Labour Market Situational Report
It is not all good in the labour force context at the Land of Smiles as Thailand’s labour market faces several challenges. Firstly, the labour force participation in the country is declining from 2015 to 2022 at a compounded negative growth rate of 0.31%. There is also a stark disparity between male and female participation where the latter participant is on average 20 percentage points less than its male counterpart. Apart from the declining rate of overall participation, the proportion of Thailand’s population in the working-age category is expected to decrease from 71% in 2020 to 56% in 2060. This decline represents a nearly 30% decrease in the working-age population, ranking as the third most significant decline in the East Asia and Pacific region, surpassed only by Japan and the Republic of Korea. Datapoint also shows that there is a higher labour force participation rate of older people in rural areas reflecting a need to work longer to make ends meet despite the nearly universal Old Age Allowance social pension. The older population face particular challenges in the labour market, especially fitting in the role of future jobs. Analysis of the task complexity in various occupations reveals that older individuals are not engaged in future-oriented jobs, which demand a greater emphasis on cognitive abilities and less on manual labour. In contrast, young individuals are shifting away from traditional, routine occupations that were popular in the past and moving towards rapidly expanding job sectors. However, prime-age workers, who represent the older workforce of the near future, are still largely employed in routine jobs that are experiencing a decline in demand.
The second issue with Thailand’s labour market is the slow shift of employment from agriculture to other sectors such as manufacturing and services. In 2021, although agriculture contributed only 8.71% to the country’s gross domestic product (GDP), the agriculture sector employed a staggering 33.24% of the total employed persons in the country. Rather than individuals working in the farms shifting towards factories or services companies, it was only observed that the expansion of the industry and service sectors is fed by new entrants to the labour force rather than movements from the agriculture sector. One interesting fact is that according to the International Labour Organisation (ILO), women made a faster transition from agriculture to other sectors compared to men, despite a similar employment structure between the two genders. In order to elevate the country to the next level, the movement of workers from agriculture to other sectors need to be faster as the agrarian sector remunerates its workers the lowest compared to other sector and most of the employment is informal, leaving the workers vulnerable to employers’ exploitation.
The third main challenges of the Thailand labour market is the high rate of informality. In the country, Thailand defines informal employment as employment that are not covered by social security. Formal employment refers to jobs that are protected by labour laws and social security. It includes jobs in government, state-owned enterprises, private schools, foreign governments, and private companies that are covered by labour laws. In 2022, 51.02% of the total employed persons in the country were considered working in the informal sector, particularly the agriculture sector as 90.25% of the workers were informally employed. The high rate of informality makes the workers vulnerable to unfair termination and exploitation. During the pandemic, a lot of workers were laid off without compensation, formal workers included. While formal workers could fight for their rights at the labour court, informal workers were being left to survive on their own. Thus, the transformation of the agricultural sector from an informal sector into a formal sector is important and is in line with the Vientiane Declaration on Transition from Informal Employment to Formal Employment towards Decent Work Promotion in ASEAN that was adopted by the ASEAN Leaders at the 28th and 29th ASEAN Summit in September 2016.
The Thai government has implemented programs to extend social security coverage to informal workers. It has also provided additional legal protections to domestic workers and homeworkers through the Ministerial Regulation of Domestic Workers Protection and the Homeworker Protection Act. However, not all workers are aware of these programs, and some social security plans are limited and only available on a voluntary basis. As a result, informal employment remains a significant portion of the workforce in Thailand, especially in cities.
Looking at the overall picture, upskilling and reskilling the labour force can solve the other two issues by equipping agricultural workers with skills to transition to other sectors and providing the prime workers of the country with future skills so that the labour participation rate can improve in the future. In 2022, the Thai Government spent USD81 mil towards upskilling and reskilling of its workforce, which include the Skills Development Fund. The Skills Development Fund is a way for the Government to pass the baton of developing the workforce to the private sector with Government bodies such as the Office of Non-Formal and Informal Education (ONIE), Department of Skills Development and Thailand Professional Qualification Institute (TPQI) becoming governing bodies. The Skills Development Fund, under the 2002 Skill Development Promotion Act is a train-or-pay approach where companies with more than 100 employees need to provide annual skill training to at least 50% of their employees. The exact requirements included in the curriculum must be approved by the Ministry of Labour’s Department of Skill Development, the number of trainees should not exceed 50 persons/group for group training, and 25 persons for practical training and trainees should attend at least 80% of the whole training session. The Skills Development Fund also serves as a revolving fund for the skill development of incumbent workers as well as new or potential workers. The fund is utilized in the form of loans to cover things such as training expenses, both from the trainees’ and trainer’s side. The loan needs to be repaid within 12 months after the completion of the training, with an interest rate of 1%.
Labour Market Situational Report