The employment situation in Thailand remains unclear. While official figures show low unemployment at 1.07 per cent in the second quarter this year, the jobless number rose to 430,000, according to state-owned think-tank National Economic and Social Development Council (NESDC).
The data comes amid the closure of many local manufacturing plants, citing fierce competition from cheaper products imported from China, the high cost of living and sluggish economic growth.
“Though the unemployment rate is low, my concern is about the large number of underemployed people whose employers have cut their working hours to reduce cost, resulting in few working hours per week,” said Yongyuth Chalamwong, research director for labor development at Thailand Development Research Institute (TDRI), an independent think-tank.
Around 300,000 people worked for less than 35 hours while 162,000 worked for less than 10 hours per week, according to the NESDC.
The unemployment rate has increased, especially in labour intensive industries such as textile and clothing. This would certainly reduce their income, he warned.
New graduates from universities are unable to find jobs in their home provinces, forcing them to seek jobs in bigger cities or popular tourist destinations. This leads to higher cost of living, which takes away the motivation to migrate for many of them, said Yongyuth.
The number of unemployed new graduates is 121,000.
Meanwhile, the number of employed persons fell 0.5% year on year (YoY) to 39.5 million due to a 5 per cent contraction in the farm sector. The manufacturing sector employed 6.4 million people, up 2.2 per cent YoY, supported by export growth.
The average wage growth YoY in the private sector was flat at 14,032 baht per month, while average working hours in the private sector were 46.6 per week, down slightly by 0.1 per cent YoY.
Dire situation of SMEs
Small and medium-sized enterprises (SMEs) are facing tough times due to difficulties in accessing liquidity because of the cautious lending policies of banks worried about rising non-performing loans (NPLs) and deteriorating asset quality. NPLs were high at 7.2 per cent of total SME loans in the fourth quarter of last year, according to the NESDC.
A total of 667 factories ceased operations in the first six months of the year, resulting in 17,674 workers being laid off, according to the Department of Industrial Works.
The gravity of the situation becomes obvious considering only 373 factories closed down in the first half of 2021 during the COVID-19 pandemic. The large number of closures have raised worries about the survival of many others, with imminent job losses.
It is, however, not all doom and gloom.
“The number of new plants that have opened suggest higher employment creation than those that were lost due to closures,” says Kirida Bhaopichitr, research director for international economics and development policy at the TDRI, adding that manufacturing may have undergone a transition.
According to the Department of Industrial Works, 1,047 new plants had started operations, and 228 old plants were expanding their business, resulting in the creation of 55,127 jobs from an estimated combined investment of 219.9 billion baht.
The sizes of the new plants are larger and they have more capital expenditure than those that shut down, she said.
To protect local industries, some short-term protection measures could be imposed, but she cautioned that the country could not afford to rescue weakening industries for a long time unless those manufacturers improved their competitive edge.
Many people suspect that the new factories are mainly owned by Chinese entrepreneurs or their Thai nominees, and they are airing their frustrations on social media.
They are also worried that those who have lost their jobs, especially aging workers, may find it difficult to find employment, or they may be forced by their circumstances to accept low-paying jobs.
The abrupt change in the landscape of the local industry is likely to be a blow to government plans to increase the daily minimum wage next month to 400 baht from the current 300-plus baht.
Employers also worried
Tanit Sorat, vice chairman of the Employers' Confederation of Thai Trade and Industry, expressed concerns over the closures of many factories.
He is also worried that more factories might close down in the days ahead due to the sluggish Thai economy, the slower-than-expected global recovery, and competition from China. He cast doubts on the employment statistics, saying it did not reflect the dire situation.
The government should develop new tools to monitor unemployment in cities and rural areas separately, he suggested.
Workers earlier often worked 12 hours a day — the income from their regular 8-hour shift helped them repay their debts and buy their necessities, while the income from 4 hours of overtime was spent on their lifestyle. But now overtime work has been slashed, he said.
SMEs play a significant role in the economy, accounting for 35 per cent of gross domestic product (GDP).
Impact of cheaper Chinese goods
Thailand’s widening trade deficit with China often makes headlines in local media, triggering hot debates on social media such as Facebook and X.
The trade deficit with China in the first six months rose 15.7 per cent YoY to US$19.9 billion.
The Joint Standing Committee on Commerce, Industry and Banking, a club of leading local business leaders, also expressed concerns over the growing trade deficit with China.
They called on the new government to strengthen the investigation into product quality, and use law enforcement to prevent tax evasion. They also want a focus on strengthening the local supply chain in order to enhance the competitiveness of local firms.
Some critics have for some time suggested that the government follow in the footsteps of Indonesia and impose high tariffs on products made in China.
Newly appointed Commerce Minister Pichai Naripthaphan has vowed to impose strict product safety standards to deter the influx of low-quality Chinese products.
But there are also worries that imposing trade barriers on Chinese products could violate the bilateral free trade agreement.
“If the government imposes trade barriers on Chinese products, China may retaliate and it could impact our durian exports and tourism,” said Phaichit Viboontanasarn, the vice president and secretary-general of the Thai Chamber of Commerce in China.
“Should the Chinese take the issue for debate on mainstream media and China’s social media platform, there would be a backlash against Thailand,” he warned.
China is Thailand’s largest durian market and the biggest source of tourists.
Meanwhile, Bank of Thailand Governor Sethaput Suthiwartnarueput has been under pressure to cut the policy rate in order to support local businesses and the economy as a whole.
He however, maintained that a rate cut would not remedy the structural issues of manufacturing. He also noted that while growth of local consumption had been steady, it had failed to translate into manufacturing expansion.
SMEs have long been struggling to access bank loans even before the pre-COVID-19 pandemic. So it is not a surprise that bank loans to SMEs contracted in the second quarter, he added.
Signs of improvement
Thailand’s exports grew 4.5 per cent in value in the second quarter, sparking hopes of a full-year growth rate of 2 per cent, a turnaround from a 1.5 per cent contraction last year.
However, exports largely depend on the global economy as China's economy remains weak and US labor figures suggest a softening that might lead to a hard landing.
