11
The Middle Class and Employment in AsiaNatalie ChunEconomist, Asian Development Bank25 September 2013
Based on the Special Chapters of theKEY INDICATORS FOR ASIA AND THE PACIFIC41st and 42nd EditionsThe Rise of Asia’s Middle ClassToward Higher Quality Employment in Asia
2
Middle class grew rapidly in size and purchasing power
Region YearTotal Pop (millions)
Percent of Population Annual Exp. (2005 PPP$ billion)
Poor (<$2)
Middle ($2-20)
High ($20+)
Poor (<$2)
Middle ($2-20)
High ($20+)
Total(Per Person Day) (Per Person Day)
DEVELOPING ASIA1990 2681 80 20 0 841 703 38 15822009 3363 40 59 1 672 3423 428 4523
DEVELOPING EUROPE
1990 352 11 86 2 24 612 97 7332009 351 2 83 15 19 980 657 1656
LATIN AMER./CARRIBEAN
1990 409 28 66 6 49 645 341 10362009 536 20 71 10 39 1031 777 1847
MIDEAST/N AFRICA1990 154 18 80 2 18 234 38 2902009 203 10 87 3 14 365 76 456
OECD1990 626 0 26 74 74 775 7860 87092009 713 0 15 85 85 480 13874 14439
SUB-SAHARAN AFRICA
1990 259 74 25 1 68 106 43 2172009 389 59 39 1 95 234 99 428
Source: PovcalNet Database
Emerging consumers to assume key role in rebalancing
Source: Staff Estimates based on PovcalNet Database
Developing Asia
Developing Europe
Latin Am./Car-
ribean
Mid East/North Africa
OECD Sub-Saharan Africa
05000
100001500020000250003000035000400004500050000
Annual Expenditures
1990 2009 2030
Annu
al E
xpen
ditu
res (
Billi
ons)
4
Middle class demand more consumer durables
Household ownership of refrigeratorby per capita expenditure/income decile
0
10
20
30
40
50
60
70
80
90
100
D1 D2 D3 D4 D5 D6 D7 D8 D9 D10
Decile based on per capita expenditure
Perc
ent
Philippines, 2006 India, 2004-2005 China, 2002
Household ownership of carby per capita expenditure/income decile
0
5
10
15
20
25
30
35
40
45
D1 D2 D3 D4 D5 D6 D7 D8 D9 D10
Decile based on per capita expenditurePe
rcen
tP hilippines, 2006 India, 2004-2005 China, 2002
5
Middle class tend to invest more in education and health
Mean Percentage Share of Household Expenditures Spend on Education and Health
0
2
4
6
8
10
12
14
16
< $2(poor)
$2 - $4(lower middle)
$4 - $10(middle middle)
$10 - $20(upper middle)
> $20(upper)
Class
% sh
are
Bangladesh, 2000Bhutan, 2003Cambodia, 2003China, People's Rep. of, 2002India, 2004Indonesia, 2002Malaysia, 2004Nepal, 2003Pakistan, 2001Philippines, 2003Sri Lanka, 2002Thailand, 2002
6
But majority of middle class between $2 and $4; still vulnerable
Percent Middle Class and AboveMost Recent Survey Year
0
10
20
30
40
50
60
70
80
90
100
AZERBAIJAN
MALAYSIA
THAILAND
KAZAKHSTAN
GEORGIA
CHINA
SRI LANKA
ARMENIA
PHILIP
PINES
VIETNAM
MONGOLIA
BHUTAN
KYRGYZ REPUBLIC
INDONESIA
PAKISTAN
CAMBODIA
INDIA
UZBEKISTAN
LAO PDR
NEPAL
BANGLADESH
Perc
ent
$2-4 (2005 PPP $) $4-10 (2005 PPP $) $10-20 (2005 PPP $) >$20 (2005 PPP $)
7
Middle class to increase burden on environment and health
Per capita water consumption (cubic meters), 1997-2001
702849
896980
1,1531,179
1,2181,245
1,2921,3171,324
1,3931,5431,545
1,5912,223
2,3442,483
0 500 1000 1500 2000 2500
ChinaNepal
BangladeshIndiaJapan
S. KoreaPakistan
U.K.Sri LankaIndonesiaVietnamAustralia
PhilippinesGermanyMyanmarThailandMalaysia
USA
8
Middle class more likely to hold stable jobs
Percentage share of regular/permanent wage employmentto total labor force of each economic group
0
10
20
30
40
50
60
70
80
< $1.25(poor)
$1.25 - $2(near
poor/vulnerable)
$2 - $4(lower middle)
$4 - $10(middle middle)
> $10(upper middle &
rich)
% sh
are
India, 2004-05 Philippines, 2006 PRC, 2002
9
Stable Jobs Are Important for Reducing Poverty and Income Inequality
Informality, Poverty and Inequality (1990 -2008)
10
Developing Asia has had high growth and low unemploymentLabor and Employment Statistics by Region
Levels (2010)Compounded Annual Growth
(1990-2010)
Region
GDP per Cap (2005
PPP$)
Labor Force ('000)
# Employed ('000)
UnempRate
Real GDP
per Cap (2005 PPP$) Pop.
Labor Force
Employment
Developing Asia 4,728 1,759,693 1,709,072 4.8 6.2 1.3 3.5 3.9Developing Europe 12,037 145,261 132,558 9.8 0.8 0.1 0 -0.1Latin America & Caribbean 9,843 255,206 234,954 7.8 1.7 1.5 3.4 3.3OECD 33,517 507,965 465,260 8.5 1.5 0.6 0.8 0.7
11
Sizable structural transformation has occurred in Developing Asia
Developing Asia Developing Europe Latin America & Caribbean
OECD0.00
0.20
0.40
0.600.61
0.270.17
0.070.18
0.33 0.26 0.320.21
0.400.57 0.61
1990
Empl
oym
ent S
hare
0.000.400.80
0.430.16 0.15 0.03
0.24 0.26 0.23 0.220.340.58 0.63 0.752010
Agriculture Industry Services
Empl
oym
ent S
hare
12
Informal employment in Developing Asia remains high…
0.000.400.80 0.73
0.160.43
0.170.26
0.780.53
0.80
0.01 0.06 0.04 0.03
1990
Empl
oym
ent S
hare
0.000.400.80 0.70
0.17 0.360.130.27
0.810.60
0.85
0.03 0.02 0.04 0.03
2010
Informal Workers Employees Employers
Empl
oym
ent S
hare
13
Informality uneven and persistent
Singapore(1991-2008)
Hong Kong, China(1990-2008)
Malaysia (1990-2008)
Korea, Rep. of(1990-2008)
Philippines(1990-2008)
Thailand(1990-2008)
PRC(1995-2008)
Pakistan(1990-2008)
Indonesia(1992-2008)
Nepal(1991-2001)
India(1991-2008)
Bangladesh(1991-2005)
0.0 25.0 50.0 75.0 100.0
10.0
10.7
21.9
24.8
43.5
54.2
58.9
63.1
67.9
71.6
81.9
85.9
8.1
10.2
31.4
32.6
53.1
70.3
64.3
74.2
68.5
74.3
80.1
88.3
Percentage of Informal Workers to Total Employment
Start EndYear
Cou
ntry
(yea
rs)
14
Informality is becoming more common even in non-agriculture jobs
Informal Sector Employment in Latin America and Asia 1980-2008
1980-1985 1990-1995 2003-200830
40
50
60
0
2
4
6
8
10
12
Latin America
Informal Employment (%)Per capita real GDP (2005 PPP constant $ '000)
Shar
e of
Info
rmal
Em
ploy
men
t
Per c
ap re
al G
DP (2
005
PPP
$ '0
00)
1980-1985
1990-1995
2003-2008
30
40
50
60
0
2
4
6
8
10
12
Developing Asia
Informal Employment (%)Per capita real GDP (2005 PPP constant $ '000)
Shar
e of
Info
rmal
Em
ploy
men
t
Per c
ap re
al G
DP (2
005
PPP
$ '0
00)
Data source: ILO LABORSTA, CHIP, NSS-EUS
15
Formal versus Informal EmploymentInformal employment is typically lower quality and associated with: • Lower income• Underemployment • Less security • Absence of social safety nets
Benefits Received by Formal and Informal Wage Workers(% of total formal/informal wage jobs with benefit)
Arm
enia
Bang
lade
sh
Bant
en
Yogy
akar
ta
0
20
40
60
80
100
Pension
Arm
enia
Bang
lade
sh
Bant
en
Yogy
akar
ta
Sick Leave
Arm
enia
Bang
lade
sh
Bant
en
Yogy
akar
ta
Maternity/Paternity Leave
Arm
enia
Bang
lade
sh
Bant
en
Yogy
akar
ta
Vacation Leave
Formal Informal
16
Income and stability are most important for majority of workers
Azerbaijan
Armenia
Kyrgyz Rep.
Malaysia
OECD
Bangladesh
Thailand
PRC
Georgia
India
Indonesia
Philippines
Viet Nam
0 10 20 30 40 50 60 70 80
Safety/Security
OECD
Indonesia
Viet Nam
Philippines
PRC
India
Kyrgyz Rep.
Georgia
Thailand
Bangladesh
Armenia
Malaysia
Azerbaijan
0 10 20 30 40 50 60 70 80
Good Income
Source: Staff estimates based on unit record data from the World Values Survey, 2000 -2008
Percent of Workers Reporting Certain Attributes as Most Important in a Job
17
Quality of Employment Enhances Worker’s Well-Being
Fully-employed workers are more likely to report the highest well-being.
Unemployed
Employed part time, looking for full time
Employed part time, not looking for full time
Employed full time (by self)
Employed full time (by employer)
0 5 10 15 20 25 30 35
Workforce Well-Being, Thriving Worldwide2009-2010
percent
18
Better Employment Can Enhance Firm Productivity and Profits
• Efficiency wage hypothesis implies worker effort and productivity depends positively on wages (Stiglitz 1976)
• Human resource management literature indicates pay for performance schemes, target setting, and communication associated with higher productivity and profits (Bloom and Van Reenan 2010)
19
Productivity Growth Key to Promoting Higher Wage Employment
Brun
ei D
arus
sala
m
Sing
apor
e
Japa
n
Phili
ppin
es
Thai
land
Taip
ei,C
hina
Bang
lade
sh
Kore
a, R
ep. o
f
Sri L
anka
Mal
aysia
Hong
Kon
g, C
hina
Indo
nesia
Mon
golia
Indi
a
Viet
Nam
PRC
-5
0
5
10
15
20
Real Wages and Labor Productivity Growth 2001 to 2008
Labor Productivity
wage
Perc
ent
2020
Summary
• Middle class in developing Asia is rapidly expanding and key to rebalancing.
• Growing Asian middle class provides business opportunities.
• Vulnerability of middle class, requires policies targeted to their needs.
• Generating more formal employment opportunities may be key way to support and build the middle class.
21
Many Challenges• Skill biased technological change
• Restrictive labor and industrial policies
• Uncompetitive markets (SOEs and Monopolies)
• Demographic changes
22
Policies to Nurture Middle Class and Improve Employment• Stable and sustained economic growth• Greater infrastructure development• Increased FDI• Skill development through quality technical
and vocational education• Managed migration from lower productivity to
higher value added sectors.
• Safety nets especially for informal workers
23
Concluding Remarks• General policy prescriptions given tell us little
about how to implement the policies.
• Need greater in-depth micro studies to better understand true effects of policies on distribution.
2424
Thank you.
KEY INDICATORSFOR ASIA AND THE PACIFIC
http://www.adb.org/publications/key-indicators-asia-and-pacific-2010
http://www.adb.org/key-indicators/2011/main