Article: Labor mobility's impact on HR's future in ASEAN

Strategic HR

Labor mobility's impact on HR's future in ASEAN

Labor mobility has been a key objective in the economic group of ASEAN. But with digital changes making job structures more vulnerable to change, what does the future hold for HR professionals?
Labor mobility's impact on HR's future in ASEAN

Demand and supply often work like two forces that come together at an equilibrium, balancing each other out. In a free-market structure, this principle is held to be true for all factors, from setting the price of a commodity to firms having access to the right talent. But often establishing such an equilibrium becomes a tough task, as is the case in the latter situation.

Jobs distribution and the availability of talent are often limited by factors like geography, demographics composition, and skills distribution. Often firms have inadequate access to talent where for some portfolios, the availability of talent far exceeds its demand while in other cases, the demand outstrips the supply. While this is the case for many labor markets across the globe, the case with the ASEAN regional group has grown in importance in the region. And for HR professionals in the region, the availability of skilled talent plays an important role in making sure their firms can remain profitable.

The working population of the ASEAN member states constitutes one of the largest in the world and is growing at a fast pace. To be able to tap into this potential successfully would mean to allow working people in search of jobs to move freely across the region. This urgent need for talent mobility across ASEAN countries was soon formally recognized. Thus, the ASEAN Economic Community (AEC) was inaugurated back in 2015.

The initial vision of AEC was the establishment of a single market and production base that creates better economic opportunities for the region by allowing, among other things, a “free flow of skilled labor” as experts put it.

The impact of digital technology

But envisioning the establishment of a single market is far from actually being able to achieve it. For HR professionals this means a talent landscape that has remained marked with skill inequalities and inefficient hiring mechanisms. And for many, the increasing scope of digitalization across the region poses newer challenges. Digital technology is radically reshaping the many key industries across the landscape while online platforms and startups have begun growing in number leveraging the rising digital population within ASEAN. This spur in the digital economy has left many HR leaders with limited talent options and many have begun extensively looking at reskilling initiatives while skill gaps across the region persist. The shortage of skilled labor and skills gaps have plagued Southeast Asian nations for many years, preventing economies from reaching their full potential. Greater labor mobility under AEC was supposed to be the solution but little progress has been made so far.

Rising mobility: a boon or bane?

The benefits of streamlining labor mobility across the ASEAN region has many positives. Not only would integration of markets, as envisioned under AEC, would lead to better flow of talent but it would also help companies to create more value, thereby further propelling the business into the future. A study by the Asian Development Bank (ADB) and International Labour Organisation (ILO) suggested that greater integration under AEC could raise aggregate output by as much as seven percent and generate around 14 million additional jobs across the region. Increased integration has the potential to bring about significant productivity gains that will shift the region’s global market competitiveness towards higher value-added production, and away from an over-reliance on low-skilled industries.

For HR professionals, this provides a more streamlined way of hiring talent and planning for skill changes that might impact the market. It also helps them use technology more effectively in transferring lower-skilled jobs into ones that add more value to the company. With the rise of automation and AI, the threat of low-skilled jobs getting displaced is quite real and for HR professionals, rising labor mobility and the eventual vision of unifying and streamlining access to different markets would present as a game changer within ASEAN.

But not all are equally enthused about the option. With skill distribution being unequal across the region, many believe centralization of markets and removing all restrictions to the flow of labor might create more problems for the local population than previously assumed. Currently, according to a World Bank estimate, Singapore, Malaysia, and Thailand attract the bulk of migrant workers in the region, many of them lower-skilled. Altogether, they take in 6.5 million ASEAN migrants, 96 percent of the total. While such a one-sided flow of labor might cease, countries like Cambodia fear that with the ease of labor regulation, skilled professionals from outside the company would take up top jobs in the country, leaving little opportunity for those left. And it's not just Cambodia that has such fears. Countries like Singapore too have begun putting a limit on the number of foreign workers, especially in highly skilled areas, that accept within the country. The fear of digital change has made many within ASEAN wary of the overly liberalizing flow of talent.

As HR professionals within ASEAN, how the issue of talent mobility shapes up is going to be a major factor that shapes the future of the function in the coming years.

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Topics: Strategic HR, #MyNextCurve

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