Introduction

This paper provides an assessment of the labor market and social impacts of the financial and economic crisis in Asia and the Pacific and reviews national policy responses to the crisis. It highlights some policy options available to governments confronting the crisis that are likely to generate employment, improve social welfare on the basis of decent work principles, and promote a sound economic and labor market recovery.

Section 2 provides an analysis of the impact of the crisis on the region’s economies along with the key channels through which the crisis is being transmitted. It examines economic growth trends in 2008 and projections for 2009. Section 3 assesses the employment and social consequences of the crisis, including falling demand for labor, the more salient trend of rising vulnerable and informal employment, and falling incomes and their pressures on the working poor. As the recovery in the labor market is likely to lag behind output growth, the section examines this issue by looking back at the experience of Asian labor markets following the 1997 Asian financial crisis. The section identifies the most vulnerable groups and provides some scenarios regarding impacts on unemployment, vulnerable employment, working poverty, and labor productivity in 2009.

Section 4 provides an overview of the size and composition of fiscal stimulus measures in selected economies in developing Asia. The section assesses fiscal stimulus responses in terms of their nature (direct and indirect) and temporal impact (short and long term) and the need to combine measures that enhance short-term demand as well as long-term growth. The paper concludes with Section 5, a brief review of some critical issues and policy options to maximize the positive economic, employment, and social outcomes of the fiscal stimulus measures in developing Asia, including in the areas of public investment and infrastructure expenditure, social transfers to the poor and vulnerable, global and regional coordination of fiscal policy responses, employment and social protection policies, and support for enterprises and environmental sustainability.

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