The myth of Thailand’s demographic doom

It is easy and tempting these days to be discouraged with Thailand. The place reeks of bad news and is full of tension and challenges in its society, economy and politics. Yet the Thai story remains counter-intuitive and compelling. With daunting dilemmas in all directions, Thailand should not have space for complacency. But it also should not be a place without hope.

While it is likely to get worse and worse still in the short- and medium-term, this country still has a chance in the longer term. Take, as a case in point, the economic fearmongering about its labour market and ageing society.

THAILAND’S MIDDLE INCOME TRAP

When we think of an ageing society, Japan comes to mind as the poster country. Wealthy people there are living longer and producing fewer children. Older people are being enticed to work longer beyond the traditional retirement age. Women are encouraged to enter the workforce without corresponding norms and regulations to reduce their homemaking requirements. Japan’s deeply embedded insularity and geography as an isolated island and maritime power preclude the large immigrant flows its economy needs. So Japan is stuck, as can be seen in its economic stagnation over the past 25 years after its bubble economy burst.

Yet Japan is not doing as badly as one might think. Its national wealth, if measured in gross domestic product terms, hardly expands on an annual basis. But if calculated on gross national income to include net foreign assets and returns, Japan continues to be wealthy. Its future at home will be challenged because of demographics and an assortment of other structural problems in its politics and economy, but its fortunes abroad will help Japan maintain its wealth and manage its attendant problems.

Thailand is now said to be afflicted with symptoms of a similarly ageing society without the kind of wealth the Japanese have parked and grown abroad. The United Nations population data shows the Thai population is no longer self-generating on par with decades past. Like in Japan, Thais are living longer and having fewer offspring due to modernisation and urbanisation trends and imperatives. Thailand’s workforce population is due to peak over the next few years and will begin an inexorable descent thereafter. Within the next two decades, almost two-thirds of the population will be over 60 years of age.

Exacerbating population trends are symptoms rooted in being stuck as an upper-middle-income country with bleak upward mobility. This so-called middle-income trap (MIT) means the economy is squeezed between higher-value-added economies such as South Korea and Taiwan and cheaper-labour countries in Vietnam, Indonesia and Bangladesh, among others.

The usual culprits are at work. To move up the global value chain, the Thai economy needs upgrading through skills, education reforms and innovation. The literature on MIT and Thailand’s firmly rooted place in it is voluminous.

Compounding Thailand’s demographic conundrum and growth challenges going forward are its deeply polarised society and broken political system. Over the past decade of crises and coups, characterised by street demonstrations of various colours, Thailand has proved unwell, unwilling and unable to move forward under mutual accommodation and compromise.

Instead, it is ruled by naked partisanship in a winner-takes-all environment. The current coup period and its crooked Constitution-drafting process that favours the unelected and unchecked power of the few over the rest are likely to build up into another political tsunami whose proportions may well outstrip previous crises and turmoil as Thailand’s endgame is all to be played for.

It is thus hard to be optimistic. But as in the misplaced case of a demographic doom, the reality on the ground reflects Thailand’s strategic assets and good fortune, which should neither be taken for granted nor ignored. All is true about Thailand’s declining population. It is a global trend from which not even the most pro-life Catholic countries can escape. But the Thai labour market is more dynamic and inventive than people might anticipate.

BUT NO NEED TO BE GLOOMY

On any given day, there are probably at least 72 million humans inhabiting Thai soil. This number features the 67-million-odd Thai nationals, but includes at least three million young migrant workers from next-door countries. Add in another two million tourists on a daily average and the Thai critical mass as a market becomes compelling. This is why the country’s coup government can be criticised abroad, but no major country can afford to isolate the Thai economy.

The foreign migrant workers are a crucial component of the Thai labour force and we do not know their real strength because most of them are undocumented. From cursory and anecdotal data commonly used, at least 2.5 million come from Myanmar, with another few hundred-thousand from Cambodia and more than a hundred thousand from Laos. There are also a growing number of unregistered Chinese workers, estimated in a rough range of several hundred-thousand, in the entertainment and hospitality industries, especially those from Yunnan, many of whom are proficient in the Thai language.

The conservative estimate of three million migrant workers from Cambodia, Laos and Myanmar, plus an untold number of Chinese, keeps the Thai labour force flexible and competitive. With virtually full employment, Thai inflation has been remarkably low and manageable, thanks in large part to sound and well-embedded macro-policy institutions anchored around the Bank of Thailand. The steady influx of nearby foreign workers buys time and alleviates Thailand’s demographic challenge.

What needs to be done is to start thinking about giving residency rights and related access to education and healthcare to foreign workers from these next-door countries.

Higher-skilled workers, too, should be given more enticements to settle in Thailand. If the Thais are not having enough children, they can poach and take in more talent and lower-skilled labour from outside. And the Thais themselves can think about extending the outmoded retirement age, especially in the bureaucracy, though the lead-up time for the military and the police must be longer than other sectors.

Conventional demographic analyses cite conventional data and examples. But in Thailand, the data are woefully incomplete because undocumented foreign migrant workers are ubiquitous, mostly in the services sector and outside Bangkok.

A trip to the north, north-east, lower north-east and the south will reveal a pattern of foreign migrant workers consistent with Thailand’s geography. Those from Myanmar are roughly more prevalent in the western side of Thailand, whereas the Lao and Cambodians have flocked to work in more urbanised areas in the eastern half of the country.

The indispensable addition of migrant workers from these countries is not a cause for celebration. In fact, with cheaper labour on offer, these workers pose and compound Thailand’s MIT structural problems, further putting off the incentives to upgrade skills and upscale industries and firms to be more globally competitive and rise up the value chain. And foreign workers are traded by greedy and slimy middlemen who worsen regional human trafficking.

But at the same time, we should not be overly gloomy about Thailand’s labour force. The Thai labour market is ultimately mainland South-east Asia’s labour market, a trend that is likely to pan out over the next two decades. It will help save Thailand from itself by keeping its growth trajectory buoyant and viable in the face of political and societal adversity to come. BANGKOK POST

ABOUT THE AUTHOR:

Thitinan Pongsudhirak is associate professor and director of the Institute of Security and International Studies, Faculty of Political Science, Chulalongkorn University.