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28 May 2014
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Looking Beyond Today: The future of Thai labor in 2014 when economy is bad and politics is worsened

Thailand Development Research Institute (TDRI)

TDRI Director of Labor Development looked beyond the here and now to warn laborers on the effects from economic problems and the prolonged political crisis while unemployment among university graduates may continually rise.

The prolonged and unresolved political situation has increasingly driven the other problems in the Thai society, which deserve to be solved, to a desolate corner, especially the directly and the indirectly affected troubles of the Thai laborers.

Dr. Yongyuth Chalamwong, Research Director for Labor Development, Thailand Development Research Institute or TDRI, said that the unimproved economy due to several factors deriving from export, domestic consumption and the government’s expenditure during its transitory period is expected to slow down the economic growth in the first quarter and may gradually recover in the second, third and fourth quarters.

The macroeconomist continued that if the political problems are quickly resolved, the spillover effects will not be so severe since Thailand still enjoys a low unemployment rate while the labor market structure focuses on the lower level which mainly uses foreign workers for skilled labor. The labor market fluctuation is likely to absorb the unemployment of the lower level whereas the middle level labor still lacks technicians.

However, the shortage problem may be reduced while the quality problem may remain. The bachelor’s level is over demand, causing consistent unemployment. Overall, the labor shortage problem in the lower level will be lessened but the unemployment rate in the higher level will intensely increase.

It is predicted that the gross domestic product this year will increase only 3-4%. Theoretically, if GDP is less than 4%, the unemployment rate may rise at more than 1%, from the merely original 0.7-0.8%.

If the situation continues for six more months or one more year, the effects to the labor sector will be more apparent, particularly in the sensitive production sectors, which are the manufacturing industries and the service industries which intensely absorb more labor, especially the assembly industries, which will be severely affected.

Dr. Yongyuth said that one of the most apprehensive problems which are expected to develop in the latter half of 2014 and the next year is the effects from the political factors which will slow down the investors or the new investments or will move the investments to other countries or quickly shift the production bases, causing effects to labor, especially in the electric and electronics assembly industries which absorb more than 3-4 hundred thousand laborers.

On the other hand, motor vehicle and parts manufacturing or the larger industries will not be as affected due to their networks or production bases in various countries and their marketing networks to transfer products to the demanding markets, hence the overall effects will not be as bad as perceived.

Or we could say that the crisis of an industry can create good results for another industry because labor can be easily transferred, from an industry to another industry which is in need of labor.

The service sector, which absorbs labor of different kinds and is sensitive to the stability of the government, will be rapidly affected. If the situation is prolonged, the effects will be multiplied and will hit the service labor. Moreover, the effects will spillover to other professions outside the industry, which mainly rely on unearned income from services in the tourism industry, for example, vendors, spa staffs, Thai masseuses, and those who are seasonal workers.

The overall labor situation in 2014 can be concluded that shortage of labor still exists and unemployment problem is not different from the previous year. The effects from the political situation will result in a lower economic growth than expected, creating an impact for the entrepreneurs, particularly the SMEs, to quickly adjust, slow down new employments and limit their hiring.

The most affected labor group is the new laborers entering the labor market in the second quarter this year, especially the graduates with a bachelor’s degree who have consistently been unemployed every year.

Nevertheless, in a labor market where fluctuations can be sharp and only high-skilled workers are in demand while the political problems still remain, current laborers and the older laborers may need to prepare themselves for inevitable fluctuations, unemployment possibility, and income losses.

At the same time the new laborers also need to prepare themselves by acquiring more knowledge while waiting for the market to recover or to change into a more independent profession, if they can no longer wait.


Yongyuth Chalamwong, Ph.D.
Research Director, Labor Development