Publications

Introduction

On September 19, 2006, the prime minister of Thailand, Thaksin Shinawatra, was in New York at a large gathering of world leaders at the United Nations General Assembly.  On the same day, in Bangkok, a bloodless military coup reduced him to a stateless dignitary in a matter of hours.  By the close of the week, Mr. Thaksin was in self-imposed exile in London, and he has not returned to Thailand since.  The country is now in the hands of a premier appointed by the junta, with democratic elections promised for early 2007. 

A military coup was widely anticipated among the general public in Thailand.  Nonetheless, any sort of political instability is unnerving to the business community and makes foreigners wary of investment.  It is surprising, therefore, how stable the Thai economy has remained in the aftermath of the coup.  Standard Chartered Bank predicts a growth rate of 4.1% in 2006 and as much as 5.2% in 2007.  

Recent Labor Trends

Thailand has a labor force of 35 million people.  Political unrest and poverty in neighboring Myanmar has also driven hundreds of thousands of Burmese to find work illegally in Thailand.  Between 2004 and 2006, the Thai government administered a temporary work permit program for migrant workers from Cambodia, Laos, andMyanmar, but it is unclear whether this will continue.

While there is an emerging middle class in Bangkok and other major cities, a lack of skilled labor remains a serious problem in Thailand.  More than half of the national workforce is still employed in the agricultural sector. This sector, however, accounts for less than 10% of GDP.  While unskilled labor is flowing in from neighboring countries, talent seems to be slipping away.  The Reverse Brain Drain program set up by the Thai government to attract Thai expatriates back to their homeland has had little success.  In the first half of 2005 alone, 105,000 Thais left the country to find work overseas (1).  This is an annual net emigration rate of around 6 per 1,000 members of the labor force.  The political unrest in 2006 is only likely to increase these figures. 

Labor Laws

The minimum wage in Bangkok was raised in January 2006 to 184 Baht per day ($5/day).  These are the highest minimum wage rates in the country, with smaller cities having rates as low as 140 Baht per day ($3.80/day). Nationwide, actual salary increases have remained steady at around 6% annually for the past 6 years.  Larger employers are required to keep written records documenting working hours and wage, though this is rarely enforced.  Labor unions also continue to push for further minimum wage hikes, but should not be expected to have much effect.  Less than 2% of the Thai labor force is unionized.

Thailand has a progressive income tax system.  In 2005, the upper limit for tax-exempt income of 80,000 Baht ($2,181) was raised to 100,000 Baht ($2,726).  Currently, the income brackets published by the Revenue Department are as follows:

Thailand Personal Income Tax Brackets

Benefits 

Thailands Social Security Act guarantees compensation for injuries and illness, maternity leave, death of family members, and child welfare.  In 2004, the Thai government added unemployment benefits to the Social Security Act.  Social security contributions are made by employees, employers, and the government, each contributing at a base rate of 5%.  The new unemployment insurance will require an additional contribution from the government, but employer and employee contributions will remain at 5%.

National Pension Fund

Thailands population is aging, with nearly 17% of the population expected to be over the age of 60 by the year 2020.  This is a rise of 88% over the figures for the year 2000.  To combat this problem, the Thai government has initiated a plan for a National Pension Fund.  The plan was scheduled to begin in January 2007, but implementation may be delayed by as much as a year.  Twelve million workers, mostly private employees, will be targeted during the first year. The plan will eventually include all types of workers.  It requires a 3% contribution from both employees and employers.  Rates are expected to rise once the program is initiated.  Many larger FIEs in Thailand already have their own private pension funds.

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