As rapid economic development has pushed the percentage of people working in most East Asian countries to among the highest in the world, policy makers should enact labor regulations and social protection policies to benefit all workers, including those in the large informal economy, according to a new
In the last 20 years,
"The unprecedented economic development in
As the region's economic growth is moderating and labor costs are rising, constraints of the region's current labor market and social protection policies are becoming a more pressing issue. Though relatively strong on paper, those policies are often poorly enforced, driving more people - especially women, young people and those with fewer skills, such as janitors and caterers - into unprotected, unregulated and untaxed jobs, or even unemployment.
Modest, nationally financed unemployment packages, for example, can help employers avoid costly severance schemes, lower labor taxes and encourage business to become formal, according to the report.
The report, a follow-up to the Bank's World Development Report 2013: Jobs, contributes to a relatively small body of empirical evidence on the impact of employment policies and reform options in
"Business as usual is not an option," said
Current employment policies, the report says, have failed to help most workers, favoring prime-aged men in salaried positions at the expense of women, youth and those with low skills. Empirical evidence shows that rising minimum wages in
Across the region, more than 30 percent of people ages 15 to 24 are completely left out - they have neither a job nor receive an education or training. That creates labor market segmentation and exclusion, as well as a higher risk of social unrest and violence. Meanwhile, rising wages for skilled workers, which benefit from the current policies, have led to higher inequality in some countries.
To keep the region on the right track, the report recommends that countries look beyond the labor market and focus on fundamentals, such as policies that ensure price stability, encourage investment and innovation, and support a regulatory framework that enables small- and medium-size enterprises, which employ most people in the region.
"Top-down industrial policies are less viable in today's increasingly integrated and rules-based global economy," said
The region's diverse economies, of course, call for different policy priorities. For the many countries that are still mainly agrarian, the report recommends that policy makers focus on boosting agricultural productivity and encouraging non-farm enterprises. For urbanizing economies, such as
The report is available at www.worldbank.org/eap/atwork
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