Decent Work for All ASIAN DECENT WORK DECADE 2006-2015

Trade, informality and jobs

Kee Beom Kim

ILO Regional Office for Asia and the Pacific

Outline

Introduction: Linkage between trade, jobs and informality

(working poverty)

Asia’s labour markets in the global economic crisis

Informality and trade performance

Policy implications

Some contextual observations

Being connected may not be guarantee for economic

growth, but few examples (if any) of significantly

enhancing growth while being disconnected

Openness tends to increase exposure to external

shocks with adverse short-term effects on employment

and wages

Openness and trade simultaneously destroy and create

jobs – in medium-term more jobs appear to have been

created than destroyed

Jobs created are of higher quality than jobs destroyed?

Quality of jobs and informality

Informal economy is diverse and segmented

Typically low-quality, unproductive and poorly

remunerated jobs, not recognized or protected by law,

with little or no social protection and lacking rights at

work and representation

Most of working poor engaged in informal

employment

Employment earnings main source of income for poor

– quantity and quality of work critical in determining

poverty

Asia’s labour markets during the

global economic crisis

Source: ILO, Labour and Social Trends in ASEAN 2010.

Unemployment rate (%)

…labour market recovery but

manufacturing continues to shed jobs

More open economies experienced larger

labour market shocks

Source: ILO, Labour and Social Trends in ASEAN 2010.

Share of employment in industry and services (%)

…shift may entail movement of workers from relatively

high value-added (and higher-paid) to lower value-

added (and lower-paid) work

Industry

10

15

20

25

30

2008 Q2 2008 Q4 2009 Q2 2009 Q4

Philippines Thailand Malaysia

Services

35

40

45

50

55

60

65

2008 Q2 2008 Q4 2009 Q2 2009 Q4

Philippines Thailand Malaysia

Decline in share of employment in industry

and rise in services

Indonesia: Informal employment expands

Source: Statistics Indonesia.

Thailand: More workers in vulnerable

employment

Both sexes Men Women

2007-08 2008-09 2007-08 2008-09 2007-08 2008-09

Total employment 1109 840 383 471 727 369

Employers -126 61 -116 56 -9 4

Government employees 139 92 74 -2 65 94

Private employees 407 -206 158 -49 249 -158

Own-account workers 169 509 102 255 67 255

Unpaid family workers 524 372 161 203 363 169

Vulnerable employment 693 882 263 458 429 424

Status in employment in Thailand, annual change in Q2, thousands

Source: Thailand National Statistical Office.

More than 60% of Asia’s workers in

vulnerable employment

Wage & salary workers Employers Own-account workers Unpaid family workers

Source: ILO, Global Employment Trends 2009.

How does informality affect trade and growth?

Persistence in informality: Twice as likely to stay remain informally

employed than return to formal employment

Informality can act as barrier to

necessary economic restructuring

Source: ILO/WTO, Globalization and informal jobs in developing countries.

Informality may narrow the degree export diversification

Informality weakens export performance

in developing countries

Contribution to export concentration (%)

Source: ILO/WTO, Globalization and informal jobs in developing countries.

Informality limits firm size, talent and

productivity growth…

…hampering ability to trade internationally

Source: ILO, Laour and Social Trends in ASEAN 2008.

Policy implications

Enhancing social protection

Reduces the adjustment costs of changing economy

Provides the reassurance for innovation and risk-taking

Can also contribute to rebalancing of economies

Strengthening the social protection system to better respond to shocks (e.g. automatic stabilizers) and extending social protection to the informal economy

A social floor (composed of health care, child benefits, assistance to unemployed and working poor and income support for elderly) can be provided at affordable cost without jeopardizing fiscal sustainability

Asia: Low-levels of investment in social

protection

26.7

18.3

16.2

13.1

10.59.7

5.6

4.2

8.6

0

5

10

15

20

25

30

Western

Europe

Central and

Eastern

Europe

North

America

CIS Latin

america

and the

Carribean

Middle

East

Asia and

the Pacific

Africa Total

Regions

Per

cent

age

of G

DP

Total public social protection expenditure

Non-health public social security expenditure

Public health expenditure

Source: ILO, Social Security Department.

Greater capacity of persons to adjust to structural change

and take advantage of new opportunities arising from

trade

More productive and higher performing enterprises

Higher levels of economic output and living standards

Producing quality LMI for informed decisions

Making employment, career and training services broadly

available

Encouraging partnership between policy-makers, business

community, education sector and workers’ representatives

Expanding skills recognition and portability to improve

migration management

Multiple benefits of skills development

Source: UNESCO Institute for Statistics.

Gross enrolment rate, most recent year (%)

0 20 40 60 80 100

Cambodia

Lao PDR

Myanmar

India

Malaysia

China

Indonesia

Philippines

Brunei Darussalam

Korea, Rep. of

Japan

Secondary

0 20 40 60 80 100

Cambodia

Myanmar

Lao PDR

India

Brunei Darussalam

Indonesia

China

Malaysia

Japan

Korea, Rep. of

Tertiary

Different stages of development,

different challenges in education

Source: ILO, LABORSTA, Economically Active Population Estimates and Projections (5th Edition).

Labour force growth in ASEAN + 3 and India, 2010-2010 (%)

-10 -5 0 5 10 15 20 25 30

Japan

China

Korea, Republic of

India

ASEAN

Thailand

Singapore

Viet Nam

Myanmar

Indonesia

Malaysia

Brunei

Philippines

Cambodia

Lao PDR

Challenges to social protection, training

and skills development

Decent and productive work for all

Placing employment at the heart of economic and social policies

Enabling a sound policy environment

Dialogue between government, workers and employers in policy

design

Fundamental principles and rights at work

Improved policy coordination (e.g. between trade and labour

market policies) and administrative capacity to implement

measures

Strengthening regional and international cooperation (G-20,

ASEAN, ASEAN+3 etc)

Decent work plays critical role in addressing Asia’s challenges

and shaping a socially just, fair globalization

Thank you

For more information, please contact:

Kee Beom Kim (kim@ilo.org)

ILO Regional Office for Asia and the Pacific

www.ilo.org/asia

ASIAN DECENT WORK DECADE 2006-2015

Decent Work for All