Impact of Asia’s ageing: Labour quality can trump quantity

Source: The post is based on the article “Labour quality can trump quantity” published in the Business Standard on 13^th November 2022.

What is the News?

According to a study, the impact of Asia’s ageing on the global supply of workers and savings, workforce quality is likely to trump quantity, at least for the next decade in Asia.

About the study

The study analysed the demographic shift in 10 major Asian economies (the A-10: China, India, Indonesia, Japan, the Philippines, Vietnam, Thailand, Korea, Malaysia, and Taiwan).

What are the Key findings of the study?

a) The A-10 countries dominate global trade in manufactured goods but will see the working-age population decline soon, b) The number of workers can grow by 0.9 to 1.6% annually in India, Indonesia, and the Philippines, but shrink by 0.2 to 1% in China, Japan, Thailand, and South Korea, c) Asian economies higher labour force participation ratios (LFPR) are declining and are expected to continue falling in the near future. But this is due to people spending more years in education, d) Around 28% of the A-10 workforce is still deployed in agriculture. Reskilling farm workers for industrial work is undoubtedly challenging.

e) Parents with fewer children have the time and resources to invest more in their development. This not only affects their average level of education but also their physical development, f) The prevalence of underweight children has fallen meaningfully across countries in Asia, g) Average years of schooling has risen substantially across the region, rising by three to five years, with the best improvement in Indonesia and Vietnam. This is again driven by government and parent’s efforts.

h) Except for Japan, Korea, and Taiwan, A-10 economies still have high informality in their labour force. Informal workers tend to have lower productivity, and i) There is strong evidence of a rise in robotisation in ageing societies. There are industries like electronics assembly, garments and toys where significant automation is still difficult.

What is the significance of the study?

–Improvement in human capital can offset some of the declines in fertility: On average, people may have fewer children, but those are more likely to grow into stronger and more capable workers.

-The A-10 industrial labour supply may even remain in surplus. This is due to the younger economies (India, Indonesia, Philippines) which successfully deploying their workers.

What are the major recommendations of the study?

The main lesson for countries with younger populations like India is to focus on improving human capital, closing gaps in early-childhood nutrition and educational outcomes, and accelerating the process of economic formalisation.