South Asia: The labour force - a bulwark against an economic crisis

Published: April 16, 2012

An estimated 1.2 million new workers will join the labour force every month over the next few decades. ILLUSTRATION: JAMAL KHURSHID

KARACHI: 

The recession is long from over. Crises deepen as the world gears up for the ‘centurion’ – a phenomenon which occurs once in a century or a lifetime and culminates in a global economic slump. Analysts predict that rising fuel prices, limited oil supplies, barriers to entry in new markets, and widespread uncertainty in the coming years can fuel another ‘Great Depression’ that may cripple the global economy.

Yet, economists believe that after every fall comes a rise and markets eventually claw back to a sustained long-term equilibrium. In South Asia particularly, which will be home to 70% of the world’s markets by 2015, things look good against all odds. The region has faced enormous employment challenges in the past century, but the worst of economic disasters has also brought with it a wave of change. An estimated 1.2 million new workers will join the labour force every month over the next few decades – an increase of around 25 to 50% over the historical average. The challenge will be to absorb them into the workforce with rising levels of productivity.

With average creation of over 800,000 jobs per month between 2001 and 2010, there remains hope. Open unemployment is low, wages have increased for the salaried class, while poverty has declined for the self employed.

South Asia has mostly created better jobs. Job quality can be determined through wages and poverty estimates, coupled with the risk of low and uncertain income at the same time: both trends have shown a positive variance.

Aggregate productivity in South Asia has risen successfully, but there is a need for slow growing economies to spur growth by easing human capital constraints. This is usually done by reallocating labour out of low-productivity firms in manufacturing and services, into high productivity areas like agriculture; thereby creating a balance. However, doing so requires key inputs like electricity to be available in abundance, as it is vital to sustain a constant workflow, which leads to expansion and further job creation.

Furthermore, training programmes are necessary to enable labour to learn and apply required skill sets according to needs. This is vital if we are to export surplus labour – which would otherwise stress the domestic economy – to countries like Saudi Arabia, where the departure of workers from western countries is providing room for skilled labour to penetrate the market for better jobs and higher wages.

South Asian countries have also witnessed a ‘demographic transition’: the period in which the number of workers grows more rapidly than the number of dependants, hence creating an upward surge in savings per family. This may be utilised in the future in high priority human and physical capital investments.

Most of the countries in the region are emerging economies and have not been hurt from the fall-out of the global recession fuelled by the western capitalist model. They can share resources and reduce barriers to entry through trade and technology transfers; the latter especially in terms of skilled labour. To maintain order, all that needs to be done is that countries ensure complete adherence to labour laws.

An important factor that must be looked into is education. Policy makers must ensure quality learning at all levels, while child education should be revamped to ensure basic primary education and improvements in cognitive behavioural and creative learning.

This will lead to efficiency and better labour performance from an early stage in life.

A healthy labour force drives nations to power. Reforms to encourage job creation must go hand in hand with strengthening labour market institutions and labour law implementation – both in the formal and informal job sector. Our markets must absorb labour market shocks and make sure they have the right workers doing the right jobs. Governments need to get their act together and invest in people, rather than luxuries. In the end, the path to self sufficiency is the only viable solution to survival.

The writer comments on international relations and foreign policy.

Published in The Express Tribune, April 16th, 2012.

Reader Comments (7)

  • Apr 16, 2012 - 8:30AM

    India forms 80% of South Asia. So, this article is mostly about India.

    India has been steadily creating high value jobs which are high paying. According to some WB professionals, you need a growth of 6% to generate enough jobs to satisfy the people coming into the job market every year, for a developing Country. India’s average growth for the past decade or two has been much more than that. As a result poverty is expected to halve from 51% in 1991 to 22% in 2015, according to a UN MDG report.

    Pakistan averages much lower at around 4% and hence is responsible for dragging the statistics down in South Asia, not a net contributor.

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  • BlackJack
    Apr 16, 2012 - 9:48AM

    In South Asia particularly, which will be home to 70% of the world’s markets by 2015, things look good against all odds. What does this even mean?

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  • Nobody
    Apr 16, 2012 - 10:21AM

    The number of people living on under $1.25 a day has actually risen in the past 3 decades. Agreed, progress has been made; the poverty rate has dropped from roughly 60% to about 40% over the past 3 decades, not quite 22% (unless India pulls off a few miracles over the next 3 years). While the poverty rate has fallen (globally as well), the number of poor people has actually increased in India. You get an A for effort though my friend.

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  • Raza
    Apr 16, 2012 - 4:58PM

    While this article does not really apply for Pakistan, it is still worth reading; if only someone could force the hapless policymakers of our country to read this. Solid infrastructure (which includes power), skilled/trained workforce, and creation of small business is the order of the day. That, and decreasing the exponential population growth.

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  • Rameez
    Apr 16, 2012 - 5:11PM

    imagine if the three big south Asia countries join hands (india, Pak, China) and name the union the “Asian dragons”. We control more than a third of worlds population. S.Asia would become the power house of 21st century and it would be hard for Europe to catch up.

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  • Reddy
    Apr 16, 2012 - 5:59PM

    @Rameez:you are being too optimistic over here, China is not there in south asia to start with, they are screwing India in Africa, latin america and in afgahnistan,we are returning the favor whenever we get a chance albeit not as many times as they did.coming to pakistan most of the pakistanis think it is in middle east, that left us with Bangladesh,Sri lanka, India,Maldives,Bhutan,Nepal and i think they are slowly but steadily coming together to sideswipe the problems at the best of their ability.it’s best for S.Asia to avoid using jingoistic words like dominating,pulverizing and many imperious words for a longer period of time.

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  • Apr 16, 2012 - 8:26PM

    @Nobody:

    Wrong. The poverty rate in India has decreased tremendously. Show me one viable UN or WB report which says so. I can certainly provide you with links which back up my claim.

    http://blogs.wsj.com/indiarealtime/2011/07/11/india-makes-some-progress-in-reducing-poverty/

    “India’s poverty rate is expected to fall to 22% by 2015 from 51% in 1990.”

    2015 is just 3 years away.

    I might get an A, but you get an F.

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