Human Capital Conference Belguim 17 Dec 02

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How do Asia/Pacific countries compare?

Raymond Torres, OECD
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Asia/Pacific countries do relatively well
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Ageing is a common challenge to all
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Asia/Pacific economies grow fast (except Japan)
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Key issue in the JS reassessment are welfare
benefits and regulations bad for jobs?

• Welfare benefits may inhibit work incentives
• Labour regulations (minimum wages, dismissal
  regulations, etc.) may
• make employers reluctant to hire (lower labour
  demand) and
• slow down allocation of resources (lower labour
  productivity

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Point 1 If well designed, welfare benefits may
promote labour supply

• The mutual obligations approach
• Governments offer good re-employment services,
  financial incentives to work, non-financial
  services like child-care the rights
• Beneficiaries should take active steps to find
  work the obligations
• This may require a minimum wage set at right
  level
• gt This can be very effective to bring
  disadvantaged groups into employment

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Asia/Pacific spending on ALMP is less than
average
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Point 2 Employment regulations can be made
consistent with employment

• Overly rigid dismissal regulations can be big
  problem
• It can inhibit job creation,
• Contribute to labour market duality and
• Reduce mobility
• But some degree of regulation can help
• This will force firms to internalise cost of
  dismissal decisions see Austrian reform,
  experience rating in the US
• Helps find better job match (productivity)
• gt Wage flexibility and/or training needed

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Union density and collective bargaining coverage
in Asia-Pacific are low (except Australia)
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Big shift away from low-educated employment
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Training reduces the risk of unemployment
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Pros and cons of different strategies

• First option not doing anything
• deregulation approach (low benefits, low EPL)
  
• enhances work incentives and labour demand
• cheap for public purse
• But not enough in certain cases (lone parents)
  ...
• ... And does not help improve career prospects
  and may lead to labour market insecurity

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• Flexicurity (adequate benefits, strong
  activation, low EPL) - anglo-saxon countries
  moving in this direction?
• Promotes participation
• Reduces demand-side barriers
• But it is costly and complex vis-à-vis
  deregulation
• And it implies workers accepting low EPL
• gt Ok if evaluation in place, social consensus
  and training providing by government

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• Internal flexibility (high EPL for regular
  workers, wage flexibility, firm-training)
• Promotes adjustment within firms through wage
  flexibility (Japan, Korea -- Mexico?)
• Maintains employment security
• But at the cost of duality (rising incidence of
  non-regular jobs)
• gt Requires innovative ways to provide EPL

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Thank you