Some time ago, we discussed Thailand’s demographic challenges: it is another Asian country with a rapidly aging population and declining fertility rates. Now for an update comes an article by a young Thai writer on the demographic issues facing this country.
According to Sasiwan Chingchit, program manager for The Asia Foundation (Thailand), as the country entered the range of an “upper middle-income economy” in 2011, its current demographic imbalances will seriously hamper its prospects for future growth. Its current concerns revolve around slow economic growth, loss of competitive advantage and high levels of economic inequality.
To address these concerns, the current government has put in place a social and economic development plan and a “Thailand 4.0 goal”. These both focus on technology and innovation, modernizing transport infrastructure and improving human resources through education reform. To reduce income inequalities, it is planned to increase growth, especially in the poorest areas in the north and northeast of the country.
The problem is, Thailand faces significant demographic headwinds that will reduce economic growth: labor shortages and an aging society.
Thailand, along with China, has the highest proportion of older people of any developing country in the Asia-Pacific region. These elderly people are not being sufficiently replaced by new citizens as Thailand’s total fertility rate has fallen to 1.5 children per woman (the replacement rate is around 2.1). By 2040 (in 23 years) the World Bank estimates that 42% of Thais will be over 65. (42%! That’s an incredible number! Imagine being in a country with almost half of the population at retirement age?)
This means that unemployment has been falling since 2007, as the number of workers available for work has not increased to keep pace with economic growth. Unfortunately, this also means that there is a labor shortage, especially in the manufacturing and service sectors (the latter accounts for 40 percent of Thailand’s GDP). Like China, the concern in Thailand is that it will age before it can get richer.
If so, Thailand’s ability to meet the needs of its growing number of dependent elderly people is called into question. Currently there are plans to increase allowances for the elderly, but these plans require an adequate base of active taxpayers – which cannot be guaranteed. A proposal from the office of the Civil Service Commission was to raise the retirement age from 60 to 65. This proposal has not yet been accepted by the government but has been circulating for at least three years. This will certainly have to be taken into account as the proportion of the population over the age of 60 increases.
At the other end of the demographic scale, little is done to increase fertility rates. However, even if the government introduced such measures (TV ads to encourage more births have been used in places like Singapore, Denmark and South Korea), there is a big question as to their effectiveness.
The new generation of young Thais have high expectations about their lifestyle and prefer to wait until they are financially ready and have reached a career goal. In addition, the decline of arranged marriages and the increased rush of modern city life have left many Thais unable to find a mate. If child care and daycare costs are not high, it has not been enough to overcome these problems and increase fertility rates.
What about migration? Western countries manage to avoid demographic problems by importing workers and taxpayers (and more fertile citizens) through large-scale immigration. Currently, Thailand has over three million foreign migrants from neighboring countries who are mostly unskilled workers (the total population is just under 69 million people). However, these migrants bring with them problems as well as opportunities for the Thai government: in particular, human trafficking and undocumented / illegal migration. As Chingchit notes:
“A recently passed law even increases penalties for non-compliant employers, exacerbating the labor shortage. The laws make it very difficult for legal migrants to apply for permanent residence which will allow their children, born in the country, to become Thai citizens. The quota for each nationality to obtain permanent residence is limited to 100 per year. In addition, Thais are still not very open to foreign immigration.
In short, until Thailand raises its fertility rate or drastically changes its immigration policy, serious demographic problems are likely to limit its economic growth in the years to come.