Emerging Economies in Asia Face Skilled Labor Shortages Despite Large Working-Age Populations
A new report from the Workforce Analytics Institute (WAI), titled “Deciphering Labor and Skill Shortages in Asia with Workforce Analytics,” reveals a concerning trend: emerging economies in Asia are experiencing a severe shortage of skilled labor. This shortage is projected to continue in the near and medium term, despite the presence of large working-age populations. The report attributes this disparity to inadequate skills-based education and evolving workforce demographics.
While Asia demonstrates a high demand for skilled labor, workforce preparedness varies significantly across the region. Singapore boasts the largest proportion of highly skilled workers, exceeding 50% of the employment share. Conversely, Bangladesh exhibits a high concentration of low-skilled labor, exceeding 40% of the population. A comparison between advanced economies like Singapore, Hong Kong, Japan, and Korea, and emerging economies like Malaysia, Thailand, the Philippines, Indonesia, mainland China, India, Vietnam, Nepal, Bangladesh, Cambodia, Pakistan, and Myanmar reveals a significant gap. Despite substantial GDP investment in education, the proportion of the educated population, particularly those with tertiary or post-secondary education, remains considerably lower in emerging economies.
This regional imbalance contributes to supply-side discrepancies. Skilled workers are more mobile than their low-skilled counterparts in emerging economies.
Skill Momentum Index Highlights Preparedness Gaps Across Asian Economies
To assess the workforce readiness across 12 Asian economies, The Conference Board created a “skill momentum index.” This index considers anticipated trends in the urban labor force alongside educational and technological indicators. It provides insights into a country’s trajectory in addressing future skill demands.
According to the index, Thailand and the Philippines are comparatively better positioned and on track to address their skill requirements. Conversely, Myanmar, Pakistan, and India show weak skill preparedness and are likely to encounter challenges in the coming years.
Workforce Analytics: A Tool for Understanding Talent Concerns and Gaining Competitive Advantage
Dion Groeneweg, Partner and HR Transformation & Workforce Planning Leader for Growth Markets at Mercer, emphasizes the importance of understanding regional talent concerns for multinational organizations seeking expansion in Asia. He highlights the disparity in employee motivations: career advancement drives attrition in China and India, while base pay significantly impacts attrition in advanced economies like Singapore and Hong Kong.
Groeneweg observes a growing trend of companies leveraging workforce analytics to gain deeper employee insights and cultivate lasting competitive advantage. By analyzing internal and external factors such as demographics, compensation, and training opportunities, workforce analytics empowers organizations to optimize talent decisions, ultimately impacting their bottom line.
Dr. Caitlin Pan, Senior Researcher, Asia Region of The Conference Board and the report’s author, emphasizes the need for localized solutions tailored to specific organizational contexts. The report includes case studies of leading Asian organizations that have successfully addressed labor shortage concerns. She underscores the importance of evidence-based decision-making driven by internal data, enabling human resources to justify strategies and secure stakeholder buy-in. Combining internal data with external sources provides a comprehensive understanding, enabling organizations to develop effective and tailored strategies.
Country-Specific Challenges and Opportunities
China: China faces a declining working-age population due to the legacy of the one-child policy. While the policy’s reversal may eventually increase the workforce, its impact will take years to materialize. Additionally, the influx of rural migrants, often lacking technical and soft skills, primarily fills low-paying jobs, exacerbating the skilled labor shortage.
As China’s economy matures, its reliance on cheap labor diminishes, increasing the demand for skilled workers commanding higher wages. However, organizations need to explore alternative retention strategies beyond salary increases, such as career advancement and training opportunities.
India: Despite a projected growth in its young working-age population, India faces a significant skill deficit. Only 2% of its workforce is skilled, starkly contrasting with South Korea (96%) and Japan (80%). This lack of skilled labor poses a critical challenge to India’s development. To address this, employers may need to focus on increasing female labor participation, which currently stands at a low 25%, and enhancing tertiary and vocational education infrastructure.
Indonesia: Indonesia shares similarities with India, possessing a young and growing population. However, it also grapples with a lack of skilled labor, with only 4.1% of the population attaining post-secondary or tertiary education. The demand for skilled workers is projected to surge from 55 to 113 million by 2030, intensifying competition for talent. Organizations operating in Indonesia need to prioritize employee training while implementing effective retention strategies to prevent attrition of highly skilled employees.
Philippines: The Philippines benefits from a growing working-age population and is better positioned to address skill challenges compared to other nations in the region. While it has made strides in expanding access to education, it still faces a shortage of highly skilled labor, partly attributed to high migration rates. Organizations can explore strategies to attract returning migrant workers and retain local talent considering migration.
Interested? Read the full report, Deciphering Labor and Skill Shortages in Asia with Workforce Analytics, at https://www.conference-board.org/workforceanalyticsinstitute/.