The Dynamics of Asian Labour Markets

John Benson, Ying Zhu, John Benson, Ying Zhu

• Publisher: Routledge
• Year: 2011
• ISBN:
  9781136823909
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Gestión de recursos humanos

Asia has undergone rapid economic transformation over the past two decades. Despite its constant economic growth, the 1997-98 Asian financial crisis and the resulting surge in unemployment highlighted the vulnerability of national systems that base development solely on economic growth.

This book fills a major research gap by exploring the nature, dynamics and functioning of Asian labour markets in eight major Asian economies, including Japan, South Korea, Hong Kong, Singapore, China, Vietnam, India and Malaysia. It examines the type of labour markets that exist in Asia; how they have responded to globalisation; and how flexible they are to changing social and economic conditions. The book analyses how the current transformation has impacted on the key parties, such as employers, employees, trade unions, governments, organisations and society as a whole, and considers the likely future trends and developments in Asian labour markets.

1	Labour markets in Asia
	Globalization and transition
	John Benson and Ying Zhu

Introduction and key questions

Asia has undergone a rapid transformation over the past few decades as countries in the region have embraced the processes of globalization and have sought to develop more market-based economies. Foreign capital has flowed into the region and trade amongst Asian countries – and between Asia and the rest of the world – has substantially increased. The resultant industrialization has led to an exodus from rural areas and agriculture, and a move to urban areas in search of work in the growing industrial sectors. The ensuing economic growth has attracted considerable attention and has resulted in a significant volume of research being undertaken in an attempt to explain the rapid growth of Asian countries, and to assess the impact of this growth on workers and society (see, for example, World Bank 1993, 1995; Leipziger 1997; Muqtada and Basu 1997).

This economic growth has led to improvements in the quality of life for many Asian workers, as well as important changes to the nature of work and employment. However, while Asia’s economic boom appeared relentless, the 1997–98 Asian financial crisis showed that economies which have fully embraced globalization are in fact quite vulnerable to sudden downturns (see McLeod and Garnaut 1998). The resultant unemployment, and the social consequences of this unemployment in the Asian economies (see Benson and Zhu 2005), demonstrated the inherent weaknesses of the global economic system and the negative impacts of a development approach based solely on economic growth. The events of the 1990s were not to be an exception, as a similar pattern of economic and social impact was again visible with the global financial crisis of 2008–09.

For workers in many of the Asian economies,¹ these crises highlighted employees’ vulnerability to events beyond their control. The lack of adequate legislative protection and institutional support systems in many Asian economies meant that trade unions were one of the few institutions capable of achieving some measure of equity and social justice (Rowley and Benson 2000). As demonstrated in Trade Unions in Asia (Benson and Zhu 2008), however, the degree of equity that can be achieved is dependent on the nature and trajectory of trade unionism in the various economies making up Asia, which is in turn dependent on a number of economic, political, and sociological considerations.

The way these economic, political, and sociological considerations affect work and employment within an economy depends to a large extent on the nature and structure of the labour markets that exist in that economy. These labour markets are in turn affected by, and will significantly influence, the key industrial relations actors, such as trade unions, employers, and government. Notwithstanding the importance of labour markets to the changes taking place in these economies, it is surprising that little research has been undertaken on the nature and functioning of Asian labour markets and how globalization has impacted on these markets over the past few decades.

Previous research provides little guidance as to how labour markets in Asia may have responded to economic conditions and globalization more generally, as the research has tended to focus on single economies (see, for example, Hamada and Kato 2007; Sundar 2008), and has not sought to locate its findings within the context of labour market developments in the wider Asian region, or to compare findings in Asian economies with the trajectory of labour market developments in advanced industrial economies. However, some notable, albeit limited, exceptions do stand out, such as the work by Strath (1996) on the historical development of labour markets in Germany, Sweden, Britain, and Japan, the work by Cooney, Lindsey, Mitchell, and Zhu (2002) on labour market regulation in East Asia, and the more recent work by Corbett, Daly, Matsushige, and Taylor (2009) on labour market reform in Japan and Australia. The paucity of research has meant that our understanding of the overall dynamics of Asian labour markets has been limited. In addition, given the speed of change in Asia, much of the earlier research may now be out of date.

This volume will therefore fill this research gap by exploring the dynamics of Asian labour markets in a cross-section of Asian economies. Four key questions will underpin the research. First, what types of labour markets exist in Asia, and how have these markets responded to globalization? Second, what are the major institutions of the labour market, and how have changes to the labour markets impacted on the key parties – namely employers, workers, and trade unions – and on the state? Third, how flexible are Asian labour markets to the changing social and economic conditions in Asia? Fourth, what are the likely future trends and developments in Asian labour markets, and how have these changes impacted on workers, organizations and society?

By addressing these questions, we believe this book can make an important contribution to the existing literature, and may well contribute to a reassessment of some labour market theories. However, to address these questions in detail across a variety of Asian economies would clearly be beyond the expertise of any one researcher, so we have brought together leading researchers on Asia to prepare individual case studies. To ensure that there is consistency between chapters and that the key issues are addressed, we commence the volume with a chapter by Howard Gospel (Chapter 2), which provides the broad framework for the ensuing chapters. Importantly, Chapter 2 sets out in a holistic manner the issues and considerations that need to be taken into account when attempting to understand and assess the operations of individual labour markets and the likely future trends and developments. Readers are therefore advised to start with Chapter 2 before consulting any of the chapters focussing on specific economies.

Structure and framework

Labour markets develop over time and are influenced by a variety of factors, including the processes of industrialization and the particular characteristics of the society and culture. To accommodate these differences, we break down much of our analysis in the final chapter by the broad categories of developed and developing economies. This informed our choice of the eight Asian economies chosen as case studies to investigate the questions underpinning this book. One proxy for the level of development is the distribution of employment between the agricultural, industrial, and service sectors. Where employment in the agricultural sector is low, it can be reasonably assumed that the level of industrialization and economic development is higher. The economies that were chosen, and the distribution of employment in each economy across the three sectors, are presented in Table 1.1.

Table 1.1 Employment by sector in the economies studied, 2008 (%)

	Share of employment
Economy	Agriculture	Industry	Services
Japan	4.2	27.3	67.2
South Korea	7.2	17.4	75.4
Singapore	0.0	27.8	72.2
Hong Kong^*	0.7	4.6	94.7
China	45.0	23.0	32.0
India	52.1	13.9	34.0
Vietnam	55.6	18.9	25.5
Malaysia	14.4	28.2	57.4

Sources: see chapters 3–10

* Figure is for 2009

Of the eight economies selected, four were classified as ‘developed’ – Japan, South Korea, Singapore, and Hong Kong – while the remaining four – China, Vietnam, India, and Malaysia² – were considered developing economies. In the developed economies, the search for improved efficiency and profitability has meant that many companies have invested heavily in offshore production facilities, a trend that has served to undermine the nature of domestic labour markets and the institutions serving those markets. In contrast, in developing economies, the shift from agricultural pursuits to manufacturing has led to the transformation of labour markets from a more controlled and protected internal structure towards a more flexible and less secure external labour market. It is thus possible to view the dynamics of Asian labour markets as being underpinned by a fundamental choice between control and flexibility.

In the developed economies, the sectoral shift towards services and knowledge work has meant a decline in manufacturing, the traditional private sector base for permanent full-time employment. A noticeable shift towards more peripheral forms of employment can also be seen in the developed economies. Nevertheless, institutions and regulations have been developed in these economies to guide employment and regulate labour markets, and a degree of legislative protection and trade union support for workers exists. In developing economies, on the other hand, the shift from agricultural pursuits to manufacturing, and the vulnerability of new workers in the burgeoning production sector, means that the influence of trade unions has been constrained, labour market institutions and regulations remain poorly developed, and little support is provided to those workers displaced by the changes.

Whilst sectoral employment is a useful way to categorize the eight economies, the economic health of these economies over the past decade or two has varied significantly and cuts across the developed–developing divide. As can be seen from Table 1.2, the three fastest growing economies over this period – China, Vietnam, and India – are all developing economies, well ahead of the developed economies of Japan and Hong Kong, which performed much less well. Moreover, while Singapore and Malaysia experienced relatively low economic growth, they had the lowest levels of unemployment. This suggests that the relationship between growth and unemployment may well be moderated by the sectoral shifts taking place in employment as economies move from an agricultural base to a more industrial and service structure.

Table 1.2 Average real GDP growth and unemployment rates in the economies studied, 1996–2005 (%)

Economy	Real GDP growth	Unemployment
Japan	1.3	4.5
South Korea	4.6	3.9
Singapore	5.5	2.7
Hong Kong^*	4.2	5.5
China	8.5	4.0
India^**	5.6	8.3
Vietnam^**	8.7	2.2
Malaysia	4.7	3.2

Sources: see chapters 3–10

* Figure is for 2000–09

** Figure is for 2002–07

Notwithstanding these sectoral and economic classifications, each of the eight economies considered in this book has a different development trajectory, and the history of each economy, as well as their respective governments’ attitudes to the key institutions of the labour market, such as trade unions, has varied considerably. The breadth of this difference means that the economies studied in this volume represent the range of Asian economies that have undertaken, or are going through, significant economic restructuring and transition. Many of the economies have had periods of foreign occupation, and some have maintained the institutions that were established during these times. Indeed, with the exception of China and Vietnam, East Asian states ‘have adopted, in broad outline at least, systems of labour law that reflect the form and content of the systems of Western countries’ (Cooney et al. 2002: 3). The unique set of conditions that underpins the political, social, and economic systems of each of the economies studied has, however, strongly influenced the way Western systems have been adopted, and is important to understanding the development of each economy’s labour markets and the way these markets are now being transformed.

The structure adopted for the analysis of each case study economy consists of six sections. Each of the case studies commences with a brief introduction providing relevant background information. This is followed by an overview of the economic and social context of the economy, allowing the reader to become familiar with its economic and social history and the overall nature of employment. The third section of each chapter considers the types of labour markets present in the economy and discusses these in terms of the dichotomies of formal and informal, primary and secondary, and internal and external markets. This is then followed by a section that explores the major institutions of the labour markets and the way in which they are managed, particularly in terms of human resource management (HRM) practices, trade unions, and the state. The fifth section of each chapter then attempts to assess the flexibility of labour markets, as a lack of flexibility is often considered a barrier to improved productivity and competitiveness. Lastly, the final section of each chapter considers the future trends and developments in labour markets. This standardized format also extends to the inclusion of a common table in each chapter providing basic statistics on each economy. However, we did not want to be overly prescriptive, and have allowed some chapters to make small variations to the standard format.

Given that the objective of this book was to contribute to a greater understanding of labour markets in Asia, we felt it necessary to begin with a conceptual chapter that would introduce the key issues as well as provide some comparisons with Western labour markets. Chapter 2 therefore provides the justification for the framework outlined above, as well as providing links with the major literature on labour markets, drawn from labour market analysis in advanced countries and the theories and broad insights that have been derived from such analysis. However, as Gospel points out in his chapter, the intention ‘is not to impute Western models or trajectories for these countries, but rather to suggest a basis of ideas for comparisons’. Gospel notes that a comparative exercise has both advantages and pitfalls, and that above all ‘we should be aware of the nationalist ...