World Bank East Asia and Pacific Regional Report – serie

The unprecedented progress of East Asia Pacific is a triumph of working people. Countries that were low-income a generation ago successfully integrated into the global value chain, exploiting their labour-cost advantage. In 1990, the region held about one-third of the world's labour force. Leveraging this comparative advantage, the share of global GDP of emerging economies in East Asia Pacific grew from 7 percent in 1992 to 17 percent in 2011. Yet the region now finds itself at a critical juncture. Work and its contribution to growth and well-being can no longer be taken for granted. Labour's share of national income has been declining across most of the region. The challenges range from high youth inactivity and rising inequality to binding skills shortages and lagging infrastructure.A key underlying issue is pervasive and persistent economic informality, despite rapid urbanization, which constrains innovation and productivity, limits the tax base, and increases household vulnerability to shocks. Informality is a consequence of both strict labour regulations and limited enforcement capacity. In several countries, de jure employment regulations are more stringent than in many parts of southern Europe. Even labour regulations set at reasonable levels but poorly implemented can exacerbate the market failures they were designed to overcome. Aggravating these failures further are under-investment in transportation infrastructure and poor urban planning, limited access to finance for investment and growth, and the failure of the skills-supply system to keep up with the changing demands of modern market economies.East Asia Pacific At Work argues that governments in the region will have to actively help markets sustain the well-being that people can expect from work. The appropriate policy responses to these challenges are to ensure macroeconomic stability and a regulatory framework that encourages the vitality and growth of, in particular, small- and medium-size enterprises, where most people in the region work. The countries that are still mostly agrarian will need to focus more on raising agricultural productivity, a vital but often overlooked step in the process of structural transformation. In urbanizing countries, effective urban planning becomes critical, and better management and functioning of land markets, transportation infrastructure, and delivery of services will loosen constraints on the demand for labour and human capital. The most important investment Pacific island countries can make is to provide their young people with the human capital needed to succeed abroad as migrant workers. And across the region, it is critical to 'formalize' more work, thereby increasing the coverage of essential social protection and sustaining productivity. To this end, policies should encourage the mobility of labour and human capital, and not favour some forms of employment–for example, full-time wage employment in manufacturing–over others, either implicitly or explicitly. Policies to increase growth and well-being from employment should instead reflect and support the dynamism and diversity of work across the region.

Developing East Asia has shown how rapid and broadly shared growth can lift millions out of poverty. But inclusive growth is not assured. This book is about how countries in the region can confront challenges such as a growing concentration of income and wealth, limited access to social services, and rapid aging to achieve inclusive growth.

East Asia's success over the past half century has been built on a combination of policies that fostered outward-oriented labour-intensive growth while building basic human capital and providing sound economic governance. This model of “growth with equity” has delivered rapid and sustained growth that has lifted the region's developing countries into middle-income status while moving hundreds of millions out of poverty and into economic security.But as the world and the countries themselves change, there are now growing concerns about the efficacy of this East Asian development model in supporting countries' transitions from middle- to high-income status. Changes in technology and trade are occurring rapidly, but at an uncertain pace and with consequences for growth and jobs that are not always easy to anticipate. With greater prosperity also have come rising societal expectations for higher-quality services and greater voice and accountability. There are concerns, therefore, that these changes could slow productivity growth and hinder economic inclusion in the region.A Resurgent East Asia is about how the countries of the region can navigate the changes in the world and at home to sustain their progress on growth and inclusion into the next decade. Specifically, how can they revive productivity growth, ensure inclusive development, and improve governance to achieve even greater and more broadly shared prosperity?