A nationwide survey of companies in six key sectors by the Siam Commercial Bank’s Economic Intelligence Centre (EIC) last year found that at least half had trouble filling vacancies within three months.
Businesses that need workers with vocational degrees were struggling the most, reporting a 23pc shortfall of hires. In other words, for every 100 openings, they can find only 77 recruits. That leaves expansion plans stuck at square one.
Unfilled vacancies are the downside of Thailand’s very low rate of unemployment, which has averaged around 1pc during the past 10 years.
A healthy level of unemployment should actually be higher than that, to allow for factors such as the transition period between positions for job-seekers. (In the United States, 5pc unemployment is considered a healthy minimum rate.)
What is causing the problem? An EIC analysis identifies the following factors.
- The demographic dividend is disappearing: The number of Thais of working age will peak in 2018 and shrink thereafter. From the 1970s to the 1990s, the East Asian growth miracle was driven in part by fast growth in the working-age population, a legacy of high birth rates.
This was the period when Thailand experienced what economists call “the demographic dividend”: an economically optimal population structure shaped by a shift away from farming toward occupations in industry; more women entering the workforce; and fewer non-working dependents including children and old people.
During those years of fast modernisation and after, birth rates fell, in part because urban families have fewer children than their rural peers working the land. Eventually, of course, the working-age population shrinks.
Thailand’s birth rate is now the lowest in Asean, on par with that of Singapore. Meanwhile, advances in medical care have been increasing the number of elderly. Today there are 10 elderly people for every 100 of working age, and that dependency ratio will double within 15 years.
The upshot is that Thailand is already an “ageing society”. And this transformation is happening much faster than in nearby countries with comparable levels of development.
In Indonesia, Malaysia and the Philippines, the size of the working-age population is likely to grow throughout the next two decades.
- Productivity investment lags: Poor deployment of human resources has worsened Thailand’s labour problem during the past decade, a consequence of short-sighted management and government policy
From 2007-13, both the state and private sector invested too little in the machinery and infrastructure needed to enhance productivity and to improve working conditions to attract and retain employees.
Thailand’s annual level of capital spending has not recovered to the pre-1997 level during any single year since.
In contrast, capital spending by other Asian countries, including South Korea and Indonesia which were hit equally hard by the Asian financial crisis, has substantially exceeded pre- crisis levels.
Why have businesses scrimped on tools, technology and infrastructure? One big reason is that it’s simply cheaper to hire migrant workers.
According to the International Labour Organization Thailand hosts some 3 million migrants, most of them undocumented, from Myanmar, Cambodia and Laos. The government’s official number of registered migrant workers is 1.2 million.
Migrants are mostly unskilled; their wages are low, often below the official minimum. Businesses therefore lack incentive to invest in new machinery to augment labour. This limits productivity.
And Thailand’s heavy reliance on migrants can’t be sustained. Living standards, jobs and wages will soon improve in migrants’ own countries and attract them back home.
- The Thai labour force lacks needed skills: There is a mismatch between the job skills that employers seek and the skills actually possessed by workers trained in the Thai educational system.
Thai schools and universities emphasise general education instead of vocational training, engineering and science.
Vocational students account for only 20pc of all students in education in Thailand, a very low fraction compared with Malaysia (50pc), South Korea (45pc) and Indonesia (30pc).
This is a worrying figure, because employers actually have a greater need for vocational workers, with their practical training, than for graduates of universities.
Even professional-level candidates lack many of the skills required by employers. According to a World Bank survey in 2007, Thai professionals perform poorly in creativity, innovation, IT, English language and mathematics.
The workforce’s skills in English and IT have been trending down, and workers in Malaysia, the Philippines in particular perform much better in these areas.
This probably means that the Asean Economic Community will result in Filipinos replacing many Thai workers in sectors such as hotels and tourism, which require English-language proficiency.
- Universities are underperforming. The World Economic Forum’s Global Competitiveness Report rates Thai universities lower than those of competing countries.
In 2014, Thailand ranked 87th in the quality of its universities, below Malaysia, Indonesia and the Philippines. Thailand’s labour shortages, whether caused by too few workers, poor education or too little labour-saving investment, are reducing the economy’s capacity to grow.