12 November 2014

Asia's precariat

The overwhelming majority of Asian working men and women have "precarious" jobs -- short-term, without a formal contract, no job security or social security.

Economies are booming. Poverty is falling. Incomes are rising. Unemployment is low. This is one side of the Asian economic story.

But there is another side of the story, as well documented by Professor Rene E. Ofreneo of the Philippines.

The gap between rich and poor is rapidly widening. Workers share of national income has declined sharply, especially in China, despite rising productivity. Most who have escaped the clutches of extreme poverty, continue to suffer from other widespread deprivations. They also remain vulnerable to the slightest economic, social or political shock.

Unemployment may be low. With Asia's weak social safety nets, people have to eke out a living one way or another. But the overwhelming majority of Asian working men and women have "precarious" jobs -- short-term, without a formal contract, no job security or social security. This can lead to exploitation through low wages, long and variable working hours, no overtime pay, no benefits, and above all no redress against abuses.

This is Asia's "precariat", as described by political scientist Guy Standing. And this why the International Labour Organisation declared 2006-2015 the Asian Decent Work Decade. But progress towards this honorable aspiration has been meager.

For example, many Chinese workers, employed by Foxconn, assemble iPods, iPhones and iPhones for Western consumers. But sadly they cannot afford to buy one for themselves. Wise words many decades ago by Mahatma Gandhi still ring true today: "There is enough for everybody's need, but not enough for anybody's greed".

Asia's precariat is a sea of informals, migrants and casuals, writes Professor Ofreneo. The "informal sector" of the economy is composed of enterprises which are neither registered nor regulated, and whose workers have no contract or rights. Minimum wage laws, collective bargaining, and health and safety standards are unheard of in the informal economy.

Informal employment in the manufacturing and service sectors (the economy's most advanced sectors) accounts for 67% of total employment in emerging Asia, according to the Asian Development Bank. Informal workers range from over 80% of total in Bangladesh and India, to 50-70% for countries like the Philippines, Thailand, China, Pakistan and Indonesia, and down to around 10% for Hong Kong and Singapore.

There has been virtually no decline in the share of informal employment over the past two decades, despite rapid economic growth. Asia's failure to generate more high quality employment is a product of its brand of capitalism. Asian economic development has been driven by the shift of workers out of low-productivity agriculture into low-cost manufacturing created by export-led growth.

Due to the virtual unlimited supply of low-skilled labor, wages and job quality have been kept relatively low, and the enterprises leading these new manufacturing activities have been able to make large profits. Globalization had added to the challenge, as the pressure to remain competitive has created even greater incentives to keep the labor costs low, and employment relations informal.

Who are Asia's precariat?

Workers in Asia's vast precarious informal economy include those in small factories, backyard mechanics, home-based producers, domestic servants, most agricultural workers, ambulant peddlers, street vendors and hawkers, casual construction workers and so on.

"There are success stories about economic empowerment and entrepreneurship among the informals", writes Professor Ofreneo. "However, these are overwhelmed by the numerous sad stories about abuses, hardships and difficulties of worker survival in the harsh and unprotected world of the informals".

Globalization can foster more informal work. Multinational and large domestic companies, such as in the garments industry, can outsource production to micro- and home-based operations.

Migrants are another group that makes up Asia's precariat. While most Asian low-skilled migrants travel outside the region, especially to the Middle East, there are large numbers of undocumented workers crossing Asia's porous borders, like the India-Bangladesh-Pakistan, China-Hong Kong, China-Indochina, Thailand-Myanmar, Indonesia-Malaysia and Malaysia-Singapore corridors.

Most of these migrants cross borders without any legal papers or documents, and end up not only as unregistered, but also as highly vulnerable workers in the countries of destination. For example, stories abound of how migrants from Myanmar's Rohingya tribes are abused in Thailand and Bangladesh, and how Indonesian plantation workers suffer in Malaysia. Even those migrants who enter countries legally, are often victims of abuses like high recruitment and placement fees, contract substitution, employer substitution, contract deviations, outright trafficking, and non-existent job placements.

Another group of the precariat is the large floating populations of internal migrants, especially in large economies like China and India. They flock to the industrial areas from the rural areas, picking up odd and casual jobs at pitifully low wages.

Most tragically, Asia accounts for 56% of the world's 21 million people who are made to work against their free will ("forced labor"), coerced by their recruiter or employer, for example through violence or threats of violence, or by more subtle means such as accumulated debt, retention of identity papers or threats of denunciation to immigration authorities.

Asia is also home to more working children than any other region in the world. An estimated 122 million Asian children aged 5-14 years are compelled to work for their survival. Millions are not enrolled in school at all. Although there has been progress in reducing child labor in many countries in the region, the problem persists. For example, the ILO has found working children in sectors like domestic labor, seafood processing, garment and footwear factories, mining and quarrying, pyrotechnics, rag-picking and scavenging, rubber and sugar-cane plantations, entertainment and other services.

Will economic development lead to a reduction in Asia's precariat?

It would be nice to think that economic development will lead to a reduction in Asia's precariat. But the reality is, as mentioned before, that there has been virtually no decline in emerging Asia's precariat population over these past two decades. Moreover, Japan has seen its widely admired system of life-time employment fritter away, since a financial crisis befell the country over two decades ago.

In the face of today's globally competitive markets, Japanese enterprises value flexibility more than loyalty and reliability. Some 40% of Japanese workers now have "irregular contracts". They are mainly part-timers, or dispatched workers who are under contract to a dispatching agency. Women account for some two-thirds of Japan's irregular workers. Life-time employment contracts are now reserved for a much smaller number of very highly qualified people. In Korea, the shift to irregular employment has been even more dramatic than in Japan.

Another disturbing trend is that each successive financial crisis, from the 1997 Asian Financial Crisis to the 2008 Global Financial Crisis, has seen a rise in precarious employment in Asia -- even in the US and other Western countries. Workers with regular jobs get laid off when crisis strikes, and are re-hired on irregular contracts when the economy recovers.

Large companies may believe that having a precariat underclass will help them internationally remain competitive. But it is also a blind alley. Typically, precariat workers receive much less training than those with a regular job situation. Not surprisingly, precariat workers have much lower productivity.

As I have seem with my eyes in Japan, precariat workers have little incentive to take initiatives, accept responsibility or make suggestions. Their best work strategy is to play safe, follow orders and hope to keep their job contract for as long as possible. This syndrome cuts off a major source of potential innovation and efficiency improvements -- workers on the factory and office floor can be an important source of incremental innovation.

As economies exhaust their supplies of surplus labor, economic growth must switch from being a "cheap labor" model to being human capital and innovation driven. A large precariat is anathema to that goal, and could ultimately become a brake on Asia's progress over the medium term.


John West
Executive Director
Asian Century Institute
Tags: asia, informal economy, informal workers, precariat, poverty, inequality

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