrimination in the labour market. Gender inequalities in employment could reflect discrimination in society in general rather than specifically in the labour market; if women have a lower average level of education than men, for example, their employment will be of poorer quality even if there is no overt discrimination in the labour market. Moreover, the specific character of women's reproductive and household responsibilities, determined largely by the prevailing socio-cultural norms and attitudes, also obviously shapes the character of their labour market participation. More investigative work is required to determine the extent of gender-based discrimination in the labour markets of different countries of the Asia-Pacific region. The discussion here, of necessity, focuses on gender inequalities in employment and their effects on women workers rather than on gender-based discrimination in the labour market as such.
All this also means that policy interventions designed to reduce or eliminate gender-based discrimination in the labour market can have only a limited impact on gender inequalities in employment. Policies in other spheres such as education and culture, social welfare, and so on, are of equal relevance. Besides, economic growth itself is relevant. By inducing structural changes, economic growth affects gender inequalities; migration processes or progress of commercialization, for example, generally have the effect of increasing women's labour force participation.
The second feature concerns child labour. The available information suggests that employment of child workers is a practice which can be found in virtually all developing countries of the region; only the advanced industrialized countries (Australia, Japan and New Zealand) seem to have successfully eliminated it. According to ILO estimates, there were 120 million full-time child workers in developing countries in 1995, and Asian developing countries accounted for around 61 per cent of them. Child labour and poverty are widely believed to be interlinked phenomena, and it is not perhaps merely coincidental that Asian developing countries also account for about two-thirds of the world's poor. A full empirical assessment of progress towards elimination of child labour is not attempted in this chapter, though some relevant observations are made.
What needs to be emphasized here is that a rigorous definition of full employment would have to take account of such undesirable features of the labour market. In particular, reduction or elimination of gender inequalities and child labour should be regarded as progress towards full employment. Similarly, strictly speaking, an economy cannot be said to have achieved full employment so long as gender inequalities and child labour persist, even if all other indicators point to tight labour market conditions.
