Does demography determine talent?

Among the map of forces that shape a business environment, one of the permanent, pertinent and powerful factors is a nation’s demographics. Policymakers can outrun a lot of things to support businesses—they can change laws, correct for mistakes made in regulatory systems and business codes of conduct, as well as offer incentives for attracting investments—but one of the most difficult things to change, once it is put into place, is demographics.

Asia is a very complex place to describe in one word. In so many aspects, its demographics are diverse and defy any kind of homogeneous analysis. While birth rates can say a lot about an economy at a macro level, there are also the micro-level demographic issues that can begin to crop up, creating opportunities as well as challenges. My observation is that, over the last 15-20 years, we are seeing a movement from farms to cities that has gained momentum. While this trend is not new to developing societies, the pace and scale at which it is taking place in Asia, its impact on urban and rural regions, combined with the complacency of policymakers, call for grave attention.

Throughout Asia, younger populations are moving to regions of economic buoyancy. In Vietnam, there is a movement of young population from the North to the South in search of better work opportunities. In Myanmar, while a lot of the IT training is being offered in Mandalay, most IT firms have set up shop in Yangon, resulting in a similar internal migration. And Bangkok and Manila are also facing an influx of labour. And where today’s young population settles to begin their careers says a lot about this generation and the next.

This clustering of people and businesses puts pressure on housing, transportation, natural resources, and public services. Simultaneously, this migration leads to a massive hollowing out of talent and skill in the countryside, the rice bowl of these economies. Furthermore, foreign investors are attracted to countries either because they can tap into an expanding consumer base or a growing pool of skilled talent. But the two go hand-in-hand: a well-skilled labour force has access to lucrative employment opportunities and eventually constitutes the middle-class consumers that all businesses target. In contrast, if the urban migrants are unable to find jobs due to lack of appropriate training and upskilling, then it creates a burgeoning segment of urban poor who lack affordability and purchasing power. Inequalities then emerge and social tensions become more pronounced, impacting the overall wellness of life.

Taking a leaf from the United States?

Western development models may not always be relevant for contemporary Asia, but perhaps the U.S. education model offers some guidance for developing countries today. The Land Grant universities of the U.S. established in the late 19th century paved the way for a much more geographically balanced growth. Many of these universities were set up in the South, Southeast, Midwest and far West—far from major cities, which had by the mid-20^th century already started attracting the nation’s young population.

By the 1970s and 1980s, these universities spun into new towns and cities, and businesses began to set up shop near these repositories of educated labour. This set off a virtuous circle of development—businesses came in, student graduates got jobs, settled down, had babies, and contributed to the local micro-economy—and a vibrant ecosystem began to form around these academic institutions, preventing the exodus to big cities. Moreover, many satellite tech hubs—Austin, Madison, Columbus—emerged in what were formerly labelled college towns.

Austin, Texas is perhaps an aspirational example of a sustainable growth story. What was the 73^rd largest U.S. city in 1970 is knocking on the door of the top 10 today. While it was unimaginable to get a job in Austin in the years prior to the 1970s, today it is a buoyant, independent economy with factories, and even headquarters of major semiconductor companies, equipment makers, software companies, test equipment suppliers, and the like. Austin’s story showcases a model for how economic centres can begin to be created around a first-class university.

What happened in the U.S was perhaps not by planning but by happenstance, but it ended up working well for the nation. Asia, however, needs to show greater preparedness as the future is churning faster and the stakes are higher. Its university centres tend to be concentrated in the major cities, and all talent is already migrating there. And these cities are fast turning into time bombs, ready to explode.

What Asia will look like in the future will depend on the decisions of today. Factory towns have sprouted up in Asia, but their pulling power is usually quite tied to the industrial lifecycle. Knowledge and universities tend to outlast these cycles. Perhaps India is sowing the seeds of what the future might hold in Asia. The mandate to contribute 2.5 percent of pretax profits to charity has led to the establishment of many business-family based universities. Perhaps these are the starting places for the intellectual breakthroughs that will help the country succeed in the new knowledge economy. Similarly, in the Philippines and Indonesia we see large private businesses establishing universities in an effort to develop skilled workers for their growing operations.

Skills development in Asia

New technologies and artificial intelligence (AI) are also radically altering talent needs, and will eventually result in a transfer of wealth within nations. I feel countries like Singapore, Taiwan, Japan, Korea, and Germany have rightly jumped on the bandwagon to adopt AI-enabled technologies that will automate or augment much of their ageing/declining workforce. Much of Southeast Asia is also moving in this direction—as the demographic bulge is very fast wearing thin. I have observed the challenges the Philippines’ business process outsourcing (BPO) industry is currently facing—while the population is still growing, skills are not. For the BPO industry to evolve and grow with changing demand, the Philippines now needs an upskilling of its workforce. And countries with healthy population growth will use AI to better connect with customers. So different countries will approach this new era of data science in different ways. But either which way, the workforce will need reskilling and upskilling.

The continuous migration of young people will set the pace for how countries develop for the next 20-30 years. And once set in place, the momentum of these demographic trends will be difficult to change. So policymakers need to understand that, ‘Where the young people go, so goes the future.’ Demography alone does not determine talent; proactive investment into hard and soft infrastructure does. If the right environment is not created, the demographic bonus can very quickly become a curse. Governments and industries in Asia can either take a field position under their desks and wait for it to occur, or they can step up and make the appropriate changes and preparations.

Dr Philip Zerrillo
is the Editor-in-Chief of Asian Management Insights and the Executive Director of the Centre for Management Practice, Singapore Management University