• The Thai economy is currently in a crisis with an uncertain endpoint due to the COVID-19 pandemic, which has affected nearly every business sector, particularly the tourism industry. This crisis poses a risk to the labor market, which has shown signs of weakness even before the pandemic. The most vulnerable groups are temporary workers, freelancers, and employees of SMEs, who make up about 62% of the Thai workforce and are highly sensitive to economic conditions.
  • The EIC estimates that the number of unemployed individuals could rise to around 3-5 million, a level higher than any previous crisis in Thailand. This is due to the broader impact of the crisis and a sudden stop in many economic activities. The agricultural sector may not be able to absorb unemployed workers from other sectors as it has in the past due to drought issues.
  • The EIC believes that many workers, even if not unemployed, will see a significant reduction in working hours and income, with some potentially having no income at all during certain periods. The recovery of the labor market is expected to be slow, following a U-shaped economic recovery, and the ongoing effects of COVID-19 will persist until effective treatments and vaccines are available.
  • The risks in the labor market are likely to have a lasting impact on the quality of life for households that are already vulnerable. Approximately 60% of Thai households have insufficient financial assets to cover expenses for more than three months.

The EIC has identified several signs of weakness in the Thai labor market even before the COVID-19 crisis:

  1. The number of employed individuals has decreased according to data from the National Statistical Office. The average number of employed people in Thailand in 2019 was 37.6 million, down by 480,000 compared to the average in 2014. This decline is attributed to both cyclical factors, such as the economic slowdown reducing labor demand, and structural factors, particularly the exit of older workers from the labor force, which increased from 5.4 to 6.8 million during the same period. The average number of employed individuals in the first quarter of this year is still on a downward trend, at 37.4 million, a decrease of -0.8% year-on-year, marking four consecutive quarters of contraction.
  2. The average working hours have decreased. In 2019, the average working hours for Thai workers was 42.7 hours per week, down from 44.1 hours per week in 2014. This decline is primarily due to a reduction in the number of overtime workers (those working 50 hours or more per week), which fell from 9.7 million to 6.8 million, a loss of 2.9 million people during that time. The trend of decreasing working hours continues to be observed in the first quarter of this year, reflected in the -7.6% year-on-year contraction in the number of overtime workers.
  3. The number of unemployed individuals has increased. The average number of unemployed individuals in the first quarter of this year is approximately 400,000, an increase of 14.8% year-on-year, marking three consecutive quarters of increase. Additionally, data from the Social Security Office shows that in the first quarter of 2020, the average number of insured individuals who were unemployed was 160,000, up 4.5% year-on-year, with the unemployment rate for insured individuals under Section 33 showing a continuous upward trend since the global financial crisis of 2008-2009.

Given the pre-existing weakness in the labor market, combined with multiple negative factors such as the COVID-19 outbreak, global economic contraction, and drought issues, this crisis is likely to have a widespread impact on workers across various industries. The sectors most at risk are those related to tourism, including hotels, restaurants, entertainment, and wholesale and retail trade, as they are directly affected by the loss of tourists and lockdown measures. Other sectors will also experience significant direct and indirect impacts from the severe economic downturn and the anticipated slow recovery (U-shaped recovery). Agricultural workers will be particularly affected by severe drought this year, and may also face indirect impacts from reduced purchasing power, limiting their ability to absorb unemployed workers from other sectors during this crisis.

The EIC believes that the nature of employment will be another critical factor affecting income risk and job security. Temporary workers, freelancers, and employees of SMEs, totaling 23.4 million people, account for 62.2% of total employment and are often sensitive to economic conditions, making them a high-risk group across all business sectors.

When considering both business sectors and employment characteristics, the highest-risk labor group will be temporary workers, freelancers, and SME employees working in the tourism sector, totaling 6.5 million people or 17.3% of total employment. Following them are SME operators in the tourism sector and those with similar employment characteristics in affected industries such as manufacturing, transportation, and construction. Employees in large businesses and the public sector are likely to face lower risks; however, this group constitutes a minority of total employment.

Given this level of risk, the EIC estimates that the number of unemployed individuals could rise to around 3-5 million, translating to an unemployment rate of approximately 8%-13% of the current labor force, the highest level recorded since data collection began in 1985. This would surpass the previous record high unemployment rate of 5.9% in 1987, significantly higher than the 3.4% unemployment rate during the 1997 financial crisis and the 1.5% rate in 2009 during the global financial crisis. The reason for the anticipated higher unemployment this time is due to the widespread impact of the economic crisis on businesses and households that have been vulnerable for some time, compounded by lockdown measures necessary to control the outbreak, which led to a sudden stop in economic activities. Additionally, the agricultural sector, which has historically absorbed labor, is likely to face limitations in fulfilling this role due to severe drought issues.

The EIC also anticipates that many workers, even if they do not lose their jobs, will experience significant reductions in working hours and income, with some potentially having no income at all during certain periods. If the impacts extend into the second half of the year or longer, the number of unemployed individuals could exceed the initial estimates due to increased business closures, particularly among vulnerable businesses with insufficient liquidity.

The EIC believes that after the lockdown measures are lifted, the labor market situation will likely improve, but recovery will be slow, in line with the anticipated U-shaped economic recovery and the ongoing effects of COVID-19 on the economy and people's lives until effective treatments and vaccines are available. Businesses are expected to remain cautious in spending and hiring due to the high level of uncertainty in the situation.

The loss of income and unemployment among workers will lead to significant hardship for many households due to limited financial buffers. According to the 2019 Household Economic and Social Condition Survey, there are 7.9 million households in Thailand that rely solely on income from employment, accounting for approximately 36.2% of all households. Within this group, 5.2 million households, or 65.5% of them, have financial assets that cover expenses for no more than three months. Furthermore, among households earning less than 30,000 baht per month, there are 4.3 million out of a total of 5.8 million households, or 72.9%, that have insufficient financial assets to cover three months of expenses. This will likely force these households to adjust by significantly reducing consumption, selling or mortgaging assets, or incurring debt to cover expenses, which will create additional vulnerabilities in the long term.

Analysis from EIC website: https://www.scbeic.com/th/detail/product/6775
Presented by
Economic Intelligence Center (EIC) Siam Commercial Bank Public Company Limited
EIC Online: www.scbeic.com
Line: @scbeic