Informality in Thailand runs deep. One might expect it to be confined to specific sectors of the economy like agriculture and fishing, which account for more than 50% of Thailand’s employment, but it stretches into the service sector, from wholesale and retail trade to hotel and restaurant workers. Informal workers, roughly 25 million people, comprise as much as 62% of all workers in the kingdom. Thailand’s informal sector is so large that it not only attracts informal workers from neighbouring ASEAN countries, but the informal sector’s workers and their dependents comprise more than 76% of the country’s population, according to the Organisation for Economic Cooperation and Development (OECD).
The informal sector does have value in Thai society. When the economy experiences sharp declines, as it did during the Asian Economic Crisis, the informal sector is often a cushion as it compensates for lost formal sector jobs. However, during the pandemic social distancing rules and other public health measures have lessened many of those benefits as even informal employment has become a challenge. The vastness of informality in Thailand has exposed many of the flaws in public policy, which has left millions at best vulnerable and at worst, destitute.
Most of Thailand’s labour laws were designed to protect formal workers. For example, the Labor Relations Act of 1975 (LRA) allowed workers to establish labour unions and collective bargaining. In many aspects, the LRA does a reasonable degree of public good, from the regulation of child labour, setting a standard mimimum wage, and provides protections for employees younger than 18. However, the LRA doesn’t apply to the majority of Thai workers, like informal workers, domestic workers, agricultural workers and seasonal labourers.
This lack of public protection during the coronavirus pandemic has had dire consequences for Thailand. Prior to Covid-19, Thailand’s economy was already weak. In 2019, it recorded its lowest growth in five years and struggled to keep up with some of its fellow ASEAN member states, who fared better over much of the same period. As the International Monetary Fund (IMF) noted recently, Thailand has been challenged by relatively low productivity growth, extremely high household debt and weak social safety nets, as well as a high dependence on tourism. These factors make for a near lethal cocktail for informal workers, who have been hit especially hard during the pandemic.
Informal workers have either experienced reduced working hours, as evidenced by thousands of tuk-tuk and motorcycle taxi drivers without tourists to transport from place to place, or complete job losses. The International Labor Organization in June 2020 predicted that as many as 7.5 million workers in Thailand would experience job disruption, the majority being from the informal sector.
The Thai government has not learned lessons from the past. The 2011 floods impacted more than 8 million people in 60 Thai provinces and caused damages exceeding $2 billion. The informal sector was among the hardest hit due to their vulnerability and lack of social protection, with the floods exposing how inadequate government support was.
In March of last year, the government rolled out a plan to provide 5,000 baht (roughly $150) handouts to informal workers hit hard by the pandemic. While cash payments have been recommended by international organisations, national think tanks, and development economists, the implementation of the handout scheme was clumsy.
The enormity of the Covid-19 pandemic in Thailand has challenged the government, who vastly underestimated the number of enrollees and failed to budget appropriately for its own handout scheme. While the government expected 14 million workers to enroll in the scheme between April and June of last year, almost 29 million people had signed up by the time the online registration closed. The government later expanded the scheme up to 16 million people and then later extended it again for six months. In January, the government debated dispensing more cash handouts to more vulnerable populations.
The harsh reality was that the government was inept at reaching informal workers. According to one study, only 44% of workers in the informal sector received payment from the scheme. The government also failed to realise that many workers were missing from government databases or that their low-level of education might complicate their ability to complete the online registration.
The pandemic, like that of the 2011 floods, raises important questions about the ability of the government to address huge population vulnerabilities and adapt swiftly to national emergencies.
For a considerable period of time, the total number of unemployed workers in Thailand was under 500,000. Providing stimulus to minimum wage and low-wage workers hasn’t been the priority of several past governments, with the last minimum wage increase under the Yingluck Shinawatra government in 2013, who increased it to 300 baht per day.
This was expected to boost wages for many of Thailand’s lowest-paid positions, as well as increase the number of migrant workers entering the country as this is triple the minimum wage of Myanmar, Laos, and Cambodia. Many of the low wage jobs available in Thailand are filled by migrant workers, who engage in labour intensive work that many Thais decline to do.
Now, Covid-19 has created problems for low-wage earners that have been largely unanticipated. Thai restaurant owners were left frustrated in June over the government’s ban on dining in, implemented a week after the government previously relaxed Covid-19 restrictions. The ban on dining in had a severe impact on eating establishments, as well as their restaurant staff. The inconsistency of the dining bans and the frequency of virus outbreaks cut deep into their operating margins and crippled the wages of workers. According to the Thai Restaurant Association, the industry estimates it is losing up to 1.4 billion baht per day and as many as 500,000 workers have lost their jobs.
In the case of restaurant workers, the lack of financial assistance to Thailand’s beleaguered eateries has increased pressure on low-wage earners. While government officials like Deputy Prime Minister Prawit Wongsuwon lashed out at restaurant owners, asking “What more do you want?,” after noting that the government had been subsidising half the salaries employed in small to medium sized enterprises (SME) across the country, it is not a stretch to suggest that the government’s outreach to restaurant owners has been seriously flawed.
Cash handouts to workers are ineffective if the employer no longer has the financial resources to retain those employees. A poorly conceived policy of restricting operating hours not only deprives restaurants of huge amounts of revenue, but robs workers of their livelihoods.
The Thai government should have learned these lessons sector by sector, as Covid-19 has seen over 60% of the Thai workforce lose at least 50% of their income. Informal workers are the hardest hit, with more than 81% in the vast yet barren tourism sector losing their jobs.
Public confidence in the Prayut-led government’s pandemic response has revealed a unified, non-partisan frustration with Thailand’s outreach and approach to the private sector. SMEs have suffered disproportionately and many believe that another wave of Covid-19 infections would doom industry after industry.
The government’s soft loan scheme has been met with a weak reaction by many and the earlier 5,000-baht scheme didn’t reach as many informal workers as it should have. That is particularly concerning given their precarious position and the private sector’s hesitancy to take on new debt while economic recovery is at best cloudy. Household debt is already at an 18-year high.
To stem the tide of threats to informal workers, Thailand needs to address fundamental changes fast. To service its growing amount of Covid-accumulated debt, it should consider hiking taxes on the richest Thais. Thailand is one, if not the most unequal country in the world, with the richest 1% controlling almost 67% of the wealth. During the pandemic, many have gotten richer, as was the case of Dhanin Chearavanont of the Charoen Pokphand Group, whose net worth now exceeds $18 billion.
Thailand needs to formalise informal labour. While it tried to promote a transition to formal employment through social security schemes, it was too slow and coverage was low. The government must modernise and make institutions and existing schemes more flexible and resilient to economic shocks. The World Bank suggested that the government put forward a social insurance system, implemented with the same innovative approaches that were employed to implement its Universal Health Care coverage.
Short-term measures like incentivising employers to retain employees during the pandemic are important as are subsidies for both SMEs and vulnerable workers. Covid-19 has shown that Thailand’s vast informal sector has not received the attention it deserves by the military-backed government.
It’s time to start planning ahead to protect Thailand’s most vulnerable workers.
