UN Common Country Assessment
Thailand,
1997-1998

 

Chapter 5 : Working Life

Contents

Introduction

The Need for Productive, Quality Employment and Skill Development

The Need for Improved Social Protection and Social Safety Nets

The Need for Improved Working Conditions and Occupational Health and Safety

The Need for Strengthening Institutions for Social Dialogue

Labour Migration

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Introduction

Rapid economic growth sustained over a decade had improved incomes, employment and the working life of Thai citizens up to the mid-1990s. The Eighth National Economic and Social Development Plan (1997-2001) recognised the imbalances which accompanied this growth process and emphasised the goals of people-centred development and reduction of regional disparities. The objective was to promote sustained growth within a framework of democracy, equity and social justice.

The creation of productive and remunerative employment and poverty alleviation continue to be of central importance in view of the increasing pace of economic liberalisation, globalisation and regionalisation. These trends have accentuated the need for a well-trained and adaptable labour force to provide Thailand with increased competitiveness in export markets. The economic downturn experienced by Thailand since mid-1997 has posed some serious challenges to the achievement of these objectives. While appreciable progress has been made in economic management and political integrity since 1997 and some extent of macroeconomic stability ( exchange rate and prices) seems to have been achieved, full recovery may take longer the deep-seated origins of the crisis. The pressures of increased competitiveness may lead to the increased advantage of workers, particularly of women, and vulnerable groups such as children and migrant workers, in labour-intensive industries. The crisis has led to problems of retrenchment and redeployment and increasing pressures on industrial relations systems. There is also an urgent need for the improved protection of workers, especially in the field of occupational safety and health, as well as for the development and extension of social protection systems to provide adequate coverage for vulnerable groups and the unorganised sector. The crisis has also stressed the need for respect for core labour standards e.g. freedom of association and right to bargaining, non-dissemination in employment and minimum age for employment.

There has been a call for reforms of labour market institutions, greater social dialogue among workers, employers, the government, and development partners and social consensus for moving towards rapid recovery. A number of immediate and medium-term strategies have been identified: job creation and the management of employment dislocation and layoffs; promotion of skill development and training responsive to emerging industrial needs, new approaches to workplace co-operation; greater unity among tripartite mechanisms for policy direction; enhanced social security coverage and social safety nets; and occupational safety and health reforms. It is imperative that all these take place within a long-term vision for the economy and an atmosphere of effective social partnership. The crisis should be used as an opportunity to address long term structural imbalances of the economy.

The Need for Productive, Quality Employment and Skill Development

Background

At the 1995 World Summit for Social Development, participating countries including Thailand made a commitment to "promoting the goal of full employment as a basic priority of ... economic and social policies, and to enabling all men and women to attain secure and sustainable livelihoods through freely chosen productive employment and work." Thailand had ratified the ILO Employment Policy Convention No. 122 of 1964 which commits countries to the promotion of "full, productive and freely chosen" employment as far back as 1969. This is consistent with the above commitment at the World Summit for Social Development.

Data and Analysis

Thailand had an impressive growth record since the mid-eighties which was reflected in substantial growth in employment and reduction of poverty. Annual labour force growth declined from 3 per cent in the early 1980s to about 1.5 per cent in the 1990s and employment growth rate was faster than the population growth rate. The open unemployment rate (which includes those unemployed and actively seeking work) had been below one per cent since 1988, while the total unemployment rate (including those not seeking work) had been below two per cent since 1992. Thailand had thus virtually reached a full employment situation by mid-nineties. The labour market had become tight with labour shortages occurring in both the low and high skill segments. The employment structure was becoming diversified with more jobs created in the modern sector of the economy which helped absorb increasing numbers of women workers, migrants from the rural sector as well as those in low productivity informal sector jobs. Thailand changed to a net importer of (largely unskilled) labour in the 1990s. By 1997, it was estimated that there were some 1.26 million foreign workers, most of them from Myanmar.

Yet Thailand has faced several structural problems in this pattern of growth.

The recent economic downturn has however, aggravated these tendencies with a sharp reversal of the earlier favourable trends. The employment challenges facing Thailand are therefore, both short term and long term in nature.

Economic downturn and the short term challenges

The immediate issue facing Thailand in the management of employment dislocation with rising unemployment coupled with large-scale layoffs in the formal sector. Controversy still surrounds the actual magnitude of the job losses. The Committee on Labour Force, Employment and Unemployment Estimation, set up by the Ministry of Labour and Social Welfare estimated the unemployment rate to rise to 4.4 per cent in 1998 from 1.9 per cent in 1997. Chart 1 shows the behaviour of unemployment rates since 1996. The February 1998 Round of the Labour Force Survey (which represents the dry season) has reported total unemployment to reach a level of 4.6 per cent compared to only 2.3 per cent in February 1997. This shows almost doubling of unemployment levels within a year. The numbers of seasonally inactive persons also has shown a marked upward trend over the last few seasons. The total unemployment rate including the seasonally inactive has shot up to 8.5 per cent and 11.2 per cent respectively in the February and May rounds of the labour force survey, 1998. The normal level in February in previous years has been around 5 per cent.

Layoffs of workers have become another sensitive issue. There are no direct estimates of the numbers affected. The MOLSW Mass Layoff Centre reported 62,000 of laid off workers during August 1997 to August 1998 which is probably an underestimate. The number reported by the Social Security Office from enterprises already closed down from January 1997 to August 1998 is around 336,000 which seems to be more realistic, although it does not cover enterprises operating at a reduced scale and those employing less than 10 workers. The hardest hit sectors with most retrenchments are: finance and banking, construction, manufacturing involving electronics, garments, automobiles, footwear and leather.

Indications also are that women are hard hit by the crisis. Recent research carried out by the Asian Institute of Technology with ILO support on the gender dimensions of the Asian crisis in Thailand, reveals that the structural problems faced by working women have been exacerbated by the crisis. In some of the sectors for example electronics and textiles which have retrenched many workers, employed mostly women. In other cases women take the jobs of men but at lower wages or in more vulnerable employment situations. The rural areas where women are largely responsible for meeting the basic family needs, have absorbed many people who returned from the cities without a job, making it more difficult to feed families.

It is known that part of the labour market adjustment may have been effected through downward changes of wages and earnings. The lack of reliable wage statistics is again a problem in monitoring these trends.

The impact of the crisis on vulnerable groups of workers is also an important issue. According to current labour market trends, several vulnerable groups of workers can be identified: white collar workers; disabled persons; migrant workers; home-based workers; elderly persons, etc. With the job crunch, these groups would face job losses and also find it harder to get re-employed.

The response to the crisis has taken several forms. The government has revamped the employment service to redeploy laid off workers. It has also initiated a number of activities supported by the World Bank and ADB social sector loans. Given that a fair number of workers have returned to the rural sector, more emphasis has been given to community and rural-based income generation activities. The government has considered repatriation of foreign workers, especially undocumented workers to save jobs for unemployed local workers. At the same time, the government plans to promote the emigration of workers, especially, as a temporary solution to the employment crisis.

Long run challenges: skill development for competitiveness

Apart from crisis-led responses, Thailand needs to address structural problems noted above which affect growth, productivity, and competitiveness. The present economic difficulties coincide with the more secular or longer-term erosion of Thai industrial competitiveness. There is particular concern that competition from other developing economies in the region with lower labour costs has eroded Thailandís competitiveness in the traditional labour-intensive and light manufactured goods which formed the basis of past growth. Thailand now needs to move into middle- and higher industrial technologies, to develop its own global brand names, etc., and inadequate human capital investments are a bottleneck to this transition.

Training, skill upgrading and lifelong learning are critical element in achieving the dual aims of economic efficiency and social equity. At the same time, there is a serious shortage of skills required for industrial restructuring and the achievement of higher productivity based on new technologies. The national training system will need to be reformed substantially if it is to overcome many of its present weaknesses, which include, for example: the focus on supply-side training; the poor linkages between training provided and the needs of industry; the lack of flexibility in responding to these needs; the weak employment outcomes of many training programmes; the lack of effective skill recognition systems; and the poor co-ordination between training providers. The survival of some labour-intensive industries has depended on the cheap availability of migrant workers.

While the skill issue can be framed in terms of the need for industrial upgrading and productivity improvement, it also extends to the basic entrepreneurial skills required for self-employment. This is because the bulk of employment is generated in small and micro-enterprises. To ensure access and equity considerations are met, skill development needs to take into account the specific circumstances of women, the disabled, and existing workers who have not received any training. The importance of recognising and certifying skills irrespective of how they were obtained, will become increasingly important for Thailandís economic development. Thailandís system occupational skill standards, with its relatively low level of skill recognition could prove to be a major constraint to future development. A new model of workplace-based skill recognition and training that focuses on the competencies required by workers in a specific industry or industrial sub-sector is urgently required.

Data Quality and Needs

The crisis has brought out the limitations of the existing labour market information system. Regular, reliable, transparent and timely labour market information is urgently needed in Thailand for evaluating the current labour market trends and working conditions, and the "working life" of the employed population; measuring the number and characteristics of the unemployed, redundant workers and others affected by the financial crisis; employment outcomes of training programmes, and evaluating progress in applying Government policies and action plans which attack these problems. A set of appropriate labour market indicators have been proposed for this purpose.

The Need for Improved Social Protection and Social Safety Nets

Background

There is no general social safety net in Thailand. Social assistance or public welfare has very limited resources and these are targeted on particular groups such as the very poor, the elderly, and the disabled. Even for these groups the level of the benefits provided is extremely low. However, the existing social security scheme currently has no unemployment insurance component. Employees in small enterprises, self-employed workers, and those in the informal sector, remain outside the coverage of the social security scheme. The proportion of women in these categories tends to be significantly higher than in the protected section of the labour force.

Data and Analysis

Different groups in the labour force enjoy widely varying degrees of social protection. For private sector employees, a social security scheme exists, but it is still in its infancy. To date it covers only a very limited range of contingencies: sickness and maternity benefits, invalidity benefits, funeral grants, and, above all, health care which is the main focus of the scheme. So far the scheme also covers only a limited section of the population: namely those working in enterprises with at least 10 employees. Because of this restriction and also because not all the enterprises in question comply with the law, the number of employees insured by the scheme is less than 6 million. An employment injury insurance scheme, providing short- and long-term income cash benefits and medical care, established about 20 years earlier than the main social security scheme, covers the same population.

The scope of the social security scheme is shortly to be widened. At the end of 1998, a pension scheme will be launched and child benefits will start to be provided. It has yet to be decided what precisely will be the benefits under these new schemes.

The social security legislation also provides for an unemployment insurance scheme to be established, but does not name the date by which this should be done. The ILO very recently carried out a feasibility study at the request of the Royal Thai Government, which concluded that the introduction of an unemployment insurance scheme would be economically and administratively feasible in the year 2001. For the time being, workers who lose their jobs have to rely on the severance pay which, under the labour law, they receive from their employers, though enterprises are sometime unable to fulfil their legal obligations.

Data Quality and Needs

More information is needed about people who are not covered by social security, with a view to extending the systemís coverage and to evaluating the success achieved in implementing such measures. In order to provide policy-makers with a more comprehensive view of social protection expenditure as a whole, a social protection budget model should be constructed for Thailand, which can be used to make projections under constant legislation and to explore the qualitative impact of policy reform proposals.

The Need for Improved Working Conditions and Occupational Health and Safety

Background

Thailandís economy over the decades has undergone dramatic changed, from a largely agro-based economy to manufacturing and service. The latter accounts for more than 80 percent of the GNP. Despite financial crisis since 1997, various industrial activities continues to play a major role in social and economic development of the country. The economic downturn presents further risks for workersí health and safety. Facing mounting cost pressures, some firms may be tempted to seek savings in the area of work safety provision. There is a likely risk which costs not only to the workers affected by injury, but also to the public purse and, indeed, the firm itself.

Data and Analysis

With the rapid expansion of economic activities, the number of workers injured in work accidents has increased significantly in recent year. The number of reported accidents has risen from 54,703 in 1988 to 230,076 in 1997. It is known that the reported numbers are generally underestimated, especially in manufacturing, construction and transport sectors.

The problem is more serious in small enterprises. Although the official number of occupational diseases cases is small, it is considered that many workers are exposed to various types of health hazards including dust, chemicals and noise. Many occupational diseases are left unidentified due to the lack of knowledge of workers and employers as well as insufficient medical surveillance.

An important recent development is an initiative being pursued by the government towards a comprehensive review of Thailandís occupational safety and health system (OSH) and programme. This review will examine the accident statistics, problems of occupational diseases, the current OSH training system, the labour inspection system and funding, as well as the organisational structure. Special attention will be given to the linkage between the OSH programmes and workmenís compensation. The review requires tripartite dialogue and consensus of the social partners and an assessment of the policy, programmes and the comprehensiveness of existing legislation

Reforms in Thailandís Labour Protection Act 1998 make it timely for training labour inspectors on new strategies to meet challenges of the globalisation and crisis impact. The countryís newly decentralised system of minimum wage setting also calls for capacity building of the minimum wage administration system.

Data Quality and Needs

Accidents: Data coverage needs to be expanded. Efforts have to be made to collect and analyse data for small enterprises and the informal sector. An improvement of the workmenís compensation data system is necessary.

Occupational diseases: Data are still very weak. The authorities concerned need to determine long- and mid-term strategies as well as action programmes to improve data and information. Capacity building of doctors and medical surveillance and environmental surveillance system need to be developed.

The Need for Strengthening Institutions for Social Dialogue

Background

The two main features of Thai industrial relations are the under-representation of the formal sector workforce and the excessive fragmentation of the labour and employer federations. As to the former, trade union membership in Thailand is, in relative terms, the lowest of any country in the region. Many factors -- political, cultural, and economic -- account for this situation. At present, the underdevelopment of institutions of social dialogue in a period of rising unemployment is a worrisome feature of the Thai social climate. Institutions for social dialogue have a role to play in contributing to social stability and help to solidify gains made in the recent democratically oriented constitutional reforms. To perform this role, social dialogue will need to extend beyond the formal sector workplace to incorporate broader segments of society. As to the longer term, there is no country in the world where living standards are high and institutions of social dialogue absent or weak.

Data and Analysis

There are now signs in Thailand that the weakness of institutions of social dialogue is perceived by many as a problem. MOLSW sees excessive fragmentation as an impediment to dialogue with the representatives of Thai labour. The employersí view labour fragmentation in much the same light. Thailandís major employer federations, ECOT and ECONTHAI, believe that the bipartite, labour-management relationship in Thailand is indeed in need of strengthening. Finally, the labour federations are mindful of the structural weakness that excessive fragmentation gives labourís voice in Thai domestic affairs. The labour federations have been for a long time engaged in a process of encouraging labour unity, thus far without success.

Thailand is creating industrial relations committees at the decentralised provincial level. Ten provinces, including Bangkok and the relatively industrialised provinces surrounding it, have been selected for the establishment of these committees. Here, too, the initiative will require training the committeesí members in techniques of workplace co-operation and the prevention of labour disputes.

While Thai labour law provides for the voluntary creation of employee committees in enterprises employing more than fifty workers, there are only about 500 such committees, and the role that they could play in enhancing worker participation is considered by most observers as underdeveloped.

Institutions of social dialogue cannot be confined to the labour-management relationship in the formal sector. There is a need to strengthen such institutions more broadly in Civil Society, so that there can be more and easier access to Government by community-based organisations and other NGOs. There is also a need to strengthen employersí organisations.

Data Quality and Needs

Beyond aggregate figures on trade union and employer organisation membership, there are few data on the instance of social dialogue in Thailand, and (2) on its effects. For the formal sector, there are no comprehensive data on collective bargaining outcomes or the activities of the enterprise committees. There is scant information on whether social dialogue has contributed to finding alternatives to retrenchments and to productivity improvements.

Labour Migration

Background

International migration is one of the key areas identified by the United Nations ACC Task Force on Basic Social Services for All (BSSA) from a review of the Social Issues to emerge from the United Nations Global Conferences in the 1990s. Special attention is drawn to the situation of undocumented migrants, as well as to refugees and displaced persons, as groups in need of protection and monitoring. The international migration of labour has also been a long-term concern of the International Labour Organisation.

Data and Analysis

Although Thailand has been a recipient of migrants from neighbouring regions for many centuries, it has only been recently that international migration has become a major policy concern for the Royal Government of Thailand. The rapid rate of economic growth through the 1980s and first half of the 1990s, in the context of a sustained decline in fertility from the late 1960s, created labour deficits in certain sectors of the economy. These deficits were met through the inflows of labour and Thailand changed from being primarily a net exporter of labour in the 1970s and 1980s to being primarily a net importer of labour in the 1990s. By 1997, it was estimated that there were some 1.26 million foreign workers in Thailand, representing about 4 per cent of the total work force.

Perhaps the most significant trend is that the numbers of foreign workers appear to have doubled in the previous 3-4 years. Some three-quarters of the foreign workers are from Myanmar with the balance from Lao PDR, with smaller numbers from Cambodia and China. Less than one third of the foreign labour is registered with a work permit and hence the majority of the foreign labour is undocumented or illegal. Undocumented migrant workers lack any protection and work for much lower wages in hazardous occupations.

The emigration of national labour is also an issue. There are perhaps some 0.5 million Thai workers overseas. The government plans to promote the emigration of workers, especially, as a temporary solution to the employment crisis. The current recession spreading throughout Asia is, however, likely to affect labour exports, with, as yet, unknown numbers being laid off and returning to be reabsorbed in an economy mired in recession. Increasing pressures from neighbouring countries to send migrants to Thailand and rising levels of returning Thai workers from overseas in the context of rapidly increasing domestic unemployment combine to create one of the challenges currently facing policy makers in Thailand.

While there are reasonably reliable estimates of the number of Thais going overseas to work, the information on those coming into the Kingdom is seriously lacking. With long land and sea borders and poorly paid border officials it is easy for people to enter into the country. Even the information on internal migration is only partial.

The critical aspects of labour migration in Thailand revolve around:

Indicators for chapter 5

I. For which data exist:

II. For which data do not yet exist:

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Dated: 26Jan1999