Australia
China
India
Indonesia
Japan
Malaysia
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Asia’s labor market has exhibited diverse trends in 2023, signifying a dynamic and evolving environment. Digging deeper, Shehriyar Antia, Head of Thematic Research at PGIM, discusses a range of factors shaping the continent’s labor industry and its potential implications for economies and investors.
Among its many tragic consequences, the pandemic left labor markets in turmoil. Within a matter of weeks, hundreds of millions of workers around the world saw their income reduced or disappear entirely.
This immediate crisis obscured three long-term, structural changes that were already underway, which will ultimately have a significant impact on reshaping the global workforce and economy.
Three forces driving global labor markets
First, demographic trends are powerfully reshaping the global workforce, creating a new and highly differentiated regional map for labor markets. In China, Thailand and Korea, for example, where there was once a demographic dividend, there are now shrinking working-age populations.
Second, the structural mismatches between labor demand and supply are being amplified. With the “golden era” of globalisation over and a resurgence of industrial policy and onshoring of critical products, these mismatches are likely to accelerate.
Third, AI is the latest chapter in the complex relationship between labor and technology. It promises to take automation from the factory floor to the office. This would lead to the gradual replacement of jobs in service industries such as law, finance, pharma research, and education.
Reshaping the macro landscape
What kind of impact will these forces have on future inflation, economic growth and fiscal spending patterns?
Inflationary impulses arising from ageing populations will possibly dominate, and most economies will experience inflation because of their older demographics. Japan’s disinflationary experience will likely not be representative or easily repeatable as globalisation has lost considerable momentum. Also, shrinking national pools of labor is now more widespread.
However, if left unaddressed, countries suffering from shrinking working-age populations will see a decline in both their potential and actual growth rates for multiple reasons. Total factor productivity tends to decline with ageing populations as an ageing workforce negatively impacts areas that influence growth potential.
This includes investments, innovation and technological progress. Additionally, the total hours worked will likely decline unless productivity rises to compensate. This phenomenon will also adversely impact overall growth.
All in all, many emerging markets are set to experience rapid ageing and lower levels of wealth and fiscal strength than many developed countries that went through a similar demographic transition.
Those emerging markets that face the sharpest rise in dependency ratios and currently have challenging fiscal situations will face the most acute strain and are especially at risk going forward.
Which countries will benefit from changes in Asia’s labor markets?
The reshaping of Asia’s labor markets will create a new set of winners and losers by industry and region, and it will be essential for investors to understand the far-reaching implications of these new dynamics. Many of the current leaders will struggle to meet future demands for labor.
In Asia’s labor markets, China and India will be greatly challenged to meet their future demand. China’s steep demographic drop-off and net negative migration have left it low on labor supply. While India’s demographics are not as stark as others. However, the country falls short of retaining talent and attracting capital.
In this new era of labor dynamics, Singapore and Australia are likely to gain prominence as regional leaders. Their small and ageing populations are likely to be supplemented by extensive work visa programs that target specific skills. These two countries also do a good job of attracting and retaining global talent along with being attractive destinations for capital.
Malaysia is also fairly well-positioned for the future. It is ageing less rapidly and is more open to immigration than Thailand, Indonesia and the Philippines. Malaysia is also an easy place to do business and an attractive destination for capital.
Opportunities in renewable energy, semiconductors and senior care
Industries likely to see the most growth in employment in the next five years include renewable energy, semiconductors, as well as senior care.
The green energy transition will continue to drive demand for solar panel and hydrogen fuel cell technicians. For example, according to the Australian Renewable Energy Agency, under the coordinated action scenario, up to 1.35 million jobs can be supported across the Australian energy system by 2050.
This will be possible through investments in key renewable energy infrastructure. Along these lines, Singapore’s clean energy workforce is projected to increase by 80% till 2032, reaching around 2,700 workers.
Separately, by 2030, the global semiconductor sector will require at least one million more skilled workers. This is because, by that time, demand for chips will soar by 80% above 2021 levels.
Also, employment in medical services and elder care services combined are expected to grow by 40% by 2030. By the year 2050, around 3.5 million Australians will be accessing aged care services, calling for a workforce of almost one million aged care professionals.
By 2032, nearly one in four Singaporeans will be over the age of 65. And according to projections, family eldercare services will increase by 41% by 2030. Meanwhile, workers in industries like simple manufacturing and professional services may be displaced as new technologies like AI increase productivity.
For investors, it is critical to recognize that the winners and losers in Asia’s labour market are not predetermined and will depend heavily on the quality of responses and actions by governments and firms moving forward.
Shehriyar Antia
Head of Thematic Research
PGIM
Shehriyar Antia is an award-winning macroeconomist with capital market experience in Asia and the US. He spent several years in Tokyo on FX and bond trading desks before returning to his native New York. Following graduate work in economics, he joined the Markets Group of the Federal Reserve Bank of New York in 2003. There he specialised in monetary policy and its impact on financial markets. Antia joined PGIM in 2019.
