Catalog

Structure and quality of employment

Finding decent and productive jobs is a formidable challenge for workers in general, but it is a particularly serious challenge for younger workers, and especially for young women. The difference between young male and female employment ratios in India is the highest among the four countries, at around 30 percentage points (Figure 2.1.12), though the gap is large in Indonesia and the Philippines as well. Underemployment, commonly defined as underutilization of labor time of workers—for example, due to seasonality in work or availability for alternative work—is also of acute concern as is the quality of jobs that the young do. Of total workers, about 5% in India, some 20% in the Philippines, and 3.5% in Thailand are reportedly underemployed.

Sector distribution of young workers

An idea of where the potential for future youth employment may lie is given by current patterns and trends in the structure of youth employment. Over the past 15 years, youth employment has in general shifted from agriculture toward manufacturing and services (Figures 2.1.13a–c). As incomes rise, it is natural to expect a decrease in the contribution of agriculture to GDP and hence to employment. But despite the retreat from agriculture, the sector remains a significant employer of young workers.

Slow agricultural productivity growth contributes to the problems faced by young workers. Teenagers in particular are dependent on agricultural employment. This is most probably a consequence of lower education participation in rural areas as well as lower skills requirements for agricultural occupations. High levels of teenage participation in the sector probably also reflects slower job and income growth in the urban sector following Asia's financial crisis as well as the "return to the land" survival strategy that some young migrants were compelled to follow.

Industrial and services sectors seem to employ a larger share of young workers in their prime age (20–29 years). In India and Thailand, industrial employment accounts for a higher proportion of total youth employment in the 2000s than in the 1990s. But in Indonesia and the Philippines, the movement out of agriculture has generally been toward services rather than industry. It is notable that in both countries, growth of the industry sector has been hobbled by stagnant productivity (ADB 2007a, p. 274).

In all four countries, employment opportunities for young workers have grown most rapidly in services (Figure 2.1.13c). The sector has drawn labor out of agriculture, but in Indonesia and the Philippines, the share of services has grown at the expense of industry, too. Though segments of services employment are highly productive, most jobs in the services sector are confined to low-wage, traditional occupations such as those in retail sales, low-end real estate, hotels, and restaurants. The quality of these jobs is a matter of concern. More than half of youth employment in these four countries, especially in services, is informal, characterized by low wages, long hours, poor working conditions, and lack of job security.

Incidence of informal employment

The incidence of informal sector employment is an important indicator of job quality. Typically, its importance rises during growth slowdowns as self-employment rises. Conventionally, "informal sector" or "informal economy" employment captures employment that is not registered for legal purposes.³ This covers employment not just in firms that are not registered for tax purposes, but also "unregistered" employment in registered firms.

In many lower-income countries, a pragmatic approach to measurement is adopted, principally on the basis of firm size and, to some extent, the employment relation. In this chapter, informal sector employment covers the self-employed, as well as unpaid and paid family workers, and casual (seasonal, nonpermanent, or nonregular) workers. Formal sector workers are all regular salaried and wage workers.

Figure 2.1.14 depicts data on the incidence of informal employment by age and gender. Because of definitional differences, not too much weight should be placed on the cross-country comparison of absolute numbers. At a broad level, informal employment is generally higher among women than men. In general, both adult and young workers are becoming more formalized. But the trend is more noticeable for the latter. This trend could be explained by the preference of formal sector employers for young workers who tend to be relatively more educated, cheaper, and more flexible than adult workers.

Vulnerability in jobs

Though employment of any kind generates income, it does not always guarantee an escape from poverty. Young people without a job or on low wages remain at risk of poverty (Figure 2.1.15). ILO estimates that in 2007, 6–8 out of 10 workers in Asia were in vulnerable employment, without formal employment arrangements or social security protection. Extreme working poverty is a serious problem. The majority of young people are in the informal sector and engaged in casual jobs. Paid and self-employed workers who earn less than $2 a day and unpaid family workers account for a significant proportion of young workers. In 2005, approximately 25% of the world's young population were living below the $2-a-day poverty line (ILO 2006). Those who cannot find formal sector jobs and face the prospect of extended spells of unemployment often find self-employment or "forced entrepreneurship" as the only option of a survival strategy. Such workers are often poorly educated. Though entrepreneurship can be associated with independence, with flexibility of work hours, and with better job satisfaction, this is rarely the case for young informal workers.

Education, skills, experience, and wages

Young people often reach working age without acquiring basic skills, including literacy and numeracy, which are vital to improve their employment prospects. A large number of children unable to afford the cost of supplies, uniforms, and other expenses drop out of primary school every year, and often take up work to supplement family income. Several studies have identified the disproportionately high direct and indirect costs of education for low-income households as the main cause of early schoolleaving (for example, World Bank 2003, Sziraczki and Reerink 2004).

Lack of education is a major reason why the poor in developing Asia often end up in informal sector jobs with pitiable working conditions. Education is a key determinant of decent employment opportunities for young people and an important factor influencing the long-run growth potential of the economy. But a large gap exists between education achievements of the poor and the nonpoor. Poverty creates barriers to education opportunities that can improve long-term income prospects. Traditional practice, culture, and institutions such as caste, community networks, the language spoken at home, or the education of parents often determine the type of school attended by children.

This in turn, may typecast them into low-paying traditional occupations. Munshi and Rosenzweig (2006) observe such dynamic economic inefficiency among low-caste working boys in India. These boys were deprived of higher returns from rapidly rising salaries in whitecollar jobs merely by having studied in a local-language school and not an English-medium school, binding them to the local-language network. Lack of access to finance and meager wealth also prevent lower-class children from joining more expensive English-medium schools.

Even among people with low education achievement, those who receive vocational training are likely to register lower joblessness rates. But the education systems do not adequately prepare young people for labor market entry. Vocational preparation is often postponed to senior secondary school. Labor market-oriented tertiary education accounts for only 25% of technical and vocational education-related enrollments (Adams 2007). Many technical and vocational education and training (TVET) institutions focus exclusively on traditionally male skills areas. The system of TVET is fragmented and supply driven. In India, only 1.4% of young people receive formal vocational training, 3.7% nonformal training, and 3.4% other training (TeamLease Services 2007). The Indonesian system suffers from a fragmented and supply-driven TVET system, and the Government has recently begun to develop a national qualifications framework, a keystone to the reform of the system. Generally, inadequate training leads to a mismatch in skills of young workers and the needs in the labor market. Skill shortages also constitute a key constraint to the operation and growth of businesses. In India, for example, only 30% of IT graduates are employable in the IT sector (TeamLease Services 2007).

An examination of returns to education for youths and adults throws some light on the growing difficulties that the young face. In Figure 2.1.16, nominal median wage rates in the four countries are plotted for young and older workers classified by education. Wages have increased over time. While median wages for young workers are generally below their adult counterparts for the same levels of education, there is not much difference in wage by age for those with only up to primary or middle schooling. However, as the levels of education rise beyond this, the gap between youth and adult wages widens. This may depict returns to the longer experience of adults at higher levels of education.

The data for Indonesia and Thailand also show that the median wages of young people and adults were almost identical for all levels of education in the 1990s, and in the Philippines the difference was small. The gaps that opened up in the subsequent decade may have been caused by the fact that young workers of all education levels bore the brunt of joblessness during the crisis and as a consequence lost valuable years of experience. Or it could mean that young workers accepted lower-paid jobs that did not equip them with the experience or skills commensurate with their education levels.

Another possible explanation for the widening gap is that the demand for general and occupation-specific skills has been rising in new jobs, which require teamwork and creativity (Lerman 1997). As employers come to attach greater importance to skills, they place lower weight on demographic characteristics such as race, gender, family background, or place of residence but reward well-educated and trained workers with higher wages. Higher wages and returns to education may have encouraged young people to stay in the education system longer.

Certainly, years of education have risen across the four countries. Expanded availability of more qualified workers relative to new jobs appropriate for their level of education may in turn have led to the employment of overqualified people in comparatively low-skilled tasks. Figure 2.1.17 confirms that in all four countries, the proportion of young employed people with education above middle school has shot up and those with only elementary education or less has fallen.

A comparison between young women and men shows that, except in Thailand, a gender bias exists in returns to higher education. Men and boys receive higher median wages than girls and women for given levels of education (Figure 2.1.18). This bias is most pronounced in India, followed by Indonesia and the Philippines. But the gap has narrowed between the two sampling periods, especially in Indonesia and the Philippines.