Regional Study on Labour Productivity in ASEAN

Driving forces that affect labor productivity in the ASEAN have been changing rapidly and constantly. Labor productivity is measured as output per unit of labor input. In general, it is improved by investments in capital, technology, and human capital. Economic environments increasingly affected by globalization, the digitalization of economies, and aging populations will also specifically affect the labor productivity of ASEAN Member States. Globalization can be defined as the reduction of trade and investment costs or the process of increasing the interdependence of the world’s markets and businesses. Globalization can be linked with productivity in various ways, including trade liberalization, exposure to new technology, and FDI. Globalization involves global value chains (GVCs), where different stages of the production process are located across different countries to capitalize on their comparative advantages. Advances in digital technologies such as artificial intelligence, cyber-physics systems, and the internet of things have spawned the Fourth Industrial Revolution affecting and disrupting all sectors of the global economy. They are transforming the way business and production methods are run, how work is done, creating new business models, and replacing old management practices with new innovations. ASEAN Member States have experienced an increasing share of elderly population and a declining share of youth in recent decades. Workforce aging has direct implications for labor productivity. A more mature labor force will have higher average levels of work experience, with potentially positive effects on productivity (Disney, 1996). The stock of workforce skills is likely to become increasingly dated as the average age of participants in the workforce rises, with negative effects on innovation and productivity.