The Middle Class and Employment in Asia
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Esta apresentação é sobre a classe média e Emprego na Ásia. "Um trabalho baseado em vários capítulos especiais intitulados: 'A ascensão da classe média na Ásia" e "Para uma maior qualidade do emprego na Ásia', explica Natalie Chun, Economista do Asian Development Bank, responsável por esta apresentação mostrada na “Conferência Internacional sobre Sustentabilidade e Promoção da Classe Média”, ocorrida em 25 de setembro de 2013. Veja mais na matéria: http://ow.ly/poL9G
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The Middle Class and Employment in Asia
- 1. 11 The Middle Class and Employment in Asia Natalie Chun Economist, Asian Development Bank 25 September 2013 Based on the Special Chapters of the KEY INDICATORS FOR ASIA AND THE PACIFIC 41st and 42nd Editions The Rise of Asia’s Middle Class Toward Higher Quality Employment in Asia
- 2. 2 Middle class grew rapidly in size and purchasing power Region Year Total Pop (millions) Percent of Population Annual Exp. (2005 PPP$ billion) Poor (<$2) Middle ($2-20) High ($20+) Poor (<$2) Middle ($2-20) High ($20+) Total(Per Person Day) (Per Person Day) DEVELOPING ASIA 1990 2681 80 20 0 841 703 38 1582 2009 3363 40 59 1 672 3423 428 4523 DEVELOPING EUROPE 1990 352 11 86 2 24 612 97 733 2009 351 2 83 15 19 980 657 1656 LATIN AMER./CARRIBEAN 1990 409 28 66 6 49 645 341 1036 2009 536 20 71 10 39 1031 777 1847 MIDEAST/N AFRICA 1990 154 18 80 2 18 234 38 290 2009 203 10 87 3 14 365 76 456 OECD 1990 626 0 26 74 74 775 7860 8709 2009 713 0 15 85 85 480 13874 14439 SUB-SAHARAN AFRICA 1990 259 74 25 1 68 106 43 217 2009 389 59 39 1 95 234 99 428 Source: PovcalNet Database
- 3. Emerging consumers to assume key role in rebalancing Source: Staff Estimates based on PovcalNet Database 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 Developing Asia Developing Europe Latin Am./Carribean Mid East/North Africa OECD Sub-Saharan Africa AnnualExpenditures(Billions) Annual Expenditures 1990 2009 2030
- 4. 4 Middle class demand more consumer durables Household ownership of refrigerator by per capita expenditure/income decile 0 10 20 30 40 50 60 70 80 90 100 D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 Decile based on per capita expenditure Percent Philippines,2006 India,2004-2005 China,2002 Household ownership of car by per capita expenditure/income decile 0 5 10 15 20 25 30 35 40 45 D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 Decile based on per capita expenditurePercent Philippines, 2006 India, 2004-2005 China, 2002
- 5. 5 Middle class tend to invest more in education and health Mean Percentage Share of Household Expenditures Spend on Education and Health 0 2 4 6 8 10 12 14 16 < $2 (poor) $2 - $4 (lower middle) $4 - $10 (middle middle) $10 - $20 (upper middle) > $20 (upper) Class %share Bangladesh, 2000 Bhutan, 2003 Cambodia, 2003 China, People's Rep. of, 2002 India, 2004 Indonesia, 2002 Malaysia, 2004 Nepal, 2003 Pakistan, 2001 Philippines, 2003 Sri Lanka, 2002 Thailand, 2002
- 6. 6 But majority of middle class between $2 and $4; still vulnerable Percent Middle Class and Above Most Recent Survey Year 0 10 20 30 40 50 60 70 80 90 100 A ZER BA IJA N M A LA Y SIA TH A ILA N D K A ZA K H STA NG EO R G IA C H IN A SR ILA N K AA R M EN IA PH ILIPPIN ESV IETN A M M O N G O LIABH U TA N K Y R G Y Z R EPU BLIC IN D O N ESIA PA K ISTA N C A M BO D IA IN D IA U ZBEK ISTA NLA O PD R N EPA L BA N G LA D ESH Percent $2-4 (2005 PPP $) $4-10 (2005 PPP $) $10-20 (2005 PPP $) >$20 (2005 PPP $)
- 7. 7 Middle class to increase burden on environment and health Per capita water consumption (cubic meters), 1997-2001 702 849 896 980 1,153 1,179 1,218 1,245 1,292 1,317 1,324 1,393 1,543 1,545 1,591 2,223 2,344 2,483 0 500 1000 1500 2000 2500 China Nepal Bangladesh India Japan S. Korea Pakistan U.K. Sri Lanka Indonesia Vietnam Australia Philippines Germany Myanmar Thailand Malaysia USA
- 8. 8 Middle class more likely to hold stable jobs Percentage share of regular/permanent wage employment to total labor force of each economic group 0 10 20 30 40 50 60 70 80 < $1.25 (poor) $1.25 - $2 (near poor/vulnerable) $2 - $4 (lower middle) $4 - $10 (middle middle) > $10 (upper middle & rich) %share India, 2004-05 Philippines, 2006 PRC, 2002
- 9. Stable Jobs Are Important for Reducing Poverty and Income Inequality Informality, Poverty and Inequality (1990 -2008) 9
- 10. Developing Asia has had high growth and low unemployment Labor and Employment Statistics by Region 10 Levels (2010) Compounded Annual Growth (1990-2010) Region GDP per Cap (2005 PPP$) Labor Force ('000) # Employed ('000) Unemp Rate Real GDP per Cap (2005 PPP$) Pop. Labor Force Employ ment Developing Asia 4,728 1,759,693 1,709,072 4.8 6.2 1.3 3.5 3.9 Developing Europe 12,037 145,261 132,558 9.8 0.8 0.1 0 -0.1 Latin America & Caribbean 9,843 255,206 234,954 7.8 1.7 1.5 3.4 3.3 OECD 33,517 507,965 465,260 8.5 1.5 0.6 0.8 0.7
- 11. Sizable structural transformation has occurred in Developing Asia 11 0.61 0.27 0.17 0.07 0.18 0.33 0.26 0.32 0.21 0.40 0.57 0.61 0.00 0.20 0.40 0.60 0.80 Developing Asia Developing Europe Latin America & Caribbean OECD EmploymentShare 1990 0.43 0.16 0.15 0.03 0.24 0.26 0.23 0.22 0.34 0.58 0.63 0.75 0.00 0.20 0.40 0.60 0.80 Developing Asia Developing Europe Latin America & Caribbean OECD EmploymentShare 2010 Agriculture Industry Services
- 12. Informal employment in Developing Asia remains high… 12 0.73 0.16 0.43 0.170.26 0.78 0.53 0.80 0.01 0.06 0.04 0.03 0.00 0.20 0.40 0.60 0.80 1.00 Developing Asia Developing Europe Latin America & Caribbean OECD EmploymentShare 1990 0.70 0.17 0.36 0.13 0.27 0.81 0.60 0.85 0.03 0.02 0.04 0.03 0.00 0.20 0.40 0.60 0.80 1.00 Developing Asia Developing Europe Latin America & Caribbean OECD EmploymentShare 2010 Informal Workers Employees Employers
- 13. Informality uneven and persistent 10.0 10.7 21.9 24.8 43.5 54.2 58.9 63.1 67.9 71.6 81.9 85.9 8.1 10.2 31.4 32.6 53.1 70.3 64.3 74.2 68.5 74.3 80.1 88.3 0.0 25.0 50.0 75.0 100.0 Singapore (1991-2008) Hong Kong, China (1990-2008) Malaysia (1990-2008) Korea, Rep. of (1990-2008) Philippines (1990-2008) Thailand (1990-2008) PRC (1995-2008) Pakistan (1990-2008) Indonesia (1992-2008) Nepal (1991-2001) India (1991-2008) Bangladesh (1991-2005) Percentage of Informal Workers to Total Employment Start End Year Country(years) 13
- 14. Informality is becoming more common even in non-agriculture jobs 14 Informal Sector Employment in Latin America and Asia 1980-2008 0 2 4 6 8 10 12 30 40 50 60 1980-19851990-19952003-2008 PercaprealGDP(2005PPP$'000) ShareofInformalEmployment Latin America Informal Employment (%) Per capita real GDP (2005 PPP constant $ '000) 0 2 4 6 8 10 12 30 40 50 60 PercaprealGDP(2005PPP$'000) ShareofInformalEmployment Developing Asia Informal Employment (%) Per capita real GDP (2005 PPP constant $ '000) Data source: ILO LABORSTA, CHIP, NSS-EUS
- 15. Formal versus Informal Employment Informal employment is typically lower quality and associated with: • Lower income • Underemployment • Less security • Absence of social safety nets Benefits Received by Formal and Informal Wage Workers (% of total formal/informal wage jobs with benefit) 0 20 40 60 80 100 Armenia Bangladesh Yogyakarta Pension Armenia Bangladesh Yogyakarta Sick Leave Armenia Bangladesh Banten Yogyakarta Maternity/Paternity Leave Armenia Bangladesh Yogyakarta Vacation Leave Formal Informal 15
- 16. Income and stability are most important for majority of workers 16 0 20 40 60 80 Azerbaijan Armenia Kyrgyz Rep. Malaysia OECD Bangladesh Thailand PRC Georgia India Indonesia Philippines Viet Nam Safety/Security 0 20 40 60 80 OECD Indonesia Viet Nam Philippines PRC India Kyrgyz Rep. Georgia Thailand Bangladesh Armenia Malaysia Azerbaijan Good Income Source: Staff estimates based on unit record data from the World Values Survey, 2000 -2008 Percent of Workers Reporting Certain Attributes as Most Important in a Job
- 17. Quality of Employment Enhances Worker’s Well-Being Fully-employed workers are more likely to report the highest well- being. 17 0 5 10 15 20 25 30 35 Unemployed Employed part time, looking for full time Employed part time, not looking for full time Employed full time (by self) Employed full time (by employer) percent Workforce Well-Being, Thriving Worldwide 2009-2010
- 18. Better Employment Can Enhance Firm Productivity and Profits • Efficiency wage hypothesis implies worker effort and productivity depends positively on wages (Stiglitz 1976) • Human resource management literature indicates pay for performance schemes, target setting, and communication associated with higher productivity and profits (Bloom and Van Reenan 2010) 18
- 19. Productivity Growth Key to Promoting Higher Wage Employment 19 -4 -2 0 2 4 6 8 10 12 14 16 18 BruneiDarussalam Singapore Japan Philippines Thailand Taipei,China Bangladesh Korea,Rep.of SriLanka Malaysia HongKong,China Indonesia Mongolia India VietNam PRC Percent Real Wages and Labor Productivity Growth 2001 to 2008 Labor Productivity wage
- 20. 2020 Summary • Middle class in developing Asia is rapidly expanding and key to rebalancing. • Growing Asian middle class provides business opportunities. • Vulnerability of middle class, requires policies targeted to their needs. • Generating more formal employment opportunities may be key way to support and build the middle class.
- 21. Many Challenges • Skill biased technological change • Restrictive labor and industrial policies • Uncompetitive markets (SOEs and Monopolies) • Demographic changes 21
- 22. 22 Policies to Nurture Middle Class and Improve Employment • Stable and sustained economic growth • Greater infrastructure development • Increased FDI • Skill development through quality technical and vocational education • Managed migration from lower productivity to higher value added sectors. • Safety nets especially for informal workers
- 23. Concluding Remarks • General policy prescriptions given tell us little about how to implement the policies. • Need greater in-depth micro studies to better understand true effects of policies on distribution. 23
- 24. 2424 Thank you. KEY INDICATORS FOR ASIA AND THE PACIFIC http://www.adb.org/publications/key-indicators-asia-and- pacific-2010 http://www.adb.org/key-indicators/2011/main
Notes de l'éditeur
- Stable Jobs Are Important for Reducing Poverty and Income Inequality The importance of developing more stable forms of employment can really be seen in patterns given in cross-country data where reductions in poverty and inequality are related to increase in the share of employees (left panel). Thus formal and stable jobs seem important for moving numbers from poor to middle class.
- Developing Asia has had high growth and low unemploymentAt first glance developing Asia has seemingly done quite well in terms of labor force expansion and employment expansion over the last 20 years and has generally had much lower rates of unemployment than other regions. However, if we look at these statistics Latin America actually has done a much better job generating employment growth than Asia despite much lower levels of per capita income growth.
- Sizable structural transformation has occurred in Developing AsiaOne reason that employment generation may seem somewhat small in relation to per capita income growth is that a lot of per capita income growth was driven by structural transformation which shifted people from agriculture to higher value added sectors of industry and services especially compared to other regions. As these charts show Asia still has quite a room for additional growth through structural transformation as still 43% of the population was employed in agriculture in 2010.
- Informal employment in Developing Asia remains high…Yet, I think one of the most concerning things is that informal employment in Asia remains quite high. If you compare it to many other regions including Latin America the rates of informal employment are much higher and there was surprisingly little reduction in informal employment despite the structural transformation that has occurred. In general, manufacturing and higher value-added services were generally seen as sectors which could generate a greater number of formal employment opportunities which would be the basis for building a strong middle class. I think the results we see in changes in the percent employed informally are especially disappointing compared to Latin America which appears to have done quite well in reducing the proportion of the population that is in informal employment even despite much lower rates of growth.
- The rates of informality for many of the biggest countries in Asia, including China, have remained well over 50% of the population and India seems to actually have seen a rise in informality between 1990-2008. Only Thailand and to a lesser extent Malaysia appear to have made significant progress in terms of creating more formal employment over the past 20 year period.
- Informality is becoming more common even in non-agriculture jobsLooking at the trends within the non-agriculture sector we can see that shifting people from agriculture to non-agriculture employment is clearly not resulting in decreasing rates of informality. In fact, there is a clear upward trend in the percentage that have informal employment in non-agriculture jobs despite quite significant growth in per capita GDP. Latin America again has done much better by having decreasing rates of informal employment between 1990-2008 period as GDP per capita growth has risen.
- Formal versus Informal Employment-If we use formal/informal employment as a proxy for quality the data generally shows that informal employment is typically associated with lower income, underemployment, less security, and absence of key social safety nets.-Data from Armenia, Bangladesh and 2 provinces of Indonesia show the much higher rates of key benefits such as associated with people who have formal employment compared to those in informal employment such as pension, sick leave, maternity leave, and vacation leave.
- Income and stability are most important for majority of workersThe importance of having stable or formal employment that seems is helpful toward allowing people to become middle class and motivating people to put effort on the job is also seen in self-reported values of what workers believe are most important aspects of a job. Most developing countries in Asia report that a good income and safety/security are most important.This is in contrast to OECD countries where a large portion who are already in formal employment seem to care more about the tasks that are associated with a job and less concerned with these aspects.In general, while the quality employment is a multi-dimensional concept wage and salaried employment typically captures the main features of jobs that people consider as important in developing countries.
- Quality of Employment Enhances Worker’s Well-BeingMore formal employment opportunities are generally associated with a greater sense of well-being.Data from the Gallup Surveys indicates that full time employees are much more likely to report that they are thriving than self-employed and unemployed workers.
- Productivity Growth Key to Promoting Higher Wage EmploymentWorker well-being associated with quality employment is inherently important as this can feed into higher firm productivity and profits.The literature on efficiency wage discusses how incentive aspects of employment are associated with good job quality—higher wages and non-wage benefits —often lead to better firm performance; encourage greater loyalty, work efforts, and productivity; lead to higher profits per person, labor productivity per person day, and capital productivity. On the other hand, Lower wages are associated with higher firm costs due to higher turnover rates.We also did an internal study which showed that greater average compensation generally resulted in higher firm productivity and profits even after controlling for worker education in India.
- Productivity Growth Key to Promoting Higher Wage EmploymentEssentially productivity growth has a strong association with wage growth of those employed.Policies to facilitate productivity growth therefore may be important but still may not guarantee that this will necessarily translate into higher wage growth.This can be seen from this graph that shows countries such as the Philippines had relatively minor wage increases in relation to the increase productivity growth, while others such as the PRC saw higher wage growth compared to productivity growth…
- Many Challenges1) Skilled biased technological change where low skilled jobs are being replaced by automation and capital investments will make more difficult to create better employment opportunities and expand the labor market to ensure more people can move into the middle class.2) Restrictive labor and industrial policies which have been dull incentives for firms to formalize and upscale. This is especially true in countries such as India and the Philippines.Uncompetitive markets where SOEs dominate the landscape (such as PRC and Vietnam) are given unfair advantages making it hard for more innovative and dynamic firms to compete. In the Philippines, monopolies and absence of good antitrust laws have created a much smaller labor market where too much power is held in the hands of the employer.A number of countries will be undergoing demographic changes in the coming years.Many Asian countries are poised to benefit from demographic dividends as dependency ratios continue to decrease over the next decade. Human capital investments would ensure that these dividends are actually realized. In particular, there is a need to create more jobs and promote skill development to match the skills demanded by the labor market.Countries like PRC and Sri Lanka will have to deal with an aging population in the coming years and finding a way to ensure that the aging population has enough income that they are not falling back into poverty.
- Concluding RemarksGeneral policy prescriptions that I have given tell us little about how to implement the policies. I think in the end if policies are diluted due to having to please opposing factions or is not implemented correctly they may actually do more harm than good.In the end we need more micro studies to really understand the effectiveness of policies and programs and to truly understand the effects on different aspects of the distribution of households and workers.