The Importance of Wage Employment

March 19, 2015

The South Asian region has shown little or no increase in the percentage of workers engaged in wage employment during the past 15 years, and the region has a long way to go toward building a industrial and services-led economy and establishing a broad consumer base. 

 

Percentage of Working Age Populations in Wage Employment, 2000-2013

Source: ILO Global Wage Report: Asia Pacific Supplement

 

Data from the ILO show that the percentage of the working population engaged in wage employment has hovered at or around 20% since 2000, in contrast to East Asia and South East Asia, where wage employment has steadily increased. This is problematic for many reasons, chiefly:

 

  • South Asia has shown little structural progress away from agriculture into higher-value added sectors. Whether down to a failure of government policy or inhibiting business environments, economies in the South Asia region are showing no sign of replicating the success of countries in the East and South East Asia region, which have experienced rapid industrialisation and improved living standards. 

 

  • The majority of workers are either self-employed or work in the informal sector. Dependence on precarious employment, such as farm work and informal, unregulated labor means lack of income stability and social protection, thus inhibiting living standards and social mobility, and suppressing consumer demand.  

 

Insight such as this puts the onus squarely on leaders in the region to aggressively pursue reforms. To an extent, this will be hamstrung by political instability in the region, particularly in crisis-ridden states such as Pakistan.

 

However, it is in this light that the clamour for leadership from India, and particularly the recently elected Nahendra Modi, must be seen. He has taken over leadership of a country with a huge population that is crying out for reform and he must pursue an aggressive reform program to get more of the citizenry into secure employment and drive widespread growth in aggregate demand. If he can do this, he will give the region - home to 1.7 billion people - a strong example for future leadership and the possibility of a better life. 

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