Wages And Labor Shortages Put Pressure On Asian Business

Posted on Feb 10 2015 - 7:02am by Andrew Lisa

Asia

Asia may just be the most exciting region in the business world heading into 2015 – which is the first real year of global economic recovery, by some estimations. Major players such as Japan and China are undergoing fundamental changes, a regional trade agreement goes into effect, and emerging markets such as Cambodia, Indonesia and Singapore are all caught in the tide of regional economic shift. No sector will be spared the ripple effect – certainly not the labor market, which is more volatile and fragile in some Asian countries than anywhere else in the world.

Japan: Already Tight Labor Market Faces Shrinking Economy

Japan has one of the tightest labor markets in the world. It is also home to an economy whose recent constriction has some economists worried. Japan’s workforce is getting increasingly younger, and the structure of their economy is shifting from manufacturing to service.

One in three Japanese companies are not meeting their recruiting targets, regardless of industry, but there are some caveats. The smaller the business, the more difficult recruiting becomes. But the heaviest pressure is being placed on the retail and food-service sectors, with the least-desirable positions becoming nearly impossible to fill, even when they come with a salary of twice the minimum wage.

Japan’s situation is exacerbated by a low fertility rate, a long life expectancy and a working-age demographic that is rapidly shrinking.

Highly Educated Singapore Faces Shortage of Highly Skilled Workers

The article “Singapore Is Facing Wage Pressures And Shortages In High Skill Jobs/Industries” cites the Hays Global Skills Index in reporting that employers in Singapore are staring down a tight labor market. The report finds that Singapore is second only to Hong Kong in educational performance.

The result is that wages are rising much faster for high-skill jobs than for low-skill positions. The same holds true for people – wages are rising for high-skill employees much more quickly than they are for low-skilled workers. In other words, employers feeling the most pressure are the ones seeking highly skilled candidates for highly skilled jobs.

The shortage of specialty candidates is so acute in some industries that many employers are bringing in overseas candidates to bridge local talent gaps. The industries facing the heaviest pressure are:

  • Life sciences
  • Engineering
  • Technology

Thailand: Budding Neighbors Siphon From Domestic Workforce

Thailand is in a neighborhood on the rise. Myanmar, Cambodia and Laos are all experiencing dramatic economic growth and expansion, and the increased gravitational pull from their booming markets is drawing some of the most qualified workers from Thailand. This is putting extraordinary pressure on Thailand to hire foreign workers to fill the gap.

In some areas of the seafood industry, foreign workers outnumber Thais by five to one. In some provinces, foreigners account for a full 90 percent of fishing crews. 80 percent of all construction jobs are filled by foreign nationals, and the apparel, food processing and farming industries rely heavily on imported labor, as well. Not only are labor costs rising, but Thailand’s population is declining, putting an even greater long-term pinch on the domestic labor pool.

Indonesia: The ASEAN Effect

2015 ushers in the era of a tariff-busting trade bloc agreement by the Association of Southeast Asian Nations (ASEAN). ASEAN may spell trouble on the horizon for Indonesia, which is already suffering from a surplus of low-quality workers (nearly half have only an elementary school education), an influx of expatriates, high unemployment and few job opportunities. With skilled, competent manpower at such a high premium, experts fear that ASEAN could render Indonesia’s wealth of natural resources irrelevant in the country’s bid to stay afloat economically.

China: Is a 2015 Labor Shortage Inevitable?

China’s robust industrial sector still makes it “the factory of the world.” The foundation of China’s manufacturing might is built on a 269-million strong migrant workforce, which has enjoyed double-digit wage growth for the last four years. In 2013 alone, wages grew by nearly 14 percent – twice the growth rate of China’s GDP.

With 800 million workers, China has the biggest workforce in the world – nearly double that of the United States, Japan and the European Union combined. The availability of cheap, plentiful Chinese labor drives down global interest rates, as well as global inflation rates. As far as global economic influencers go, the average Chinese wage is as or more important than the value of the dollar or the price of oil.

As wages grow in China, labor shortages grow right along with them. This is coupled with China’s state-enforced low birth rate. China is rapidly approaching the end of its labor surplus, which will force businesses to rely more on technology than labor to remain competitive or force factories to flee to neighboring countries with relatively stagnant wages. One unexpected side effect is that a newly empowered class of consumers could emerge, as low-skill workers now have money to spend.

In China, a surplus of cheap labor that once seemed endless is, indeed, coming to an end. Singapore is witnessing a drought of the most highly skilled workers for the most sophisticated positions. Thailand’s workforce is being stretched thin by increasingly competitive neighbors, Japan’s economy is receding, along with its workforce, while Indonesia is bracing for a new regional alliance. No one can predict the coming year, but all eyes are on the Asian job market.

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Andrew Lisa is a freelance writer living in Los Angeles. He writes about small business management and offers budget help and software reviews.