Skill shortage

Upbeat talk about skilled labour mobility in the Asean Economic Community has not yet been translated into action. By

The shortage of skilled labour and skills gaps have plagued Southeast Asian nations for many years, preventing economies from reaching their full potential. Greater labour mobility under the Asean Economic Community (AEC) was supposed to be the solution but little progress has been made so far.

International organisations and labour experts point to a number of barriers to mobility. They include restrictions in terms of labour migration policy, the lack of standardised labour market tests in the same language, and the lack of information regarding the job markets in each country and in the Asean as a whole.

The International Organization for Migration (IOM) says there needs to be consistency between labour market needs in Asean member states and the policies to meet those needs.

“Almost all of the (Asean) member states report shortages of skilled labour, particularly in the priority professions identified by Asean for the free movement of labour, with similar challenges in the labour markets including a skills mismatch and over-reliance on labour-intensive industries,” Euan McDougall, the IOM’s programme manager, told Asia Focus.

If any Asean member state has a labour shortage in a specific area but the policies and regulations do not allow for efficient movement of labour supply to meet those needs, then arguably the productivity of the region will suffer as a whole, he said at the launch of the IOM’s research study “Preparing for Increased Labour Mobility in Asean” in Bangkok last month.

There is a need to look at each occupation to see where specific gaps exist, where they are not being met, how that affects overall output, and how foreign workers might help to meet that need, he added.

“Foreign workers are just one way in which the shortages of skilled labour can be met,” said Mr McDougall. “There may be others such as training of workers or changing to more technological solutions but in a perfect world, we would like to see migrants have the ability to meet the need for their skills in the labour market and not be restricted by national barriers.”

Although each member state has different regulations, labour market tests are the most common tools used in Asean to restrict the entry of migrant workers. Typically there are more demand-side restrictions than there are on the supply side. On the demand side, the restrictions mostly deal with criteria that employers in the host country must meet to legally employ migrant workers.

Other policy tools that are used most frequently include: the requirement of a job offer and a related requirement of self-sufficiency; employment restrictions by sector and/or occupation; specific skill requirements; fees that employers need to pay, and quotas. Local-language tests can be another barrier.

Susan Stone, director of the trade and investment division at the United Nations Economic and Social Commission for Asia and the Pacific, noted that most studies show a positive link between mobility and productivity, where firms engaged in some form of intermediate labour imports tend to have a 38% higher productivity level than those that are not.

“Allowing firms to avail themselves of the most productive resources would certainly raise their productivity,” she told Asia Focus.

Countries need to follow a two-pronged approach, she said, with improving education the long-term strategy. “So in the short term you need to be open to importing and having labour mobility cross borders to increase productivity.”

INFORMATION GAP

The IOM report revealed that most Asean countries lack accurate information about labour market conditions, and governments use secondary data rather than conducting a primary analysis of the shortages. Meanwhile, migrant workers in the region, or even workers in general, are not always well informed about where the job opportunities are, and employers also are not well informed about where they can find workers.

A focus on official information provided by governments is useful in discussing the current state of clarity and transparency of immigration policies, but most governments in Asean provide very limited information in English about their immigration policies for admitting skilled migrant workers, it said.

Singapore and Malaysia have the best information publicly available and also host the highest numbers of skilled migrant workers. Singapore’s Ministry of Manpower and the Contact Singapore website provide very detailed information on various skilled labour information programmes, laws and regulations governing them, and requirements for employers and foreign workers alike.

Meanwhile, there is also an absence of migrants’ networks across the region which is one of the most common ways, besides private recruitment agencies and direct contact with employers, for skilled foreign workers to learn about job opportunities.

“Enhancing this information is certainly a big issue and it is one of our recommendations in the report,” Mr McDougall said.

“We also suggest that, perhaps, at the Asean level they can come together and agree on some common way to assess labour shortages so that they can be more comparable.”

Another recommendation from the IOM is that the policy framework and labour market conditions should be more closely intertwined so that policies can facilitate movement where there is a need.

Nevertheless, Mr McDougall noted that lowering regulatory barriers in itself would not necessarily solve the mismatch between demand and supply since there is still the need for appropriate training and education.

Asean is working to expand its Mutual Recognition Arrangements (MRAs) to support easier movement of skilled workers in certain professions, but major recipient countries such as Singapore and Malaysia continue to maintain tight controls on migrant workers. As well, discussions on the protection of the rights of migrant workers have made little progress, which has led to the lack of real skilled labour mobility, said Noppawan Chulakanista, managing director of JobsDB Recruitment (Thailand).

MRAs allow workers’ skills, experience and accreditations to be recognised across Asean in six sectors: engineering, nursing, architecture, medicine, dentistry and tourism. Two more agreements, covering surveying and accountancy, are in the pipeline. The six sectors already covered account for just 1.5% of the workforce in a region where 87% of migrant workers that are making a living in the region are unskilled.

The last talks regarding MRAs were in 2014 and involved accountancy. The first MRA was reached a decade ago in 2005.

THAI CONTEXT

Ms Noppawan said there was an imbalance between supply and demand in Thailand, where the most common problem was that students did not research the needs of future employers. Too many, she said, were choosing majors that were too broad and currently not needed by the market, such as social sciences.

“The Thai job market currently needs technicians, engineers, IT staff and accountants which require special courses but Thai students are not being encouraged to learn in these fields of study, acting on the misunderstanding that getting an undergraduate degree in any field is already good enough to get a job, where in reality, it is not,” she explained.

“Right now each country in Asia is trying to build its own capable workforce but there is no mobility between the countries and this is hampering the region’s output potential” CHATCHAI THNARUDEE Bangkok Insurance Plc

She said the extent of the mismatch in terms of supply and demand was most severe in the IT industry where digital marketing skill is the most needed at moment.

“According to our latest study, the average wages for traditional marketing and digital marketing differ by around 61%, which reflects the great need for workers with digital marketing skills in the IT market,” she said.

“If we want to move from Thailand 3.0 to Thailand 4.0, then we need this kind of skilled labour to help with the shift,” she added, referring to the Thai government’s strategy to shift away from the Thailand 3.0 model that focuses on heavy industry toward Thailand 4.0, a value-based economy that involves using technology and innovation to achieve growth.

Chatchai Thnarudee, senior vice-president of information technology at Bangkok Insurance Plc, said the shortages in the IT industry had already pushed most Asian IT business operators to look for skilled labour elsewhere, including the US and Europe.

“The turnover rate for IT employees is already notoriously high in Asia and the extent of the shortage of skilled labour has led us to train existing workers in the traditional marketing sector to fill the shortages in the digital marketing sector; however, that is still not enough which has led to an import strategy,” he said.

Dr Chatchai said headhunting was expensive and since all IT operators in Asia were looking for similar IT skill sets, the best strategy is to outsource or import experts and specialists from abroad, such as the United States and the United Kingdom, to train local staff.

He urged that the government to lower non-tariff barriers and provide tax incentives to better facilitate the movement of experts and specialists from abroad in order to encourage the transfer of knowledge in the local IT sector.

“If there is a decrease in barriers and an increase in incentives for skilled workers, then there will be mobility and the increase in the supply of the skilled workforce will happen,” he said. “Right now each country in Asia is trying to build its own capable workforce but there is no mobility between the countries and this is hampering the region’s output potential.”

Ms Noppawan said the shortage of skilled IT staff and engineers was a worldwide phenomenon and not limited to Asia, because of the boom in digitisation. But the lack of mobility of skilled workers, who are blocked by non-tariff barriers in many countries, is certainly affecting the productivity of the region.

“There is a need to bring in new technology and mechanics to increase productivity but you also need to bring in someone that knows how to work the machines or someone that can come and train your workers how to work them,” she said.

“If there is a clear shortage in a certain industry and the country cannot build the required workforce fast enough, then there is a need to bring people in, from anywhere that you can, but right now there is no real mobility of skilled workers in the six sectors that are now allowed in Asean even though there are MRAs in place.”

Suthad Setboonsarng, a former Asean deputy secretary-general, agreed that solving the skills mismatch was one of the most urgent economic challenges facing the region.

“The important factor influencing the future trend of trade in Asean is the labour market. In the next 15 years, by 2030, the working population in South Asia will surpass that of Northeast Asia,” he said at the Trade and Development Regional Forum 2016 arranged by the International Institute for Trade and Development in Bangkok last month.

“This imbalance in the amount of supply of workers in Asia, which is one of the fastest-growing populations in the world, will actually define labour market movement in the next 30 years and it will become an issue that countries will have to address.”