Globally, the total labour force is around 3.7 billion people. Asia, with total labour force of around 2.1 billion people, accounts for about three-fifths of the global labour force. East Asia has the largest labour forces (1.13 billion), followed by South Asia (around 650 million), and South East Asia (350 million).
Asian labour markets face several challenges: (i) a massive influx of young people seeking jobs, (ii) varying labour force participation rates (LFPRs), (iii) persistently high informal employment, (iv) high levels of vulnerable employment, (v) high unemployment and underemployment, and (vi) low labour productivity.
First, there is a big number of young people seeking jobs.Young people aged 15-29 years account for one-quarter of the population in Asia and the Pacific. East Asia accounts for around 18 per cent of the total population, Southeast Asia around one-quarter, and South Asia around 28 per cent of the total population.
Millions of young people enter the labour market annually, putting enormous pressure on the tech and service sectors. This is especially true in South and Southeast Asia, leading to high youth unemployment and underemployment. There is limited capacity of the economy to create adequate number of jobs in the formal sector. Educational systems often fail to match the requirements of the formal job market, leaving young people under qualified for available roles. Many available jobs are in the informal sector, thereby forcing graduates to take low-paying jobs that do not match their education or training.
Second, the average LFPRs in Asia is around 65 per cent; however, it varies across the region due to economic condition. East Asia, highly industrialised economies, has higher average LFPRs of around 70 per cent, with little variation among the countries in the region. Southeast Asia, with robust manufacturing and agricultural sectors, has average LFPR of around 67 per cent, varying between 64 per cent in the Philippines and around 80 per cent in Cambodia. South Asia has the lowest average LFPR in the region at around 55 per cent, ranging between 38 per cent in Afghanistan and around 58 per cent in Bangladesh and India.
Third, there is persistently high informal employment. Over 70 per cent of the labour force (and considerably higher at over 80 per cent in South Asian countries) are engaged in informal employment, not protected by national labour laws. The persistence of informality is higher among women, and in rural areas. It is often a means of economic survival due to limited number of formal sector jobs, thereby widening economic inequality between formal and informal workers. Workers in the informal sector are more prone to poverty and economic shocks. Further, the high persistence of informality can hinder overall economic development and poverty reduction efforts.
Fourth, there is widespread vulnerable employment, characterised by low-quality jobs without social protection. There are hidden labour vulnerabilities in East Asia like rising temporary work, and high under employment among youth and low-skilled workers. In Southeast Asia, vulnerable employment affects a large portion of the workforce. Vulnerable employment in South Asia affects nearly 70 per cent of the workforce, driven by massive informal sectors, low social protection, and high rates of young people who are not in employment, education, or training (NEET). Due to economic pressure, workers cannot afford to stay unemployed, forcing them into unstable employment.
Fifth, there is high unemployment and under-employment. The overall averages hover around 5 per cent, while the rates vary considerably across the region. East Asian countries have low unemployment rates; however, the rates are high in South and Southeast Asia.
Overall unemployment in East Asia ranges between 3 per cent in Japan and 7 per cent in South Korea. In South East Asia, it ranges between one per cent in Thailand and around 5 per cent in Indonesia. In South Asia, it ranges between 4 per cent in Bhutan, the Maldives and Sri Lanka and 14 per cent in Afghanistan.
Female unemployment in East Asia hovers at around 3 per cent. In South East Asia, it ranges between one percent in Thailand and 4 percent in Malaysia and the Philippines. In South Asia, it ranges between 4 percent in Bhutan and the Maldives and 12 per cent in Nepal and Pakistan.
Youth unemployment in East Asia varies between 3 per cent in South Korea and 16 per cent in China and Singapore. In South East Asia, it varies between 5 per cent in Thailand and 17 per cent in Indonesia. In South Asia, it varies between 10 percent in Bangladesh and 21 percent in Sri Lanka.
Those in the NEET category in East Asia ranges between 8 per cent in Japan and 18 per cent in South Korea. In South East Asia, it ranges between 10 percent in Vietnam and 19 percent in Indonesia. In South Asia, it ranges between 16 per cent in the Maldives and over 40 per cent in Afghanistan and Bangladesh.
More than un-employment, underemployment is a big problem in Asia, where around half a billion workers either have no jobs or are engaged in low-paying, informal jobs. Women disproportionately experience underemployment.
Despite rapidly rising education levels, the supply of graduates outpaces the creation of decent jobs. Not surprisingly, therefore, there is high youth unemployment and underemploymentin China and India.
Sixth, labour productivity in Asia varies widely by sub-region and sector. The efficiency in the manufacturing sectorin leading Asian countries is close to global standards, although the broader service sectors (like finance and business) lag behind.
Due to limited access to technology and training, the informal sector workers and those in vulnerable employment are less productive compared to those in the formal sector.
Labour productivity in East Asia has historically driven the rapid economic rise in Asia; however, it now faces a slowdown. Recent trends show sluggish gains within leading firms, pressures from trade protectionism, and challenges presented by automation and artificial intelligence.
Labour productivity in Southeast Asia varies widely. Singapore leads with high output per worker, while Vietnam, Thailand, Indonesia, and Malaysia experience steady growth driven by global supply chain integration, manufacturing, and digital adoption, although agricultural sectors lag behind. Further, rural and informal jobs show much lower output than modern urban industries.
Labour productivity in South Asia remains low compared to global standards, due largely to underemployment in agriculture, low female LFPR, gaps in health and education, and vulnerability to extreme weather.
A high percentage of surplus labour remains trapped in low-productivity agriculture or informal sectors rather than high-value manufacturing or tech. Health issues (like undernourishment) and variable educational quality adversely affect worker efficiency across the region.
POSSIBLE SOLUTIONS: East Asia is significantly ahead of other sub-regions across most critical socio-economic indicators. East Asia holds a predominant lead in structural wealth, human development, tech infrastructure, global electronics, advanced manufacturing and macro-stability. East Asia leads the broader region in the UN Human Development Index (HDI). Southeast Asia generally ranks ahead of South Asia in key human development and economic indicators, such as average per capita income and the HDI.
In Asia, labour market challenges are most acute in South Asia, being the relatively less developed in the region. South East Asia has relatively better socio-economic condition, and hence, the labour market challenges are less acute than in South Asia. East Asia, being the most developed in the region, faces labour market challenges, but to a considerably limited extent.
The socio-economic development is the key to adequately addressing the labour market challenges in Asia. There is need for substantial increase in overall investment, with a strong focus on the private sector, to be able to generate adequate number of decent jobs. There is need for greater investments in human capital (education, including advanced technical education--STEM), and health and nutrition. There is also need for structural reforms to enhancecompetition in the service sector and ease market barriers to boost efficient resource allocation. Foreign direct investment (FDI) and digital connectivity offer pathways for modern sectoral convergence in South Asia. There is need for policies aimed at attracting foreign firms that create stable local job opportunities. Further, streamlining market regulations to enable productive firms scale up and absorb workers smoothly is also necessary.
Former Professor and Chairman, Department of Economics, University of Dhaka, Professor Barkat-e-Khuda, PhD, also held senior positions in leading international organizations, including icddr,b. [email protected]
