During the last decade, the number of immigrants into Thailand from neighboring countries has been increasing very rapidly. This prediction is based on the current widening income disparities between Thailand and its neighbors. Such disparities are slowing the growth of the Thai work force, leading to a higher demand for cheap labor in particular economic sectors. Most formal and informal migrants to Thailand are mainly from Cambodia, the Lao PDR and Myanmar. These migrants are mostly in working age groups with low-level skills and little education.
Immigration issues are among the forefront of current economic and political concerns as the economic benefits of immigration to the Thai economy are hotly debated and a number of empirical studies attempt to measure the costs and the benefits to Thailand. How the macroeconomy should be affected from employing immigrants was, for example, the first aspect explained by Thai economists in quantifying the benefits the overall economy has received. Migration contributes to overall GDP growth and promotes investment, particularly prominent in sectors and industries with labor-intensive production. Immigration also rectifies market failures that result from uncertainty of output production, which itself is the result of incomplete information in the labor market. At the firm level, employing migrants helps to stabilize the labor supply in these sectors and to prevent uncertainties arising from production and unfilled vacancies. In addition, immigration benefits Thai and foreign producers by presenting opportunities to enjoy lower wage costs to maintain price competitiveness.
Even though economic benefits of immigration become obviously observed, these benefits can be noticed only in the short-term, whereas the contribution to long-term economic development is still doubtful. According to the Thai government’s long-term national, economic and social development plan to promote a knowledge-based economy, the key factors required to achieve such a goal include upgrading Thai labor productivity from substantive human capital investment, promoting the coverage of the social protection floor, and encouraging innovation as well as R&D. There are still concerns whether employing immigrants, who are mostly unskilled, poses an obstacle. For example, Pholphirul et al. (2010) found that a 10-percentage point increase in employing unskilled immigrants is likely to reduce overall labor productivity by about 5 percent. Firms in industries with labor-intensive production, such as in the textile industry, face more depression on their labor productivity.
Employing unskilled migrants might be also expected to blunt a firm’s incentives for innovative investment or reducing the training of workers. Firms employing cheap labor from abroad can be regarded as adopting a kind of “labor-using technology”, which would slow down productivity improvement and lead to deteriorating global competitiveness in the long run. Pholphirul, et.al. (2010) also found negative relationship between productivity-enhanced activities such as R&D investments and training of workers and employing unskilled immigrants, in particular for firms located in border provinces. A 10-percentage increase of employing unskilled migrants tends to reduce a firm’s probability of R&D investment by around 4% and provide less training by about 3 percent less probability.
Employing unskilled migrants might be expected to blunt a firm’s incentives in enhancing the productivity of its workers by either providing training programs or upgrading technology. Adopting a kind of the “labor-saving technology” strategy is therefore jeopardized to reduce worker capacity and labor productivity and reduce long-term competitiveness especially in sectors where migrant and native workers are close substitutes. Since higher labor productivity from R&D investment and skill upgrade are among key factors in creating a higher standard of living of the Thai people, a reverse effect of those activities by employing unskilled immigrants would pose challenges for long-term competitiveness.
Reference
Pholphirul, P., Rukumnuaykit, P., and Kamlai, J. (2010) “Do Immigrants Improve Thailand’s Competitiveness”, paper presented at the IPS-World Bank on Labour Mobility, June 1-2, 2010, Singapore.
