Globalization, Flexibilization and Working Conditions in Asia and the Pacific

Globalization, Flexibilization and Working Conditions in Asia and the Pacific

First Edition

Sangheon Lee

François Eyraud

INTERNATIONAL LABOUR OFFICE

GENEVA

Chandos Publishing

Oxford  •  England

Table of Contents

Cover image

Title page

Copyright page

List of figures

List of tables

Acknowledgements

Introduction

Context: globalization and workers in Asia

The research project: aims, methodology and lessons

Overview

About the contributors

Part 1: Labour Market Changes, Workers’ Voice And Labour Regulation

1: Globalization, institutional reforms and workers: changes and outcomes

1 Introduction

2 Recent developments in the labour market: economic and employment trends

3 Flexibilization and diversity of employment patterns

4 Wages and incomes: divisive growth

5 Diversifying hours of work: long hours and underemployment

6 Non-standard jobs, employment quality, workers’ choice

7 Globalization, deregulation and alternative policy options

8 Conclusions

2: Trade union rights and trade competitiveness: Asia in a global context

1 The debate

2 Developments in trade union rights, wages and export market shares

3 Recent findings

4 What does it mean?

3: The regulation of working conditions in Asia and the Pacific: flexibility, fragmentation and workers’ rights

1 Introduction

2 Globalization and the regulation of working conditions

3 Flexibility and deregulation: a persistent debate

4 Deregulatory discourses and working conditions laws in Asia and the Pacific

5 Fragmentation and the indirect deregulation of working conditions

6 Legal responses to fragmentation

7 The impact of labour law in Asia and the Pacific

8 Conclusion: advancing working conditions in Asia and the Pacific – some questions and suggestions

Part 2: Flexibilization and Non-Standard Employment

4: Australia: institutional changes and workforce fragmentation

1 Introduction

2 Globalization and labour market reforms in Australia

3 Changes in employment conditions for individual workers

4 New issues and social debates

5 Conclusions

Acknowledgements

5: Japan: the resilience of employment relationships and the changing conditions of work

1 Introduction: has the style of employment relationships changed in Japan?

2 The effects of globalization and restructuring on labour

3 Long-term employment relationship

4 Increase in the number of non-regular workers

5 Seniority-based pay system

6 Social debate: widening economic inequality and remedies

7 Concluding remarks

6: The Republic of Korea: from flexibility to segmentation

1 Introduction

2 Labour market reforms and social dialogue

3 Changes in employment conditions: segmentation in the labour market

4 Conclusion

Part 3: Economic Pressures and the Changing Quality of Work

7: Indonesia: the search for alternatives

1 Introduction

2 Globalization and labour market reforms

3 Labour market trends

4 Changes in employment conditions in Indonesia

5 Social debates and new policy measures

6 Conclusions and prospects

8: The Philippines: changes at the workplace

1 Introduction

2 Globalization and Philippine labour and economy

3 Changes in the workplace: survey results

4 Changes in management strategies and their impacts on workers: case studies

5 Policy developments and prospects

Appendix: the employer and the worker survey

9: Thailand: globalization and unprotected workers

1 Introduction

2 Globalization and labour market reforms

3 Changes in employment conditions: some empirical evidence

4 Social debates and the role of labour market institutions

5 Conclusion

Acknowledgements

Part 4: Transition and Employment Conditions

10: China: economic transition, employment flexibility and security

1 Introduction

2 Employment policies and labour market reforms

3 Changes in employment conditions: survey results

4 Debates on labour market policies

5 Conclusions and prospects

Appendix

11: Viet Nam: workers in transition

1 Introduction

2 Globalization and changes in the labour market

3 Employment and labour policies

4 Changes in employment conditions

5 Conclusions and prospects

References

Index

Copyright

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First published 2008

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List of figures

1.1 Changes in the share of industry employment, 1990–2005 (% of total employment) 9

1.2 Non-standard employment in Australia, Japan and the Republic of Korea (% of paid employees) 12–13

1.3 Employment in small enterprises in the Philippines and Thailand (fewer than 10 employees) 15

1.4 Non-regular employment in the Philippines (in thousands) 18

1.5 Trends in income inequality 26

1.6 Five major obstacles to the operation and growth of business (% of enterprises) 42

2.1 Trade union density relative to number of labour force participants by country, 1990–2003 54

2.2 Coefficients of trade performance 71

4.1 Changes in employment rates for working-age persons by sex, Australia, 1978–2006 (%) 125

4.2 Unemployment and underemployment rates, Australia, 1978–2006 (%) 127

4.3 Employees in full-time permanent work, Australia, 1984–2006 133

4.4 Employees in casual work, Australia, 1984–2006 134

4.5 Average actual weekly hours for full-time employees by sex, Australia, 1978–2006 137

4.6 Gender pay ratios, based on female/male median weekly earnings for full-time employees, Australia, the UK and the US, 1970–2005 144

4.7 Gender pay equity ratios, total hourly earnings of non-managerial employees and total weekly earnings of full-time adult employees, Australia, 1996–2006 145

5.1 Change in mergers and acquisitions by category, Japan, 1990–2002 156

5.2 Number of workers who leave/stay at the firm around the merger process, Japan, late 1990s 159

5.3 Change in rates of accession, separation and labour mobility (%), Japan, 1967–2003 163

5.4 Changes in length of service: male graduate employees in large firms, Japan, 1985–2004 164

5.5 Changes in the number of regular and non-regular workers, Japan, 1987–2006 167

5.6 Monthly cash earnings of full-time employees and part-time employees, Japan, 1993–2005 170

5.7 Working hours of full-time and part-time employees, Japan, 1993–2005 171

5.8 Age-wage profile of male graduate workers in 1990, and 2004, Japan (100 = average wages of 22-year-old worker) 174

5.9 Distribution of monthly salary and bonus by age, Japan, various years 177–9

6.1 Earnings gaps among major groups, Republic of Korea, 2001–2005 220

6.2 Net employment changes by job quality deciles, Republic of Korea, 1993–2000 and 2000–2004 222

6.3 Distribution of working hours, Republic of Korea, and 2005 230

6.4 Trends in monthly working hours by establishment size, Republic of Korea 231

7.1 Growth of GDP by main economic sector, Indonesia, 1985–2004 (%) 239

7.2 Foreign and domestic investments, Indonesia, 1967–2004 240

7.3 Unemployment rates by age group and sex, Indonesia, various years (%) 246

7.4 Percentage distribution of employed people by industry, Indonesia, 1985–2006 248

7.5 Informal employment by sex (millions) and by residence (%), Indonesia, 1990, 1999–2006 253

7.6 Casual workers (a) as a percentage of total employed population by sex, Indonesia, 2001, 2003–2006, and (b) in total waged work, Indonesia, 2001–2006 255

7.7 Average monthly wages by economic sector, Indonesia, 2000–2006 (thousand Rp) 256

7.8 Female-to-male wage ratio by type of worker, Indonesia, 2003–2006 258

7.9 Minimum living needs, minimum wages and average monthly wages, Indonesia, 1997–2006 (Rp) 259

7.10 Employment by hours of work (% distribution), Indonesia, 1990 and 2006 260

7.11 Distribution of part-time workers (1–24 hrs per week) by sex and residence, Indonesia, 1990, 1999, 2003–2006 (%) 261

7.12 Social security coverage by firms and workers, Indonesia, 1978–2005 263

7.13 Reported occupational injuries, Indonesia, 1990–2003 264

7.14 GDP, labour productivity and labour coefficient, Indonesia, 2001–2004, and labour coefficient (person/thousand Rp) 266

7.15 Number of people living below the poverty line by residence, Indonesia, 1976–2004 (million) 268

8.1 A guide to the impact of globalization on the Philippine government, employers and workers 281

8.2 Structure of manufacturing output, Philippines, 1970–2000 283

8.3 Structure of employment in Philippine establishments 289

8.4 Non-regular workers in establishments (thousands) 289

8.5 Major changes in enterprises in the last five years (%) 293

8.6 Factors important in recruitment now and five years ago 294

8.7 Workers’ autonomy at work by types of owner 295

8.8 Incidence of work-related problems (% of employers) 298

9.1 Nominal and real minimum wage rates for Bangkok (Baht, 1995–2006) 327

9.2 Relationships among actors in subcontracting employment 332

10.1 Urban employment in China: registration status, 1990–2004 349

10.2 Urban registered unemployment and rate at year-end, China, 1978–2005 350

10.3 Weekly working hours, China, 2004 351

10.4 Government and trade union pressure on enterprises, China (%) 361

11.1 Labour productivity by enterprise ownership, Viet Nam, 2000–2004 (thousand VND/employee/year) 387

11.2 Employment structure by sectors, Viet Nam, 2001–2006 (%) 390

11.3 Migrants and non-migrants by age group, Viet Nam (%) 407

11.4 Comparison of income before and after migration, Viet Nam 408

List of tables

1.1 Key indicators in Asia and the Pacific, 2000–2005 6–7

1.2 Distribution of employment by employment status, 1996–2005 16–17

1.3 Minimum wages in Asia and the Pacific 23

1.4 Working time: short and long hours (% of total employment) 29

1.5 Job satisfaction by employment status in Japan and Australia 32

1.6 Reasons for choosing current type of employment in the Republic of Korea, 2005 34

1.7 Employment conditions by employment status in Indonesia, 2004 (non-agricultural workers) 36

1.8 Job change and reasons in Indonesia, 2004 (non-agricultural workers) 37

1.9 World Bank indicators for labour regulations, 2006 (employment workers) 39

2.1 Real manufacturing wage indices, 1990–2001 56–7

2.2 Wages as a share of value added in manufacturing, 1990–2001 (%) 59–60

2.3 Indicators of democracy and trade union rights by region, mid-1990s 63

2.4 Regional breakdowns of total and labour-intensive manufacturing exports by percentage shares, 1980–1999 66–7

2.5 Regional breakdowns of intermediate and capital-intensive manufacturing exports by percentage shares, 1980–1999 68–9

2.6 Changes in total manufacturing exports associated with changes in democracy and FACB rights between example pairs of countries within regions 74–6

2.7 Summary of main results for full sample of countries 77

4.1 Award coverage rates, public and private sectors, May 1990 (proportion of employees) 119

4.2 Methods of setting pay, public and private sectors, May 2006 (proportion of employees) 122

4.3 Employed persons by full-time and part-time status, by sex, 1994–2005 128

4.4 Different types of employment, Australia, 2007 (% of workforce) 132

4.5 Full-time employees, whether overtime worked on a regular basis and whether overtime is paid or not paid, 1993–2003 (%) 138

6.1 Changes in social dialogue in the Korea Tripartite Commission 191

6.2 Trends in major economic and social indicators 201

6.3 Trend in monthly transitions across labour market states 202

6.4 Trends in employment and business condition by establishment size 204

6.5 Components of paid employment, August 2005 (%) 209

6.6 Trends in composition of paid employment (%) 211

6.7 Incidence and distribution of employment arrangements by individual and job characteristics, 2005 212–14

6.8 Transition rates across labour market status over a year (%) 216

6.9 Transition rates across labour force status over a year by demographic characteristics (%) 217–18

6.10 Trends in income distribution 219

6.11 OLS wage equations by employment arrangements, 2005 223–4

6.12 Oaxaca decomposition of wage differentials between employment arrangements, 2005 225

6.13 Coverage rate of corporate fringe benefits and social insurance, 2005 (%) 227

6.14 Indicators related to the working poor (%) 228

6.15 Average annual hours actually worked 229

6.16 Working hour and wage by employment arrangement, 2001 and 2005 232

7.1 Involuntary underemployment by sex and residence, Indonesia, 2002–2006 (thousands) 247

7.2 Distribution of employed people by employment status and sex, Indonesia, 1990, 1999–2000 and 2001–2006 (%) 251

7.3 Ratio of MLN to average monthly wages by type of worker, Indonesia, 2003–2006 257

7.4 Percentage of workers according to current work conditions compared to previous years, Indonesia, 1998, 2000–2002, 2004–2006 269–70

8.1 Sectoral composition of GDP and employment, 1970–2000 (%) 284

8.2 Unemployment and underemployment, five-year averages, 1975–2004 (%) 285

8.3 Employment by employment status, 2003–2005 286

8.4 Reasons for closure of establishments, 2000–2003 287

8.5 Changes in contractual employees 292

8.6 Pay differences by gender, educational attainment and industry 296

8.7 Workers’ satisfaction at work (% of workers who are satisfied) 297

A8.1 Sample distribution by region and by type of enterprise for employers 310

A8.2 Sample distribution by region and by type of enterprise (n = 400 workers) 310

A8.3 Sample distribution by industry and by region (employers) 311

A8.4 Sample distribution by industry and by region (workers) 312

9.1 Growth, income and poverty in Thailand, 1989–2005 315

9.2 Labour force participation and unemployment rate by gender, for the whole kingdom, 1996–2004 316

9.3 Employment proportion by sector, 1996–2002 316

9.4 Distribution of employed persons by industry, 1994–2005 (% of total employment) 317

9.5 Distribution of employed persons by employment status in the whole kingdom, 1996–2005 (% of total employment) 318

9.6 Number of employed persons by administrative district and labour market, 1996–2002 319

9.7 Termination of employment in the whole kingdom, 1999–2005 320

9.8 Number of homeworkers who were aged 15 or above, 1999–2002 (thousands) 321

9.9 Board of Investment application approval, 2002–2005 (B billion) 322

9.10 Immigrant work permits: applications and approvals in the whole kingdom, 1998–2005 325

9.11 Daily rate of minimum wages, 1990–2006 327

9.12 Average monthly wage of private sector employees by region, 1996–2004 328

9.13 Employment conditions in the agriculture sector, survey findings 331

9.14 Occupational injuries or diseases, 2000–2005 340

10.1 Major results from the enterprise survey (% of enterprises) 360–1

10.2 Share of workers covered by social insurance (means) (% of workers) 362

10.3 Key characteristics of respondents: worker survey (%) 364

10.4 What do you think of your work conditions in the last five years? (%) 365

10.5 Distribution of working time (% of workers) 366

10.6 Changes in hourly wage rate in the last five years (%) 368

10.7 The average monthly pre-tax earnings for employees (Y) 368

10.8 Social insurance and leave entitlement (%) 370

10.9 Amounts of various fringe benefits (Y) 371

10.10 Satisfaction with current employment conditions (%) 371

10.11 Working conditions for informal workers 372

A10.1 The worker survey: descriptive statistics 380–1

A10.2 The enterprise survey: descriptive statistics 381–2

11.1 Structure of GDP by sector at current prices, 2001–2006 (%) 385

11.2 FDI in Viet Nam, 2001–2006 386

11.3 GDP and ownership, 2001–2006 (%) 387

11.4 Labour force and employment, 2001–2006 389

11.5 Employment structure by ownership, 2001–2006 (%) 390

11.6 Employment structure by employment status, 1998–2006 (%) 391

11.7 Number of strikes in Viet Nam, 1995–2006 393

11.8 Average monthly wages and wage growth rates, 2003–2005 399

11.9 Mean real hourly wages by sector and educational level, 1998 and 2002 (thousand VND) 401

11.10 Average weekly working hours, 2006 403

11.11 Number of workplace accidents and injured workers 405

Acknowledgements

Sangheon Lee; François Eyraud

This book represents the product of a two-year long research project which would not have materialized without invaluable contributions and support from numerous people. First, we would like to thank the Ministry of Labour of the Republic of Korea which kindly provided financial support through the ILO-Korea Partnership Programme. Our special thanks should go to Huktae Kwon, Yongdong Na and Sungki Yi at the Ministry for their encouragement throughout the whole project. We are also very grateful to the Korea Labour Institute (KLI), which offered us an invaluable opportunity to discuss the preliminary findings of the project at an international workshop in Seoul in February 2007. The generous support of Youngki Choi and Jai-Joon Hur is greatly appreciated. We would emphasize that this research also enjoyed strong support from the ILO and in this regard we are particularly grateful to Bill Salter and Manuela Tomei for their guidance and assistance, which have been critical in completing this project.

We would like to offer our thanks to all the contributors to this book for their high-quality research, patience and commitment to the project. It has been a truly collaborative team effort, and this volume has been greatly improved and enriched as a result. Our thanks should also be extended to John Burgess who, despite his busy schedule, attended the international workshop, reviewed the whole manuscript and gave extremely useful comments on it. We also want to express our appreciation to Mark Smith for his technical and editorial comments on draft manuscripts which were of great help in improving this book. Similarly we thank Kazutoshi Chatani and Deirdre McCann for their thoughtful comments on earlier drafts.

Finally, a special word of thanks must go to the publication teams of the ILO and Chandos Publishing for their work to ensure the quality of the book.

Introduction

François Eyraud; Sangheon Lee

Context: globalization and workers in Asia

Globalization is often discussed as an abstract macroeconomic phenomenon in which a complex set of international economic factors exert a great influence on economic performance at the national level. However, people experience and evaluate globalization in more concrete terms, through changes in their work and employment. It is important to stress the common (but often forgotten) wisdom that ‘people see the world through the optic of their workplace’ (ILO, 2004a, p. 64). These views are not only practical, but also political, as is demonstrated by the antiglobalization sentiments that have emerged around the world. It is simply unrealistic to expect unemployed workers to hold favourable views about the ongoing process of globalization; and the views of the employed depend heavily on the changes they have personally experienced at work. These insights, then, point to the importance of monitoring changes in employment conditions in the processes of globalization. However, empirical studies on these issues with a global coverage are rather rare, partly due to data limitations. One notable exception is Flanagan (2006), who reviews developments in workers’ rights (e.g. civil liberties, freedom of association, forced labour) and working conditions (e.g. wages, working hours, workplace accidents). The overall finding of this review is to a large extent in line with the standard economic thinking that working conditions improve as the economy grows and that the positive role of labour regulation is limited. In addition, globalization, he contends, is overwhelmingly beneficial in improving working life, and therefore ‘[b]arriers to globalization retard the advance of labour conditions’ (ibid., p. 188). While there are few similar studies with a global coverage, different conclusions have been put forwarded by some studies with a focus on certain aspects of employment conditions. For instance, a review of the empirical evidence shows that globalization is associated with increasing income inequality (e.g. Goldberg and Pavcnik, 2007), and that the relationship between economic development and working hours is more complex than often assumed (Lee, McCann and Messenger, 2007).

Interestingly, regional-level studies on employment conditions in the context of globalization have recently increased. In particular, increasing attention has been paid to Latin American countries. Some of these studies called for greater flexibility and deregulation to better cope with globalization (e.g. Heckman and Pagés, 2004), while some others are sceptical about the positive impacts on workers of neoliberal reforms (e.g. Berg, Ernst and Auer, 2006). Overall, there appears to be little substantive agreement concerning the relationship between globalization and working life in the Latin American context.

There is a surprising lack, however, of similar studies devoted to Asia and the Pacific. This lack of research is also paradoxical in that this region provides probably the most fertile ground for examining the benefits and disadvantages of globalization and how these are reflected in the labour market and, ultimately, in daily working life. For instance, a sequence of financial crises in this region hit the labour market very hard, while that same globalization and the development of advanced technologies such as ICT have boosted certain economies or sectors. In a sense, one could say that the Asia and Pacific region has experienced some of the most dynamic labour market changes.

As in other regions, globalization is not new to Asia and the Pacific, if we understand this term to imply economic integration through trade and capital movement. Considering only the period after the Second World War, one can observe that this region has been invited to the globalization banquet in four waves: Australia and Japan in the first wave; the East Asian Tigers (Republic of Korea, Singapore, Taiwan and Hong Kong) in the second wave; followed by the South Tigers (Indonesia, Malaysia, Philippines and Thailand); and, finally, China, India and, to a lesser extent, Viet Nam. This continued wave of globalization probably explains why Asia and the Pacific as a whole is often perceived in the occidental world as the unique global competitor, based on low labour costs.

The research project: aims, methodology and lessons

The aim of this volume is ambitious. It attempts to fill the gaps in the understanding of the recent changes in employment conditions in Asia and the Pacific. Its aim is to investigate what kinds of changes have occurred in the employment conditions of individual workers in the context of the recent trends towards labour market reform and economic globalization. The objective, moreover, is to advance beyond a superficial macro analysis based on average indicators of the economy and the labour market (which characterizes debates on globalization and deregulation) to investigate the experiences of individual workers in terms of their employment conditions. The employment conditions under consideration include:

■ employment status (contract types (e.g. temporary, part-time work), self-employed/employee, formal/informal economy);

■ wages/incomes: average wages, wage inequality and wage-related underemployment (poverty), labour cost;

■ working time: work organization and other related issues (work and family balance, health and safety, etc.).

Another central goal of this ambitious project is to investigate trade-offs between these aspects of employment conditions that individual workers have experienced in the context of changes in the labour market. For example, some workers may be asked to accept a temporary contract in return for higher wages. These workers may then have to work longer to improve the probability of contract renewal, which reduces their ability to balance work and life.¹ Workers with family responsibilities, especially women, may have to compromise their working conditions to take care of their children.

Countries were selected for this research project to represent the four different waves of globalization described earlier: Australia, Japan, the Republic of Korea, Indonesia, the Philippines, Thailand, China and Viet Nam. In addition to these national case studies, two cross-cutting analyses have been singled out as particularly revealing of trends in the region and included in this volume. First, given that the workers’ right to organize is critical in improving employment conditions and that the relationship between globalization, economic development and workers’ rights are the subject of much debate, a chapter devoted to discussing these issues in the regional context is included. Similarly, in light of increasing pressures on labour regulations (as echoed in Flanagan, 2006), labour laws in the region are also reviewed and evaluated in a separate chapter.

The national studies in this volume were carried out based on a standard research guideline in order to allow us to identify common trends and issues, as well as differences across countries. This approach has been of great help in improving our understanding of employment conditions in the region, particularly their variations across countries and among different groups of workers. At the same time, the shortage of reliable data and analysis has made it difficult to maximize the benefits of this approach, and therefore efforts have been made to overcome data limitations, for instance by undertaking new surveys in several countries, such as China and the Philippines. It is hoped that more work will be done to improve labour statistics in the region, which will lead to quality research and more-grounded policy debates.

Overall, the chapters in this volume provide a rich and complex picture concerning changes in employment conditions which cannot easily fit into the stereotyped understanding of working life in the context of globalization and flexibilization. This book is also one of the few available that allows us to observe how the countries that used to be the main actors of globalization have become the ‘victims’ of its next wave. At the same time, this volume does not lend support to the view that poor employment conditions are the engine of (or a necessary condition for) globalization, allowing poor countries to compete more strongly. The chapters in this volume raise a wide range of important questions which have significant policy implications, but without offering satisfactory answers due to the lack of data and analysis mentioned above. It is therefore our hope that these questions will be taken up by interested researchers in the region, to further explore the concerns about working life in the globalized economy that are highlighted in this volume.

Overview

Part 1 sets the scene for the remainder of the book by presenting three thematic chapters which address the debates on economic growth and social protection in the context of Asia and the Pacific. In Chapter 1 (‘Globalization, institutional reforms and workers: changes and outcomes’), Lee and Eyraud review recent labour market developments in the region and introduce a range of issues which are addressed in the following chapters: employment diversification, informal employment, wage inequality, minimum wages, working time and deregulation. We show that while the labour markets in the region have managed to recover from the financial crisis in 1997, this very process created a group of vulnerable workers, both in the formal and informal economy, a situation often exacerbated by labour market reforms. It is also argued that these changes in employment conditions have a regional dimension, which calls for regional-level debates or policy dialogue.

In Chapter 2 (‘Trade union rights and trade competitiveness: Asia in a global context’), Kucera examines statistical evidence on the relationship between freedom of association (and collective bargaining) and economic performance in the Asian context. He identifies the positive correlations between these two variables, linking this finding to the possibility that the potential cost-raising effects of trade unions may be offset by their positive effects in enhancing economic and social stability. In this context, he addresses the controversial question of whether or not Asian countries can be considered as ‘exceptions’.

Reinforcing this perspective on the potential benefits of labour regulation, McCann recalls in Chapter 3 (‘The regulation of working conditions in Asia and the Pacific: flexibility, fragmentation and workers’ rights’) that many of the labour rights extended to workers were enacted as part of processes of democratization. For this and other reasons, labour rights should not be evaluated from a purely economic perspective but as serving distributive goals. Contrary to the widespread view that labour rights are, and must be, eroded in the battle to attract capital, she points out that many Asian countries, including developing countries, have in fact enacted comprehensive labour legislation, while major reforms have also been undertaken in a number of countries to extend protection to the growing numbers of ‘non-standard’ workers. The main challenge for developing countries, she suggests, is the limited influence of the legal standards on workplace practice.

Part 2 investigates developments in the three countries that inaugurated the Asian attendance at the globalization buffet: Australia, Japan and the Republic of Korea. They reveal that these countries have in common an increase in non-standard employment in the context of labour market reforms towards greater flexibility, and suggest that the key policy question is how to realize an economically sustainable and socially acceptable balance between flexibility and job quality (including security).

The Australian case is reviewed by Campbell in Chapter 4 (‘Australia: institutional changes and workforce fragmentation’). He first points out that Australia has maintained a good economic record in recent years, with low unemployment and higher real wages; and then discusses recent reforms aimed at making the labour market more flexible, focusing on the dismantling of Australia’s well-known award system. He notes that these reforms have been driven not only by concerns about the increasingly competitive global market but also by changes in the labour force, such as increases in women’s participation. Campbell’s overall evaluation of changes in employment conditions is mixed, but the key concern is with the quality of non-standard employment such as casual and part-time work. In his view, the workforce in Australia has become more fragmented and neoliberal reforms have failed to deliver their promised benefits.

In Chapter 5 (‘Japan: the resilience of employment relationships and the changing conditions of work’), Kubo reviews changes in the employment system in Japan, especially in light of the popular belief that the ‘traditional’ employment relationship system has collapsed under the pressure of globalization. He argues that while the Japanese economy is recovering from the economic depression in the 1990s, companies managed to maintain their traditional system in terms of wages and employment security for full-time permanent staff. However, the other side of this resilience of the standard employment relationship was an increasing reliance on non-standard workers, particularly part-time, temporary and dispatched workers. It appears that these contrasting developments have contributed to increasing income inequality in recent years in Japan.

The Republic of Korea, once praised as an exemplar of the benefits of globalization, has experienced the ‘risk’ of ‘uncontrolled’ globalization in the wake of the financial crisis in 1997. Its impacts on labour market outcomes and the quality of working life has turned out to be extensive and profound. These changes are investigated by Lee and Yoo in Chapter 6 (‘Republic of Korea: from flexibility to segmentation’). They review the rather disappointing progress in the tripartite dialogue on labour market reforms, and then illustrate changes in employment conditions among different types of workers. As in Australia and Japan, non-standard employment in the Republic of Korea has increased and its quality is increasingly questionable. The authors conclude that such increases in various types of non-standard employment have deepened labour market segmentation, which points to the need for ‘coordinated’ flexibility.

Part 3 looks into three of the South Tigers, all of which were hit severely by the financial crisis in 1997: Indonesia, the Philippines and Thailand. Until the crisis, these countries had benefited from sustained high growth rates and large flows of foreign direct investment (FDI). They have more recently been striving to attract FDI and, in doing so, the ‘rigidity’ of the labour market has sometimes been claimed to be a barrier against it. This is particularly the case in Indonesia, which is examined by Widarti in Chapter 7 (‘Indonesia: the search for alternatives’). She outlines recent developments in the labour market and notes that recovery has been sluggish, with high levels of unemployment and underemployment. In addition, informal employment has increased in recent years. In this context, Widarti reviews policy developments and related debates on employment conditions, especially on minimum wages, employment protection and social security. The difficult situation that governments and the social partners confront in the context of globalization is illustrated in this chapter.

In Chapter 8 (‘The Philippines: changes at the workplace’), Sibal, Amante and Tolentino offer a rather gloomy review of globalization and its potential impacts on working life in the Philippines, while recognizing that workers and employers have contrasting perspectives on the current situation and policy measures. They note that the capacity for job creation has been weakened and that job quality has suffered in terms of wages and security, as companies report their increasing reliance on non- regular workers. Rich and detailed analysis of these developments is provided in this chapter, based on the authors’ new surveys of workers and employers, which are combined with case studies.

Siengthai discusses the Thai case in Chapter 9 (‘Thailand: globalization and unprotected workers’). She looks into the changes in employment structure, which demonstrates higher unemployment rates since the financial crisis, and highlights the role of the agricultural and urban informal sectors as ‘shock absorbers’ or ‘buffers against unemployment’. Then she reviews recent policy efforts to improve labour market institutions, such as social security and minimum wages, as well as active labour market policies. Siengthai also provides an interesting review of the existing empirical studies on the working conditions of vulnerable workers such as agricultural, subcontracting and home-based workers and ‘non-employees’. In doing so, the author stresses the need to expand the coverage of labour and social protection to benefit these workers.

Part 4 considers two transition countries that are the new major players of globalization: China and Viet Nam. As transition countries, they have a number of commonalities, including increasing labour mobility from rural to urban sectors, a growth of employment in the informal urban economy and employment restructuring in state-owned enterprises (SOEs). Moreover, given the increasing competitive pressures on both countries, the governments have been closely monitoring wages and other labour cost factors in order to maintain their cost advantages.

In Chapter 10 (‘China: economic transition, employment flexibility and security’), Chen and Hou highlight the dual task of flexibilization (mainly for SOEs) and standardization (mainly for private enterprises) in the context of the transition to a market economy in China. Reflecting the changes in ownership type and the increasing inflow of migration, the authors focus on working conditions among different types of enterprise ownership and between migrant and non-migrant workers. Based on new surveys, which were undertaken for this study, Chen and Hou show contrasting fortunes in terms of employment conditions between workers in the private sector, those employed by SOEs and migrant workers. The authors conclude with the observation that more work is needed to improve the situation for rural migrant workers and private sector workers.

In the final chapter (‘Viet Nam: workers in transition’), Dao provides an overview of policy developments and labour market outcomes in recent years, which he believes leave room for further improvements, especially given the recent increases in labour disputes which demand the improvement of working conditions. Interestingly, the author highlights the role of corporate social responsibility (CSR) in advancing employment conditions among the subcontractors of multinational firms. It is argued in the conclusion that labour laws need to be revised to better address employment insecurity and inequality.

¹ A similar study has been done for the European countries. See Eyraud and Vaughan-Whitehead (2006).

About the contributors

Maragtas S.V. Amante, Professor of Industrial Relations, School of Labour and Industrial Relations, the University of the Philippines, the Philippines

Iain Campbell, Senior Research Fellow, Centre for Applied Social Research, RMIT University, Australia

Lan Chen, PhD Candidate, Remin University, China

Vinh Dao Quang, Deputy Director General, International Cooperation Department, Ministry of Labour, Invalids and Social Affairs, Viet Nam

François Eyraud, Executive Director, International Training Centre of the International Labour Office, Italy

Bao-qin Hou, Professor, University of International Business and Economics, China

Katsuyuki Kubo, Associate Professor, School of Commerce, Waseda University, Japan

David Kucera, Senior Research Economist, Policy Integration and Statistics Department, International Labour Office, Switzerland

Byung-Hee Lee, Director, Data Center of Korea Labour Institute, Republic of Korea

Sangheon Lee, Senior Research Officer, Conditions of Work and Employment Programme, International Labour Office, Switzerland

Deirdre McCann, Senior Research Officer, Conditions of Work and Employment Programme, International Labour Office, Switzerland

Jorge V. Sibal, Professor, Dean of the University of the Philippines School of Labour and Industrial Relations, the Philippines

Sununta Siengthai, Associate Professor of HRM/Industrial Relations, School of Management, Asian Institute of Technology, Thailand

Catalina Tolentino, University Researcher, School of Labour and Industrial Relations, University of the Philippines, the Philippines

Bum-Sang Yoo, PhD candidate, University of Edinburgh, United Kingdom

Diah Widarti, Consultant, former Senior Researcher on Labour Market and Employment Issues for the ILO-Jakarta Office, Indonesia

Part 1

Labour Market Changes, Workers’ Voice And Labour Regulation

1

Globalization, institutional reforms and workers: changes and outcomes

Sangheon Lee; François Eyraud

1 Introduction

The ‘conventional’ wisdom in employment and labour policies can be summarized as the positive employment impacts of globalization, the need for flexibilization and deregulation to reap the benefits of globalization, and the strengthening of market principles in the operation of the labour market. Such wisdom has been widely applied to many parts of the world, especially Latin American countries and transition countries in Europe (OECD, 1994; Edwards and Lustig, 1997; IMF, 2003; World Bank, 2004; Heckman and Pagés, 2004).

In Eastern Europe and the former Soviet Union, for instance, which have witnessed considerable increases in temporary and casual employment along with high inequality and high unemployment, the recommended list of key policy measures includes ‘liberalizing employment protection regulations for permanent workers’, ‘reducing taxes on labour’ and ‘deregulating industrial relations and wage determination’ (Rutkowski and Scarpetta, 2005). Recently, the European social model has also been faced with similar challenges, as demonstrated by the debates on the future of labour laws in Europe (see the 2006 European Commission White Paper on ‘Modernizing labour law to meet the challenges of the 21st century’).

The countries in Asia and the Pacific, which have been praised for their flexibility and recommended as examples of best practice for other countries to follow, are not an exception to these pressures (ADB, 2005a; UNESCAP, 2006; Burgess and Connell, 2006). Many countries have been under pressure to follow this wisdom, particularly since the financial crisis in the late 1990s. The experience is quite similar among the ‘South Tigers’ (Indonesia, Malaysia, Philippines and Thailand). Such policy changes may have been felt more strongly in industrialized countries in the region such as Australia, Japan and the Republic of Korea, where labour markets were much more regulated. In even more ‘regulated’ countries such as China and Viet Nam, the wisdom has been accepted as a way of making the transition to the market economy.

Given that these changes must, by definition, have had tremendous effects on individual workers, however, little is known about the changes that individual workers have experienced in the context of globalization, flexibilization and deregulation, although research efforts have intensified in industrialized countries in the region in recent years. This is also an unfortunate omission in that the usefulness and reliability of the ‘conventional’ wisdom needs to be judged by its impact on the well- being of workers. This project volume presents our collective effort to fill these knowledge gaps.

This chapter is intended to review major trends in employment conditions and introduce related issues and debates, thereby putting the thematic and national studies of this volume into a global and regional perspective. A similar attempt has already been made in our previous work (Lee and Wood, 2006), which has served as a background paper for this project volume. This chapter provides an updated review of developments in employment conditions in Asia and the Pacific. The countries under consideration in this project include three industrialized countries (Australia, Japan and the Republic of Korea), two transition economies (China and Viet Nam) and four South Tigers (Indonesia, the Philippines, Thailand and, to a lesser degree, Malaysia).

The rest of the chapter is organized as follows: following a brief review of recent developments in the labour markets of the region in section 2, three subsequent sections will describe and analyse the three key dimensions of employment conditions: employment relationship (labour contracts) in section 3, wages and income in section 4 and working time in section 5. In section 6 we will complete the analysis of the employment conditions by considering how workers perceived the quality of the ‘new’ jobs in these increasingly deregulated labour markets. Section 7 will consider the political debate around the following questions. Is deregulation necessary for globalization? Is flexicurity a policy response to promote and respond to globalization? Finally, section 8 outlines further research issues linked to employment conditions in the region.

2 Recent developments in the labour market: economic and employment trends

When analysing the economies in the region, the benchmark period is the financial crisis in 1997–98, when considerable changes occurred in the economy and the region’s labour markets. Interestingly, this period coincided with the rise of massive incursions into the international market by China and India and, to a lesser extent, Viet Nam. In fact, during the 1980s, countries like the Philippines, Thailand and Indonesia witnessed a rapid growth of their industries fuelled by continuous flows of foreign direct investments (FDI). At that time it was believed that globalization had brought very positive effects in terms of employment creation and income. In the 1990s when the flow of FDI ebbed away, however, these countries started facing the other side of globalization. The Asian financial crisis made these negative aspects more conspicuous (see Sibal et al. in Chapter 8 of this volume).

Recent economic development in the Asian region has been increasingly dominated by two big countries (China and India), which have overshadowed the contrasting fortunes in other countries.¹ First, as Table 1.1 shows, economic performance in terms of GDP is relatively good compared to other regions. Most countries managed to grow at more than 4 per cent in the first half of the 2000s. However, strong growth rates in newly emerging countries such as China and India are in contrast with rather sluggish growth in the ‘old’ tigers such as the Republic of Korea and Malaysia.

Table 1.1

Key indicators in Asia and the Pacific, 2000–2005

Source: ADB and ILO labour statistics.

Note: − = not available.

In many cases, strong economic growth is associated with greater ‘economic openness’ when the latter is defined as the trade share of GDP. Again in China and India, the share of foreign trade in GDP has increased considerably over the last five years. Yet, such positive correlation between GDP growth and economic openness