March 8th was International Women’s Day, a day when much is said about the role of women in society, including female empowerment through, and in, the labour force. With this in mind we can step back and consider not just the personal and microeconomic implications, but also the macro consequences of varying female workforce participation in Asia.
Excluding, for a moment, the communist countries of China and Vietnam where government ideology and policies notably altered workforce dynamics, Thailand (and IndoChina broadly) actually ahs the highest rate of female participation in the region, and indeed one of the highest in the world given its level of economic development. In contrast, Malaysia has one of the lowest, even lower than neighbouring Indonesia. This has numerous implications.
First of all, Thailand’s demographic profile strongly resembles that of (better known) CHina. The working age population has started to shrink in response to a long-hence fall in the fertility rate (in part due to the pioneering familyb planning work of Mechai Viravaidya), the country is potentially reaching a point of social saturation with the level of immigration (not to mention improving economic prospects will likely see some emigration back to Myanmar), the number of women in the workforce is close to maxed out, and it is unclear if, as is the case in China (but interestingly not Japan) poor health outcomes in the older generation make extending the working lifespan an infeasible solution. In short, growth can no longer come from labour force expansion. Indeed, the Asian Development Bank estimates that the ‘demographic dividend’ enjoyed in much of Asia for the past 30 years will, for Thailand, shift to a demographic tax of 0.9ppt off trend GDP growth, which would leave Thailand growing old before it grows wealthy. Indeed, one way of viewing the growth slowdown in China since 2008 is not only the diminishing returns and productivity of infrastructure ivnestment, but also the peaking and subsequent diminishing of labour supply. But returning to Thailand, a quick glance at the indicators in Thailand defintely point to a tight labour market, with an unemployment rate consistently below 1%, and still solid private sector wage pressures despite extended sluggishness in the real economy.
In short, what this means for Thailand (and China) is the need for a substantial lift in productivity growth. A shift (in Thailand) away from subsistence farming in what is still a heavily agricultural country (66% rural population), a shift up the value chain away from textiles and lower value-add manufactured goods, heavier investment in secondary and tertiary education and training as has been advocated by the World Bank, put simply, Thailand needs to redefine its competitive advantages over the next decade to meet the demographic challenges.
Doom and gloom, however, is not the only consequence of these demographic dynamics. Rather, the propensity in Thailand towards high workforce participation and few children (factors that, from an economic development standpoint tend to be causally related) – Thailand has a below-replacement fertility rate of 1.4 children per woman – creates an interesting consumption pattern as well, from a larger pool of double-income families with few dependents. Or in other words, a mass of Thai households are now reaching the age and income maturity where financial services, property, and discretionary consumer goods will become increasingly important, fuelling stronger growth rates than, say, children’s products or non-discretionary items. The Thai consumer story has been well recognised by the market (and by industry, with a supply response already well advanced), the demographic impact on the financial services and property sector, however, has not. The consequences are not just for sectoral growth rates, however, but also for the sustainability of debt, where the systemic vulnerability of higher household debt levels (over which much concerned ink has been spilled) is lessened (improved) in an environment of two wage earners in secure employment.
Which provides us with a neat contrast point back to Malaysia, where debt servicing ratios are higher (~45% of income, vs ~32% in Thailand), the ratio of women in the workforce is much lower, and fertility rate higher. That is, Malaysians are supporting a similar household debt to GDP ratio, but in an environment of many more single income multiple dependent households, making the sustainability of debt growth lower, along with discretionary purchasing power weaker. That is, the same underlying consumption support and shift in consumer behaviours are unlikely to occur in the same manner in Malaysia owing to differing demographic, particular gender-related, dynamics.
The positive story for Malaysia (and notably India) however, comes from any ability of the respective governments to push pro women in the workforce policies, something which Malaysia noted in its 2014 Budget but is yet to bare fruit on implementation. This dynamic could provide a substantial uptick to long-term growth rates.
In short, there is a lot more than empowerment at stake in female workforce participation.