Young Dynamic Labor Force Makes Cambodia The Best Country To Invest In
Multinationals have been keen on setting up their headquarters in Cambodia because of its productive labor market. In this article, we’ll talk about why companies are coming to the country not solely because of cheap labor anymore, but also to take advantage of the demographic sweet spot of Cambodia: the young, dynamic & tech-savvy population.
Cambodia is one of the countries with the highest labor force participation in the world, in fact the highest in Southeast Asia. The so-called “labor force participation rate” simply refers to the percentage of the total number of persons in the labor force (particularly under the production of goods and services) to the population of 15 years old and over. Jumping from 83% labor force participation rate in 2015 to an all-time high 87% in 2018, the latest record of Cambodia is at 84.9% labor force participation rate dated 2019 (Statista).
Based on World Bank data (2020), there are about 11.8 million or 70% of all Cambodians—ages 15 years and older—within the said age bracket. Out of the 15 years and above population, around 10 million people are in the labor force. This is approximately 59% labor force participation rate, if the case was over the total population of the country.
Such high labor participation and productivity are greatly attributed to Cambodia’s growing young and dynamic labor force.
LARGE & GROWING YOUTH POPULATION
The history of Cambodia during the Khmer Rouge had a great impact on the economy up until today. It left the country with a very thin population, of which female is the majority. Because of this, a baby boom caused the population to surge shortly after the term of the Khmer Rouge.
In the 1998 census, the population was recorded at only 11.4 million people whereas 52% were female. Today, the total estimated population in Cambodia has reached over 16.9 million people; hence the population grew by 5.5 million people between 1998 and 2021. This counts all residents regardless of legal status or citizenship.
The total population is characterized by gender, age group, and residency in both urban and rural areas.
- The male population is 8.2 million which is 49% of the total population. Meanwhile, there are 8.7 million females in Cambodia which is 51% of the total population. (World Bank 2020)
- Over 5 million people, representing 30% of the population, were aged 0 to 14 years old. About 11 million people, aged 15 to 64 years old, represents the 65% of the population. Some people—ages 65 and above—are around 777,475 which is 5% of the total population. (World Bank 2020)
- In rural areas, the total population is 12.4 million people which is 77% of the total population. While in urban areas, there are a total of 3.8 million people which makes up the 23% of the total population. (World Bank 2020)
Half of the total population (the sum of 4.8 million males and 4.9 million females) was comprised of early and prime working age population. Because of the demographic transition, more than the massive increase in population, the effect was more relevant in the dynamic of training age and working age population.
Cambodia’s education and vocational training systems not only had to face an initial situation characterized by an almost total lack of infrastructure and teachers, but also a very pronounced increase in potential demand.
Employment is the central means of earning money and for most, escaping poverty. Economically, employment expands the living standards and increases productivity in the country. So, where are the jobs in Cambodia?
Luckily, Cambodia is on the top among the countries with lowest unemployment rate in the world, according to the International Labour Organization (ILO). The employment of Cambodia is mainly distributed into three economic sectors namely agriculture, industry, and services.
In 2019, the services sector has been the largest employer with almost 38% of the total employment. Followed by the sectors of industry then agriculture. Industrial sector has contributed 28% of the total employment share, while agriculture has 34% of the total employed.
Interestingly, the employment in agriculture sector is gradually decreasing over the past years all the way to 2019.
Note: The employment rate refers to the number of people of working age in the population who are employed.
The Cambodia Socio-Economic Survey (CSES 2019) data in the labor force survey shows that Phnom Penh accounts for the largest share in employment in 2019, with a total of 76% employment rate. Other urban areas were reported at 85% and the employment in other rural areas was about 87%.
Of 8.8 million employed, based on CSES 2019 – 2020, men have the largest share of employment with 4.8 million employed compared to 4.3 million employed women. By sector, data shows that there are more men employed in the services and industry sector than women. But looking at the agriculture sector, there are more women workers with about 38%, than that of men with only 33% employment share. In general, the employment share between men and women slightly differ among the three sectors.
By occupation & gender, about 30% of the population in Cambodia mainly employed as skilled agricultural, forestry and fishery workers, whereas the majority are women with 33% share in employment. Same goes to service and sales jobs, of which 25% are women and only 13% are men. Data above shows small differences between women and men measured with an exception for plant and machine operators and assemblers, and in armed forces had much different rates. (CSES 2019 – 2020)
Nonetheless, the country is still labeled as lower-middle-income nation. The Ministry of Labour and Vocational Training announced that the basic minimum wage has now increased to $192 USD per month for 2021. It increased to approximately 13% from the basic minimum wage of $170 USD per month in 2018, which has also brought the average salary of workers to $207 USD to $218 per month. Inspite the rise in wage, Cambodia still ranked as the 4th lowest minimum wage among ASEAN countries, below Myanmar, Laos, and Vietnam, in order.
Cambodian Labor law states that the normal and legal duration of working hours is 8 hours per day, summing a total of 48 hours per week. Working overtime for employees must not exceed 2 hours per day. Therefore, the maximum working duration for each employee is 10 hours daily.
DEMOGRAPHIC TRENDS & LABOR MARKET
As expected, Cambodia’s population and labor force are mainly composed of youth and people with low lifestyle standards. The majority were aged 15 to 54 years old which makes up 59% of the total population.
Note: Labor force refers covers all individuals who are unemployed but seeking employment, fresh graduates who are first-time job seekers, and those who are actually employed, generally within 15 years old and older.
Statistically, the poor living conditions in some places of Cambodia have forced many people to start working at an early age in order to provide for their families. Some children, as young as 10 to 14 years old, are already seen working in the field.
The country’s labor force participation rate has steadily been 81% from 2015 to 2019 (World Bank). Of this, the most active participation rate were men with 91 % rate while women were just at 84%. Regardless of gender, the highest labor force participation rate were in the age group 25-44 years old with around 95% combined rate.
In general, the labor force participation rates for women were lower than the men in all age groups. The largest difference between women and men was in the age group 55-64 years where about 75 percent of the women and about 91 percent of the men were in the labor force.
Furthermore, Cambodia has a demographic labor force with remarkably low dependency ratio. Its birth rate has begun to decline and life spans have significantly increased. This means more workers and fewer dependents in the economy.
The country also has a very high internal migration rate that is substantially motivated by some economic factors. According to the University of Oxford, high immigration rate may indicate a productive economy as it is likely to increase the pool of workers in certain sectors of the economy and at the same time increase the demand for labor, as migrants expand consumer demand for certain goods and services. Nevertheless, the impact of immigration still critically depends on the skills of migrants.
Eversince the demographic transition between 1980 and 2010, Cambodia’s education and vocational training systems had to face a turmoil characterized by an almost total lack of infrastructure and teachers, in the light of its doubled training age and working age population.
Thus, Cambodia’s young and active population can either foster or constrain the development of the country. Their involvement in the country’s labor force still depends on the education and opportunities available for them.
EDUCATIONAL ATTAINMENT OF LABOR FORCE
Although most of the employed Cambodians are engaged in unskilled labor, the number of workers who have attained some education have already increased, meaning there are now less workers with no education. This suggests that educational levels among workers are improving, as well as the labor market quality.
This effect can be seen with the educational attainment of each age group in the labor force. Only 12% of ages 15 to 64 years old have attained “none or some education.” However, the low educational attainment is still evident through the high combined population of “uncompleted and completed primary school.”
By gender, it was recorded that men in the labor force have attained a higher education than those of women. Despite the increasing educational level overall, half of women are still in the group of “none or not completed primary school.” The 62% of men in the labor force, on the other hand, have either completed primary, lower secondary, upper secondary school, or have reached post-secondary education.
Overall, nearly 82% of the labor force population have only attained basic education or lower secondary education, pertaining to either of the three early or basic educational stages namely preschool, elementary, middle school, and high school. (World Bank 2016)
There are 86% of the labor force with an intermediate education in Cambodia, which refers to all education levels that take place after high school. (World Bank 2016)
The labor force with advanced education almost reached 80% (World Bank 2016). Advanced education consists the short-cycle tertiary education, and holders of a bachelor’s degree, a master’s degree, or doctoral degree.
Clearly, the skills’ gap in the labor market is still very evident due to the low educational attainment of the workers. Based on the study of International Labor Organization (ILO), the top three reasons that job vacancies are hard to fill are, in order: the presence of too much competition from other employers , no or few applicants and lack of competency or skills.
By sectors, the presence of too much competition ranked first for accommodation and industrial sectors. Establishments in the construction sector complained mainly of a lack of experience, while in the financial sector there were low to none applicants with required skills.
At least 40% of establishments indicated the lack of the following skills: lack of technical or practical skills; lack of job-specific skills; and lack of language skills.
Based on ILO’s study, the education system is the main “production” of labor market, whose aim is to increase knowledge and support the acquisition of operational skills. However, Cambodia’s education is still affected by some structural problems like lack of infrastructures, low quality of teaching, insufficient educational attainment of teachers, poor standard of classrooms, especially in rural areas.
LITERACY & ENGLISH PROFICIENCY OF LABOR FORCE
Despite the shortage in skilled workers, some important results have been attained. The rate of literacy increased from 67.3% in 1998 to 80.5% in 2015. In total, Cambodia has 9.2 million people who are literate out of the total population of 16 million people in 2017. The highest rate is concentrated in Phnom Penh with over 1.4 million people with 94% literacy rate.
The literacy rate was also higher among men at 87% than 78% of women’s literacy rate. Ages 15 to 24 years old has the highest literacy rate, with 94% among all other age groups, followed by the age groups of 25 to 34 and 35 to 44 years old.
Note: The literacy rate pertains to the capability of the population to simply read and write.
Cambodia has an English Proficiency Index score of 43.78, ranked twenty-third in Asia and ninety-fourth worldwide. The most fluent in English are mostly situated in the cities of Phnom Penh, Siem Reap, and Sihanoukville. English is a primary subject that is being taught in most private and public schools. Furthermore, it is producing more university graduates than before which enriches the professional labor market.
GOVERNMENT PROGRAMS TO BOOST LABOR FORCE & EMPLOYMENT
Cambodia is catching up with the global and national trend of investing in higher education. The highest literacy rate was recorded among ages 6 years old and above. Likewise, the highest school attendance rate is in the age group 6 to 14 years old which is about 92% of the total population of ages 6 to 24 years old (CSES 2017). This means a high population of educated people will rise in the coming years.
The Ministry of Education of Cambodia aims to eliminate illiteracy and focus more on significant skills for employment. With the support of some national and international development partners, the ministry has already implemented its first steps of its projects.
- Providing basic literacy skills to the illiterates
- Developing literacy packages for the illiterate factory workers
- Providing digital devices with literacy mobile application
- Implementation of Basic ICT Education
Based on the report of Konrad Adenauer Stiftung, the government is working on improving the labor force for the rise of the digital economy. On ICT Development Policy for 2020, the government aims to empower the Information and Communication Technologies (ICT) of the labor force by implementing basic ICT skills in high schools and professional ICT skills in human resources.
The Skills for Competitiveness Project (SCP) will upgrade five technical training institutes to produce a set of higher skilled workers. It aims to produce 18,000 skilled technicians, and upskill and reskill 360 workers. The training programs are focused on the sectors of construction, electronics, manufacturing, and electricity. It will be provided to more than 3,500 people where 25 percent of which are women.
Overall, the Cambodian labor force provides a competitive advantage for many firms especially in agriculture, industry, and services. It has a young and active labor market, increasing educational attainment among the labor force, and low labor cost. The country is an attractive destination for businesses and investors as it offers profitable returns in labor intensive companies.