Catalog

Shortages at the sharp end

The previous sections have given a bird's-eye view of the skills gap in developing Asia. But how is the effect felt "on the ground," where shortages above all represent a practical problem plaguing the everyday operations and investment plans of Asian companies? It is helpful to listen to the voice of corporate Asia to get a feel for the dimensions and depth of the impact. That voice suggests that it is the highly specialized, professional occupations that lie at the heart of Asia's skills shortage.

Three firm-level surveys that pick up this voice have been carried out in the last couple of years, two by the Economist Intelligence Unit (EIU) and one by the World Bank. The surveys had the broad aim of identifying the major obstacles to doing business in the region, and provide a partial—but revealing—profile.

Asia Business Outlook Survey 2007

The EIU carried out its first Asia Business Outlook Survey in December 2006 and January 2007. The survey aimed to identify companies' performance, business prospects, and key challenges. The respondents were senior executives of 241 member companies of the EIU's Corporate Network in Asia, in seven different industries: about 20% of respondents were in chemicals/pharmaceuticals; 20% in other services; 18% in other industrial sectors; 12% in financial services; 12% in professional services; 10% in ICT services; and 8% in electronics/engineering.

The respondents were asked to identify and rank their business concerns in three "regions" from a list of 13 major issues, ranging from terrorism to inadequate physical infrastructure to shortage of qualified staff. The regions were PRC, India, and Southeast Asia (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam). The survey results indicated that the last issue was the top business concern among the responding firms in the PRC and Southeast Asia, and the fourth-greatest concern in India (Figures 2.2.1, 2.2.2, and 2.2.3). Two issues relating to staff shortages, namely wage inflation and staff turnover, also ranked high in all three regions. These results are consistent with the view that finding and keeping qualified workers is a daunting challenge for corporate Asia.

Firms in the same seven industries in the PRC and Southeast Asia were asked whether shortages of qualified staff represented a serious business issue. The survey results showed that no industry was immune from these problems (Figures 2.2.4 and 2.2.5), suggesting that constraints cut across sectors as well as countries.

Asia Business Outlook Survey 2008

The EIU's second Asia Business Outlook Survey was conducted in December 2007. In addition to many of the earlier questions, this survey asked firms how much wages had risen during 2007 for different types of workers. A clear pattern emerged across all three regions: specialist workers experienced the biggest pay increase and unskilled workers the lowest (Figure 2.2.6). Overall, these data lend further support to the notion that Asia's labor gap is more pronounced in high-skill occupations. In addition to suggesting possible shortages, these findings are consistent with technological change that favors productivity gains by skilled workers.

Firms were also asked whether shortages of particular types of workers constituted a serious business constraint. Again, a clear pattern emerged (Figures 2.2.7, 2.2.8, and 2.2.9): staff shortages were a much bigger problem among senior managers, middle managers, and specialist professionals than among skilled factory workers and unskilled workers. The point bears repeating: Asia is suffering from a shortage of skills, not a shortage of workers.

World Bank Enterprise Surveys

World Bank Enterprise Surveys (WBESs) collect firm-level data on the business environment, on various business obstacles as perceived by firms, and on some productivity measures. They are an integral component of the World Bank's Investment Climate Survey research program, which seeks to assess the investment climate and identify significant firm-level constraints to investment. The WBESs cover manufacturing firms mainly and certain services subsectors such as ICT and tourism. Sample sizes for recent WBESs range from 250 to 1,500 firms. First conducted in 2002, the surveys now cover slightly more than 100 countries, including PRC, India, Malaysia, and Thailand.

In the case of the PRC, separate WBESs were carried out for manufacturing and services, both in 2002. Manufacturing firms perceive inadequate skills and education of workers to be the fourth most serious obstacle to doing business, and services, third, out of 17 potential obstacles (Figures 2.2.10 and 2.2.11).

WBESs of Indian manufacturing firms were carried out in 2002 and 2005. The results suggest that, although skills shortages are a significant business constraint for manufacturing in India, it is a less pressing issue than in the PRC (Figures 2.2.12 and 2.2.13). The results of the 2006 WBES for India's ICT sector confirm that skills shortages are less severe in India than in the PRC, not only in manufacturing but also in services (Figure 2.2.14). These findings broadly corroborate those in the EIU surveys.

The 2006 WBES of India's ICT sector also provides some other information relevant to skills diagnostics. Over the period 2003–2006, nominal wages rose by 30% or more for all types of ICT workers, providing indirect evidence of a skills shortage in ICT (Figure 2.2.15). Survey results also indicate that Indian ICT firms are experiencing a widespread shortage of workers with the required skills (Figure 2.2.16). Yet as filling vacancies does not pose a major challenge for Indian ICT firms (Figure 2.2.17), the evidence of a skills shortage in this sector is mixed.

WBESs were carried out for manufacturing in Malaysia and Thailand in 2003 and 2004, respectively. Manufacturers in Malaysia pointed to inadequate skills and education of workers as the top business obstacle, while those in Thailand put it second. The results support the view that in both these middle-income developing countries a lack of skills is impeding the migration of industry into more technologically sophisticated industries (Figures 2.2.18 and 2.2.19).

WBES data also provide some information about whether skills shortages are limited to a few specific types of firms—e.g., large, foreign multinationals—or are of a more general nature. Survey respondents are classified in terms of foreign versus domestic ownership, size (as measured by number of employees), and whether they are exporters or not. The results of the 2002 WBES of PRC manufacturing suggest that skills constraints affect all types of firms (Figure 2.2.20).