Thailand’s Demography Challenge

In 2011, Thailand became an upper-middle-income economy. With average income now at $5,640, Thailand is facing slow economic growth, a loss of competitive edge, and high levels of economic inequality. Addressing these issues sits at the heart of the present government’s social and economic development plan and the Thailand 4.0 goal announced last year. Both place emphasis on technology and innovation, transport infrastructure upgrades, and human resources improvements through education reform.

To reduce income disparities, strategies have been designed to increase growth in the Northeast and North, where pockets of poverty remain. However, for a decade, Thailand has been facing labor shortages and is on the fast track to becoming an aged society. This will affect the government’s ability to realize the grand strategies to achieve high income status.

Along with China, the “land of smiles” currently has the highest share of elderly population among developing countries in the Asia-Pacific. The fertility rate is now 1.5, the second lowest in Southeast Asia. The World Bank estimates that by 2040, 42 percent of Thais will be over 65 years old. An impact of the low birth rate is a decline in unemployment rates, which has continued since 2007.

Lack of unskilled, semi-skilled, and skilled labor is prevalent, especially in the manufacturing and service sectors. The latter accounts for around 40 percent of Thailand’s gross domestic product and is a main focus of the Thailand 4.0 development plan. A shrinking working-age population reduces growth and lowers the state’s capacity to provide welfare to the dependent young and elderly. Given that Thailand is poorer than most aging societies, the issue is of grave concern.

While its aging society is not new, Thailand is still at the nascent stage of addressing it. The department of older persons was formed in 2015 to provide welfare to the elderly, promote their rights, and develop their capacities. But current plans are still limited to increasing stipends (which are still very meagre for the elderly poor), provision of skills training and job placement services, and incentives to private employers to extend the retirement age. None of this has been implemented yet.

For three years, the office of the civil service commission has been pushing to change the retirement age from 60 to 65 years. Yet the proposal has not been adopted. It is also still unclear how pension schemes for people with social security will change. Pensions from this source are very limited and will not be enough to meet the cost of living in the next 30-40 years.

Plans to encourage fertility are absent. Increases in the income and educational attainments of women may lead to late or no marriage. Other factors also contribute. The new generation now has high expectations of life, preferring to wait until they are ready financially and have reached career fulfilment before settling down and having children. Early childcare can disrupt a woman’s career progress. Unlike Singapore, daycare for children and education costs are not high. The government is making progress in expanding child development centers across the country. But this has not led to an increase in the fertility rate.

For some decades, arranged marriages and traditional match-making have been replaced by romantic marriages in Thailand. But the rush of urban life does not leave time for people to meet potential partners. Women don’t actively look for partners, so finding dates online is not common. A study should be conducted on why people remain single or marry late. As in Singapore, the government should try to promote romance and dating and employ tax and child subsidy incentives for married couples. Fertility treatment subsidies may be provided for older couples with reproductive difficulties. These initiatives do not exist currently.

Immigration may be a solution for labor shortages, a decreased working-age population, and low fertility rates. The U.S. and Europe have seen 47 percent and 70 percent increases, respectively, in the workforce from migrants who contribute taxes to support social welfare. Thailand has over three million foreign migrants from neighboring countries, mostly unskilled labor. But the government has been struggling to solve issues related to human trafficking and undocumented migrant laborers.

A law passed recently even raises penalties for non-conforming employers, aggravating labor scarcity. The laws make it very difficult for legal migrants to seek permanent residency which will allow their children, born in the country, to become Thai citizens. The quota for each nationality to obtain permanent residency is limited to 100 per year. Also, the Thai people are still not very open to foreign immigration.

A sufficient workforce and demographic balance are crucial to the social and economic advancement of the country. Without these, Thailand cannot achieve its goals. Tackling these problems is an urgent matter but requires long-term and creative plans.

This article was originally published on Aug. 20, 2017 by LiveMint.

Sasiwan Chingchit is a program officer for The Asia Foundation in Thailand. The views and opinions expressed here are those of the author and not those of The Asia Foundation or its funders.