Low-income workers will be hard hit by a drop of exports

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The falling Thai exports will hurt low-income workers the most as manufacturers are expected to hire less and cut overtime employment, affecting the purchasing power of these grassroot segment.

The latest report from Krungsri Research Intelligence said although companies directly affected by a fall in Thai exports are multinational companies, the local workers and Thai industries in the supply chains will feel the repercussion.

In the first half of this year, Thai exports, representing 50 percent of Thailand’s gross domestic products, contracted 2.9 percent compared to the same period last year, versus a growth of 6.7 percent in 2018 and 9.9 percent in 2017.

The National Statistical Office of Thailand shows that 80 percent of the total employment in manufacturing sector is related to exports.

Most of workers are blue-collar workers, earning less than Bt15,000 per month. The other vulnerable group is workers relying on overtime pay because they will be the first to be unemployed when the companies need to cut costs.

The export fall is attributed to the cyclical downturn of the global economy, which is dragged further by the US trade war and China which reduces global demand for Thai exports.

Overall, Krungsri Research Intelligence reported that 66 percent of domestic manufacturing sector is affected by export contraction, even though the extent of impact varies among industries.

Heavily impacted industries include transport equipment, computer, electronics and chemicals. Sectors with milder impacts include paper, printing, automobiles and machinery and parts.

Most of these manufacturers are large-scale multinational companies sharing the network of supply chains with local manufacturers.

The sluggish export performance does not only affect the international traders but also indirectly impacts the upstream production in the supply chains.

Direct and indirect impacts from slowing Thailand’s outbound shipments have sliced the local manufacturing output by 1.1 percent, Krungsri Research Intelligence estimated.

However, indirect impact can also be severe because it is expected to impact other Thai companies in the supply chains.

Moreover, poor export performance may impact the overtime employment because investors can easily cut part-time workers to reduce their manufacturing production cost.

Industries heavily impacted by the lackluster shipments have high portion of overtime workers in their payroll or between 20-40 percent of the total employment, led by computer and equipment industries, which spend 41 percent on overtime workers of the total employment expense.

Transport equipment industry spends 27 percent of overtime workers of the total and chemicals, 23 percent, according to the National Statistical Office.

The sign of a drop of overtime payment is already evident. In the first seven months of this year, the number of overtime employment in manufacturing sector drops 8.8 percent on average, compared to the same period last year. In 2018, overtime employment grew 5 percent year-on-year.

 

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