UNDERSTANDING THE (UN)EMPLOYMENT SCENARIO ACROSS EMERGING ECONOMIES (PART 2)

Unemployment rates in Emerging Market Economies (EME) are estimated to steadily rise, reflecting the effects of the slowdown in the global economy. Following the InfoSphere issue on unemployment trends in emerging market economies, this article looks to further analyse the employment landscape on a global scale with a focus on the unorganised sector, the gap between education and employability, and the prevalent gender bias.

In order to understand the landscape for employment, we shall explore the structural and institutional background of the emerging market economies. The structural features include the education structure and policies in the countries, composition of the workforce, regulation policies of the labour market. At the same time, institutional background implores the gender gap, education bias and other institutional factors affecting employability.  

We observe that most EMEs have a rapid population growth rate. Due to which these economies still have the potential to benefit from the “demographic dividend” – the working-age population grows more rapidly than populations of dependent age. It is expected that the current trends signal at an increase in labour force participation – notably by female workers – and the increase in sufficient retirement age. Despite this labour, participation has been only growing marginally in these economies. Thus, this gap hinders the potential growth of the economy.  

Education is barricading the employment opportunities in these economies. The predominance of a higher share of the employment informal sector exists mainly due to lower levels of education. Formal sector jobs demand a higher level of education, due to which most of the integration of the population in the economy is difficult. In Turkey, it is observed that a large proportion of tertiary students study business administration and law, which provides below-average employment prospects to students and graduates. Furthermore, limited tertiary education capacity in these branches overcrowd the labour market and create unemployment gaps. There is a high demand in labour markets for science, technology, engineering and mathematics (STEM) graduates, but due to low supply, the unemployment gap in the labour market increases. The labour market is hindered by high job search costs and skills mismatches. 

Labour market regulations tend to be very rigid, which surmount the employability barricade even further. These regulations include the liberalisation of temporary work agency services, the introduction of a simplified dispute resolution mechanism, new legislation covering remote work (including telework), and easier hiring of qualified foreign workers. Since significant imbalances persist in the labour market, policymakers are sensitive to the need further to improve the employability of the low- educated majority. By increasing the size of low- educated in the formal sector, the majority of the working-age population will be able to work and contribute to economic growth. 

Participation rates – including  low-skilled, young and female workers – are trending up and so is the employment rate. In Turkey, despite strong job creation in the country, the labour force expands by only 3½% per annum (Organisation for Economic Co-operation and Development Economics Survey 2018) on average, and unemployment rates remain high, at around 10%. The authorities aim at developing active labour market programmes for reducing the formal employment costs of certain types of workers.

Gender gaps remain large in Turkey and South Africa. These inequalities between men and women arise, due to historical, cultural patterns which discouraged women’s labour force participation in urban areas, entrenched by the ensuing severe shortage of child and elderly care facilities. Historically the share of Women in educational attainment and labour force participation has been low. A key impediment to growth in South Africa is high and persistent unemployment caused due to racial and gender discriminations. In Turkey, it is estimated that adult women are still 20% less likely than men to have attained upper secondary or tertiary degrees. In comparison, their average rate of labour force participation is only 34%.

On the contrary, we see that in China the number of women has increased significantly while the number of men in the workforce has marginally decreased. The gender barrier has decreased in other spheres of the economy, such as education. In 2013, 50.7 percent of students enrolled in tertiary education were women. 

Amid rapid labour force growth and despite robust job creation, the rate of unemployment was close to 29.1 per cent in South Africa, followed by 11.9 per cent in Turkey and only 4.3 per cent in China. 

In order to try and ensure employability, there is a need to restructure not only the organised sector but the unorganised as well. Its demographic dividend can only be raised through the unorganised sector, which can propel the economy. The focus must be to provide stimulus to the entrepreneurial venture and promote the growth of Small and Medium Enterprises (SMEs) in order to make them more attractive for investment. Active policy intervention and policy advocacy is required to utilise the productive resources of the economy better.  Introduction of skill development and labour market programmes is necessary to channelize the potential of the informal sector.

Divyansh Singh Parihar is a second year student of O.P Jindal Global University pursuing his major in Economics.

 

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