Labor market and demographic scenarios for ASEAN countries (2010-35). Education, skill development, manpower needs, migration flows and economic growth

ASEAN countries have been moving at different speeds along the path of the so called Demographic transition and are at present at different stages of this complex process. As a consequence, starting in the very near future, some ASEAN countries will be affected by an increasing structural lack of labor supply, while in other a structural excess of labor supply will persist for at least 30-40 years. This situation has already contributed to divide ASEAN countries into two groups: departure countries and arrival countries. Data show that both departures and arrivals have been steadily increasing as well as labor mobility within ASEAN. Building on this demographic background, the paper proposes alternative labor market and demographic scenarios for the period 2010-35. The scenarios outline manpower needs, migration flows and population growth on the basis of the trends in WAP and alternative hypothesis on employment growth. The main conclusion is that the higher the rate of economic growth that will be attained by Singapore, Thailand, Malaysia, and Brunei (already relevant arrival countries), the higher their need of foreign labor. In fact, in a very near future the local labor supply of these countries will not be even sufficient to replace the workers that will leave for good the labor force due to retirement or death. In substance, the paper supports the idea that growing workers mobility within ASEAN countries will represent an unavoidable precondition for economic growth and social development. A survey of economic growth model brings us to support the idea that economic growth is the result of a process of technological upgrading, of diversification and structural change driven by the accumulation of capabilities, on one hand, and the transformation of the production structure, on the other. It is the knowledge base of a country that defines and limits the technologies a country can adopt, the production structure that may evolve, and therefore the possible paths to economic growth and social development. Speeding up economic growth and triggering successful catching up processes does require shifting production from low quality activities into “high quality activities”, to “jump” into new knowledge clusters. In order to do so a country also needs to drive the knowledge structure toward higher diversity and complexity, to endow its incoming labor force with new expertise and competences. The different levels of economic development reached by ASEAN countries have been fostered and reflect their different knowledge base. The percentage of people between 15-44 with secondary and tertiary education spans between the maximum of Singapore (91 per cent) and the minimum values that characterize Laos, Cambodia, and Vietnam (between 40 and 45 per cent). A more detailed analysis of the national educational attainments shows that beside Singapore -that has the world highest ranking in Industrial performance- only Malaysia and Indonesia have already shifted their production structure to high quality activities and new knowledge cluster or are ready to do so. The more polarized education structure of Thailand and possibly Myanmar suggest that these two countries have limited options to start the production of intermediate technology products, but could develop directly toward high technology sectors. In conclusion, the paper contends that in a very near future workers mobility within the ASEAN region will not be a choice, but a necessity imposed by demographic tendencies and economic growth. The pace of economic growth and the typology of development will determine the amount of labor force that will be needed and the competencies and skills that will be required by arrival countries. At the same time, the other ASEAN countries will be characterized by a structural excess of labor supply that will not be able to find a productive occupation in the national markets, since the rate of economic growth requested to absorb it will remain out of reach. It could be ASEAN goal to transform these weaknesses into strong points. The structural lack of labor supply that will affect Singapore, Thailand and, although in a lesser measure, Malaysia can be faced only in two ways: migration and delocalization of production. The second approach, although viable from an economic perspective, can provide only a very partial solution to the expansion of production, given its risks and serious political drawbacks. In this situation the papers proposes a series of policy options. In the first place, a correct migration policy can be based only upon a serious evaluation of the amount and typology of workers needed by arrival countries. The paper stresses the fact that the more developed economies do not need only skilled labor, but on the contrary -especially at the beginning of the migration process- they need mainly unskilled labor and only with time qualified workers and university graduates will become predominant. The other side of the coin is that the outflow of migrants presents both positive and negative aspects for departure countries. On one hand, it reduces the pressure on the labor market and provides remittances that could support productive investments. On the other hand, it depletes the knowledge structure and the capabilities of the departure countries because migrants are always, by definition, the most dynamic element of their societies. A correct approach to economic growth and catching up suggests that educational policies and industrial policies can play a fundamental role. In order to do so educational policies must be designed and implemented in relations to the training needs of both departures and arrival countries, while industrial policies should provide a production structure capable of promoting economic growth and a labor demand coherent with the exits from the educational system. More specifically, at national level, education and training policies should: 1) in the short run, provide a correct response to the local labor demand in terms of skills; 2) in the long run, endow the incoming generations with the knowledge and the skills necessary to move the national production structure toward higher quality products. Moreover, the educational policies of the departures countries should be coordinated also with the industrial policies of the arrival countries so that the structural excess of labor supply of departures countries will find productive employment or in the arrival countries or in their investment in departures countries. In order to face such complex set of task, ASEAN countries will need, as already clearly suggested by the last ALM Working Program, a Labor Market Information System providing comparable information on the main aspects of human resources management, from demography to education and vocational training, from macroeconomic to employment, unemployment and migration, together with a broad comparative view of their labor market legislation. Therefore, an extremely important objective of ASEAN could be the constitution of an ASEAN Labor Market Information System aimed to collects, store and analyze the data produced at the national level, better their quality, and promote their comparability. The paper proposes a second important measure that responds not only to principles of equity and competitiveness but could also foster economic growth and social development: the creation of an Employment Migration Fund. A migrant brings with him a set of capabilities that are the result not only of its personal investment, but also of the investment in education made by its country of origin. In substance, the arrival of a migrant corresponds for the production system of the receiving country to the free acquisition of a factor of production. This is obviously true only if and when the migrant worker is needed, i.e. his services are essential and do not have a substitute in the arrival country. The paper has strongly argued that this situation will exist and persist for at last four ASEAN countries and will affect a number of workers largely in excess of those “forecasted” by international Institutions. This aspect of migration has been largely overlooked by the literature because migrations are still predominantly explained from the supply side, migrants being represented as people running away from misery and deprivation or just looking for higher wages and a better life. This perspective has brought to the proposal, almost 40 years ago, of the so-called Bhagwati tax. If we abandon this point of view and more in tune with reality and empirical evidence we realize that many developed economies that have been affected already for long time by below replacement fertility do not have enough internally “produced” labor not only to expand, but even to keep the present level of production, then we have also to change our image of the migrants. The first obvious implication is that the arrival country should pay to the departure country for each migrant employed in a productive job a price proportional to the cost supported by the government of the country of origin for its education and training. The proposal is that these contributions be collected in an Education Migration Fund managed by ASEAN to be used only to improve the education and training system of member countries by intervening on the infrastructures, training the teachers, providing equal opportunities, and promoting gender equality, in coordination with the industrial and macroeconomic policies required to start effective catching up processes. This measure would not only respond to a principle of equity, eliminate market distortions deriving from the free acquisition of factors of production by arrival countries, but in the growth perspective we have introduced, it would also be beneficial to arrival countries by fostering the process of catching up of the weaker economies, increasing their level of income and therefore expanding the market for the products coming from the more developed neighbors.