Social crisis and labor market regulation in Thailand

Presentation for the visiting professor’s workshop “Global Labour Market Regulation and Changing Welfare Conditions, Institute of Political Economy,

Carleton University, February 13, 2009

• Johannes Dragsbaek Schmidt

Bullets• 1) Crisis – Dangers and Opportunities• 2) “Creative destruction” or Robbery in full Daylight!• 3) Strings and Conditionalities of the IFIs 1997 –

hypocricy in 2009• 4) De-regulating Labor Markets/Targetting the poor• and avoiding social chaos• 5) Introducing Flexibility in Labor Markets/Impacts• 6) Growing inequalities - Distributional consequences• 7) Informalization of Labor Markets• 8) Increased Social and Political Instability• 9) Concluding Remarks

Strings and Conditionalities of the IFIs 1997-2009

• Opening up for foreign ownership of shares in local companies and finance

• Abolishing restrictions on FDI• Tight fiscal and monetary policies without consideration

for social consequences• No control of financial flows• Imposition of full guarantees to creditors• Rapid structural reform measures – stringent financial

standards and corporate restructuring• Privatization of SOEs, education and health etc

• Get ”the fundamentals right” in Asia and the South but not in the North

De-regulating Labor Markets/Targetting the Poor and Avoiding Social Chaos

• Abolishing contract-based regular employment• Easier to hire and fire (Flexibility)• Enterprise unions• No minimum-wage (or artificially low if necessary)• Fear of social chaos– intro of ”social welfare”• Tripartite negotiations – never implemented

Introducing Flexibility in Labor Markets

• Reforms of labor laws – governments developed ”harmonious” industrial relations/partnerships

• Reducing employment protection • Allowed for collective dismissals• No limits on work hours• More power to management in terms of

outsourcing and use of irregular workers• Lowering wages to become competitive

Outcomes:• Thailand has the longest work hours in the world

– lowest number of annual holidays• Weakening of trade union membership and

density and bargaining power• Increased unemployment• Enormous increase in non-standard/informal

workers• A dual labor market• massive social costs• Workers paying for the crisis (AGAIN)

Informalization of Labor Markets

• Thailand pre-crisis 1997- 30% – today 2009 - 53% and growing

• Increase in wage gaps• Increase in employment insecurity• Slow down in government investments including

employees pay of skill upgrading• Increase in part-time and temporary employment• Gender impact – worst for women lead to

increase in prostitution, human trafficking and a general criminalization of the economy

Result of twin crises: Increased Social and Political Instability

• Has led to casualisation of labor and growing job insecurity

• Increasing dualism between formal labor market and informal – 3D – dirty, dangerous and difficult

• Thailand – recent military coup no. 18 since 1932 – 3 Primeministers in 6 months

• Increasing social and political instability – in search of a new social contract