Utilization of Labor in South Asia

The dominant productive resource of an overwhelming majority of households in South Asia, if not the only resource, is their endowment of labor. How this resource is utilized at each point of time and over time depends on the evolution of the framework governing the decisions of employers and households about their production, consumption, labor force participation, employment, schooling and accumulation, as well as public policy interventions intended to influence them. The interaction of these decisions in the short and long run determine in large part the outcomes, such as the evolution over time of aggregate and sectoral growth, employment and unemployment, as well as poverty. I deliberately avoid the use of the phrase “labor market”. In my view there is no national, unified and dynamic market in the sense used in analyzing labor markets in developed countries and in which a structure of equilibrium wages, equating the demand for labor of various skill categories with their supply emerges at each point of time. I attempt an analytical description and discuss the policy implications. The implications are meant to improve the existing framework in which labor use decisions are being made in the transition, which is very likely to be long, towards the challenging goal of creating an integrated and efficient national market for labor. The overarching national objective of all countries of the region, namely, to alleviate mass poverty and eradicate it within a reasonable time horizon, will further recede into a very distant future without a vastly improved framework.