In a new era of growing protectionism, global trade – a key driver of economic growth in Asia – is bound to become more subdued – an enormous challenge in the fight for economic inclusion. To bridge the gap of rising income inequality, J.P. Morgan has initiated to advance economic mobility, employment opportunity and relevant skillsets in a fast-changing global market with solutions driven by empirical evidence, data, research and analysis of real-time market dynamics
By Kenny Lau
The global economy is undergoing a drastic transformation and is presenting more than a few socio-economic challenges across the globe. In the US, middle-class families are facing the daunting reality that in 2015 they officially became a minority in what appears to be a shrinking middle class, despite the rise of US income by more than a third since 1970; their median incomes have decreased by 4 percent since 2000, and those of lower-income households have fallen by 9 percent.
Likewise, 12 out of 30 developing economies in Asia covering 82 percent of the region’s population have had a worsening “Gini coefficient” – a measure of income distribution –in the past two decades, and are found to be above the defining mark of 0.40 – which is the threshold for “high inequality,” according to the Asian Development Bank. In other words, while rapid economic growth in Asia has reduced poverty significantly, it has also widened the income gap in many countries.
In a new era of growing protectionism and anti-globalization sentiments, global trade – a key driver of economic growth in Asia – is bound to become even more subdued, giving rise to another set of challenges in the fight for economic inclusion and against income disparity. For Asia – a region which drives a significant part of global economic growth and a region where 60 percent of the world’s population resides – stability and financial resilience are simply too important to ignore.
The Asia perspective
How Asia can sustain growth inclusively in a new environment is a challenge in which policymakers and corporate leaders have an equally critical role to play. “Improving the quality of growth for a region as dynamic, diverse and non-homogenous as Asia is a very demanding task,” says Nicolas Aguzin, Chairman and CEO of J.P. Morgan in Asia Pacific. “The need for more inclusive and sustainable economic growth in Asia has never been more pronounced than today.”
And the private sector has an obligation to rise to the challenge, he adds. “Contributing to sustainable economic growth in the communities where we operate has been a key component of our strategy, globally as well as in Asia Pacific. The unprecedented changes underway in Asia, although challenging, are bringing remarkable opportunities. We are striving to ensure everyone can benefit from them.”
The question is whether a global financial services firm has a role to play and can be part of the solution by addressing these challenges head-on, and the answer is a resounding “yes” because it makes good sense to strive for sustainable development economically, socially and environmentally. It’s good when more opportunities are created; it’s good when more people can participate in – and share the rewards of – an economy; and it’s good when more communities can prosper.
The firm is planning to deploy US$1 billion towards programs focused on expanding access to opportunity and advancing economic mobility around the world and in Asia over the next five years. This is to support a wide variety of initiatives that increase employment opportunities for disadvantaged communities, sustain and grow small businesses, and enable marginalized people to access and benefit from affordable financial products.
The initiatives are driven by empirical evidence, data, research and analysis of real-time market dynamics to advance economic mobility, employment opportunity and other relevant skillsets in a fast-changing global market – all to bridge the gap of income inequality. The firm’s unique expertise and global reach allow for impact on a scale few organizations can match.
J.P. Morgan has committed to a series of workforce readiness initiatives across the region, joining forces with the public sector and academic partners.
The firm as a strong advocate of human capital development has taken significant steps to help narrow the skills gap between the rise of new, fast-growing industries and the issue of high youth unemployment in Asia Pacific by addressing the unique challenges facing emerging countries across Asia as they transition into an innovation-led growth model allowing their industries to move up the value chain.
“Building a bridge between employers, job seekers and education and training providers is a very powerful tool in addressing unemployment, particularly in Asia where high-growth industries are seeking mid-skilled labor while navigating vast developmental and geo-political diversity,” says Chauncy Lennon, Head of Workforce Initiatives at J.P. Morgan.
The firm’s workforce readiness initiatives have helped to create nearly 50,000 new jobs, placements and internships across Asia Pacific, and they leverage J.P. Morgan’s collaborative efforts with regional academic institutions, supporting research and turning insights into employable skillsets for young people from disadvantaged communities, who are often left behind.
Closing skills gaps
Over the past year, J.P. Morgan supported Tsinghua University and Fudan University in determining the nature of the skills supply and demand in China – a country whose macroeconomic transformation has resulted in a widening mismatch of labor skills – focusing on issues having to do with how to improve the quality of the labor force.
The report, Skills Shortages in the Chinese Labor Market, highlights the shortage of adequate skills demanded by enterprises looking to move up the value chain, with recommendations for a diversified vocational training and public education system through government support and greater participation of the private sector. The firm is now partnering with the China Development Research Foundation to provide market-led technical and soft skills training to vocational school students.
The firm is also expanding its efforts in better understanding the changing labor market, identifying new opportunities and developing strategies for disadvantaged communities beyond Mainland China. The five core countries of the Association of Southeast Asian Nations (ASEAN-5) – Singapore, Malaysia, Thailand, Indonesia and the Philippines – were found in a commissioned study to have a shortage of skilled workers to varying degrees.
The study by Singapore Management University, Managing Skills Challenges in ASEAN-5, reports a consistent shortage of industry-ready workers equipped with relevant technical and vocational skills in these countries, particularly in the ICT sector, which may hinder their growth potential. Tackling the shortcomings identified in the report, J.P. Morgan is now supporting the Education Development Center to prepare disadvantaged youth for employment in tech-related sectors.
In India, where J.P. Morgan has a large presence, the firm is bridging the gap between education, employability and employment. Programs supported by the firm are helping change the way skills development is introduced in schools, furthering employer-driven vocational training and engaging employers so that they recognize the value of hiring based on skills and competencies.
Here in Hong Kong, it has partnered with the YWCA in the “Road to Success” program to help sub-degree students improve their career prospects – and 120 recruits have since completed their pre-employment training and are being placed in different capacity of employment.
Small businesses, big impact
Globally, there are 450 million entrepreneurs contributing to human innovation and creativity, according to the United Nations’ 2015 Human Development Report. Like their counterparts across the world, small businesses are a critical component of any local economy throughout Asia. Small- and medium-sized enterprises (SMEs) employ over half of the workforce, with a share of GDP ranging from 20 to 50 percent in the vast of the Asia Pacific Economic Cooperation (APEC) economies.
Despite their vital role in supporting employment and the overall economy, SMEs often lack access to the resources they need to sustain and scale their operations – a challenge J.P. Morgan is tackling amid a recognition that SMEs are engines of job growth, laying an essential foundation for healthy, thriving communities.
“Capital is key, but without access to the right technical skills, networks and mentors, small businesses will have a difficult time getting off their feet,” says Diana Tsui, Head of Global Philanthropy for Asia Pacific at J.P. Morgan. “Across Asia Pacific we fund non-profits that connect underserved entrepreneurs with crucial resources they need to help them grow.”
In China, J.P. Morgan is supporting the China Foundation for Poverty Alleviation (CFPA) in accelerating the growth and expansion of Beijing Zhong He Nong Dao Technology Ltd, a social enterprise established by CFPA to help increase the competitiveness of low-income micro-entrepreneurs and their enterprises’ value by improving their agricultural product quality and sales through an e-commerce platform.
Locally, it is partnering with the Hong Kong Council of Social Services to implement the Small Business Advancement acceleration program, a pilot initiative that is seeking to gain a granular understanding of the challenges facing SMEs to be able to provide targeted capacity-building services to small businesses operating in underprivileged communities in Hong Kong.
The program aims to contribute to developing a viable ecosystem conducive to the growth and development of micro and small businesses in a sustainable manner.
Helping individuals acquire the knowledge, skills and tools needed to promote financial security creates greater financial stability, improved economic opportunity and stronger, more resilient communities. In Asia Pacific, J.P. Morgan focuses more on facilitating access to – and usage of – relevant, cost-effective financial services and products for the poor.
In India where the government has ensured that access to the banking system is pervasive, J.P. Morgan is focusing on enhancing usage of bank accounts and appropriate financial products to help low-income households build assets and reduce their vulnerability to shocks, such as death and illness.
It is working with the Institute for Financial Management and Research as well as the Institute of Rural Management Anand to map out the innovations in digital financial services and understand how India’s growing digital footprint can be leveraged to make financial services more inclusive.
In the Philippines, where there are only about 75 financial service access points for every 100,000 adults, J.P. Morgan is supporting the Grameen Foundation in building an interoperable, last-mile, agent network that will deliver financial services in rural areas through mobile-enabled payment platforms.
Recognizing the need for viable solutions to product usage, the firm is also supporting ideas42 in the Philippines to test and adapt scalable versions of a promising savings product as a way to advance scale-oriented innovation aimed at increasing formal savings for the poor.
One of the most urgent challenges facing the world is the need for increased economic opportunity and more widely shared prosperity, Tsui stresses. “As one of the world’s largest financial services companies, we have a responsibility to make a difference, and we believe our strength, global reach, expertise and access to capital allow us to support and invest in local communities where we live and work.”