A while ago we discussed Thailand’s population challenges: it’s another Asian country with a rapidly ageing population and declining fertility rates. Now, by way of an update, comes a piece from a young Thai writer on the demographic issues facing that country.

According to Sasiwan Chingchit, a programme officer for The Asia Foundation (Thailand), while the country moved into the range of an “upper-middle-income economy” in 2011, its current demographic imbalances will seriously impede its future growth prospects. Its current concerns revolve around slow economic growth, a loss of competitive edge and high levels of economic inequality.

To address these concerns, the present government has implemented a social and economic development plan and a “Thailand 4.0 goal”. These both emphasis technology and innovation, transport infrastructure upgrades and human resources improvements through education reform. To decrease income inequalities, there are plans to increase growth, particularly in the poorer areas in the north and north-east of the country.

The problem with this is that Thailand has some substantial demographic headwinds to contend with that will reduce economic growth: labour shortages and an ageing society.

Thailand, along with China, has the highest proportion of elderly people out of all developing countries in the Asia-Pacific region. These elderly are not being sufficiently replaced by new citizens as Thailand’s total fertility rate is down to 1.5 children per woman (the replacement rate is around 2.1). By 2040 (in 23 years) the World Bank estimates that 42 percent of Thais will be over the age of 65. (42%! That is an incredible figure! Imagine being in a country with nearly half of the population at retirement age?)

This has meant that unemployment has been declining since 2007 as the number of workers available to work have not grown to keep up with economic growth. Unfortunately, this also means that there is a shortage of labour, particularly in manufacturing and the service sectors (the latter accounts for 40 percent of Thailand’s GDP). Like China, the concern in Thailand is that it will get old before it can get rich.

If that is the case, then the ability for Thailand to provide for its growing number of elderly dependents is in question. Currently, there are plans to increase elderly stipends but those plans require an adequate base of working taxpayers – something that cannot be guaranteed.  One proposal from the office of the civil service commission has been to change the retirement age from 60 to 65 years. This proposal has not yet been accepted by the Government but has been floating around for at least three years. Surely it will have to be considered as the proportion of the population over the age of 60 grows.

At the other end of the demographic scale, there is little being done to increase the fertility rates. However, even if the government were to introduce such measures (TV ads to encourage more births have been used in places like Singapore, Denmark and South Korea) there is a large question as to how effective they would be.

The new generation of young Thais have high expectations of high expectations of their lifestyle and prefer to wait until they are financially ready and have reached some career goal. Furthermore, the decline of arranged marriages and the increased rush of modern urban life has left many Thai failing to find a partner. While childcare and daycare costs are not high, this has not been enough to overcome these problems and for the fertility rates to increase.  

What about migration? Western countries manage to stave off demographic problems by importing workers and taxpayers (and more fertile citizens) through large scale immigration. Currently, Thailand has over three million foreign migrants from neighbouring countries who are mostly unskilled labourers (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 law passed recently even raises penalties for non-conforming employers, aggravating labour scarcity. The laws make it very difficult for legal migrants to seek permanent residency which will allow their children, born in the country, to become Thai citizens. The quota for each nationality to obtain permanent residency is limited to 100 per year. Also, the Thai people are still not very open to foreign immigration.”

In short, until Thailand increases its fertility rate or changes its immigration policy drastically, there are severe demographic issues which may limit its economic growth in the years ahead.