Conference on Postcrisis Employment and Social Policies in Developing Asia

A three-day conference on Postcrisis Employment and Social Policies was held at the Asian Development Bank Institute from 15 to 17 December 2010. This policy dialogue conference involved the participation of policy makers from employment and economic planning ministries from developing Asia, and explored in greater depth the dialogue initiated at the 2009 Conference on this theme. It was organized in partnership with the Geneva-based International Institute of Labor Studies (IILS) of the International Labour Organisation (ILO), as well as the Tokyo office of the ILO, and drew on the IILS's "World of Work" flagship publication, as well as analytical work undertaken by the Asian Development Bank and the ADBI.

The first session addressed the issue of rebalancing Asia's economy and jobs. The need for more balanced growth has become evident in the wake of the global economic crisis. Rebalancing in Asia means greater emphasis on domestic demand, intra-regional trade and labor productivity, and will require growth in jobs and incomes. Economic recovery has been strong in developing Asia, and employment growth has picked up too. But it has been an uneven recovery, and one that does not support rebalancing. Improved growth in productive jobs and in incomes are key to balanced growth. Strengthening social protection systems and improving labor productivity are also crucial.

Social cohesion and employment issues were the subject of the second session. It was argued that world leaders have failed to address the root cause of the crisis, namely, the global and regional race to the bottom, which has sacrificed labor rights in the name of global competition. Indeed, the pre-crisis period was one of growth without fairness, as the gap widened between rich and poor in many countries. Since the explosion of the crisis, pessimism about the quality of life has increased, and unemployment and income inequality are becoming threats to social cohesion. In consequence, the following policy measures were recommended: well designed social protection; labor regulations to support labor demand and reduce duality; and minimum wages and skill development at the low-end of the labor market.

The third session tackled the topic of jobs and the recovery. In terms of employment and economic growth, Asia has fared well over the course of the crisis, in part because it was less affected by financial excesses. It was aided in many instances by substantial government stimulus efforts with an emphasis on employment-intensive infrastructure, supported by other employment-friendly policies. For example, Japan implemented an employment adjustment subsidy program. But Asia faces a number of challenges: (i) promoting formal job creation – informal and non-regular employment has increased in the wake of the crisis; (ii) improving social protection – only one-quarter of people have social protection and pension coverage is particularly low in Asia; and (iii) the macroeconomic challenge of rebalancing growth to support the world recovery – Japan has recently elaborated a new growth strategy.

Youth unemployment was the topic of discussion in the fourth session. Young people have been disproportionately affected by the global economic crisis and experience shows youth unemployment often never returns to pre-crisis levels. In Japan, the youth employment situation deteriorated sharply in the 1990s, and again with the global economic crisis. This has an adverse effect on economic growth and poverty, contributes to crime and the low sustainability of social security schemes, and leads to fewer marriages and a low fertility rate. Korea is suffering from a contraction in youth employment due to shortcomings in the school-to-work transition caused by a mismatch between education and labor markets. This implies a need for substantial reforms to the education system. In Sri Lanka, youth employment challenges include unequal opportunities (class/status, gender, geography and sector, and disabilities), labor market mismatches between supply and demand, and cultural attitudes.

The fifth session discussed promoting employment recovery, while meeting fiscal goals. Policy makers are struggling to reconcile the urgent need to support job creation with fiscal constraints. It is thus important that the remaining policy space target measures that support employment, rather than generic spending. In this context, the most effective measures are unemployment benefits, hiring incentives, training expenditures, public employment services and direct job creation. Tax cuts are one of the least effective measures. It is important to avoid a premature exit from fiscal stimulus, as Japan did in the 1990s, which would weaken the economic recovery and prolong the jobs crisis, and paradoxically compromise fiscal goals in the medium term. Japan is now saddled with a general government gross debt of 200 per cent of GDP.

The role of green jobs was the topic of the sixth session. Post-crisis Asia is going through a structural change that requires new sources of growth. Indeed, most of developing Asia is "labor-rich" and needs to find new ways to employ large workforces. Green industries are a promising prospect for the next wave of growth. According to the Asia Business Council's Green Jobs Index, China has the top conditions for green job creation, followed by Japan and India. However, other countries rank less well. The potential for green jobs will not materialize without massive and sustained investments in the public and private sectors. In particular, innovation is imperative, and R&D programs need to shift decisively to clean technologies, energy and material efficiency, and sustainable workplace practices, as well as toward environmental restoration and climate adaptation.

In conclusion, participants agreed that employment and social policy issues will remain at the top of the international agenda while the global economy is still recovery from the global economic crisis. Further, these issues are at the heart of poverty reduction and inclusive growth, the core business of the ADBI. Participants agreed on the importance of continuing the policy dialogue on these issues on an annual basis.