Photo: 2014 Reuters/Athit Perawongmetha
Thailand has some 3–4 million migrant workers that fill the gap for much needed low-skilled labor and companies in several sectors are dependent on these workers. However, a recent Royal Ordinance issued on June 23, 2017, has sparked concerns among employers. Although the proposed penalties under the Royal Ordinance have been postponed an initial exodus of migrant workers has been observed and many fear it could escalate. Why would this happen and what is the potential solution?
It is worth pointing out that Thailand has a rapidly aging society, due to longer life expectancy and reduced birth rate, so it is dependent on migrants to fill the gap in its labor force. But fostering regular migration has proven to be a daunting challenge for Thailand. Recent studies carried out by Rapid Asia have found that about 50 percent of migrant workers are irregular and some would argue that the actual percentage may be higher still. Many of these workers choose to migrate via irregular channels due to the higher cost and time associated with formal migration channels. In some cases, the cost is several times higher. The question is, would the 2017 Royal Ordinance on Foreign Workers Management help to push migrants through regular channels and obtain proper work visas?
The new ordinance would penalize employers and workers who fail to comply, with penalties ranging from 400,000–800,000 baht for employers, and 2,000–100,000 baht plus up to 5 years in prison for workers. Tens of thousands of migrant workers have already left the country, and when the ordinance comes into full effect, it could cause an escalated exodus. To provide employers and migrant workers more time, key parts of the new ordinance have been pushed forward to January 1, 2018.[1]
Another challenge are the bottle necks that already exist in the system. For example, the Department of Employment already has limited capacity to deal with its current load of enquiries and it would be difficult for it to cope with a heavier workload. Others point to the potential negative effects of the new ordinance. For example, it is very likely that employers would pass on any increases in labor costs to migrant workers, many of whom already struggle to pay off debt associated with recruitment and other migration costs. This could make hiring more difficult and lead to labor shortages, as well as creating more vulnerabilities among migrant workers.
But would it be possible to create a win-win-win situation for the government, employers and migrant workers? In 2015, the Thai Revenue Department offered a tax amnesty[2] for small and medium-sized enterprises as an incentive for companies to cease the common practice of preparing two sets of books and become properly registered for tax. A similar strategy could be applied in the case of migrant workers by offering lower cost work permits as an incentive. This could provide employers with more cost-effective labor, reduce the debt burden for migrants, and reduce labor shortages. A market needs assessment of employers and migrants may be needed to verify where the lines should be drawn. But given that Thailand attracts a substantial proportion of irregular migrant workers, the potential for increased revenue from issuing more work permits may well be greater than issuing fewer at a higher cost. If the objective is to maintain (or even increase) the workforce, while at the same time increase compliance, a similar strategy to that of the tax amnesty seems reasonable.
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About the Author: Daniel Lindgren is the Founder of Rapid Asia Co., Ltd., a management consultancy firm based in Bangkok that specializes in evaluations for programs, projects, social marketing campaigns and other social development initiatives. Learn more about our work on: www.rapid-asia.com
[1] Including penalties for employees, punishments for employers who hire workers for certain professions without permits, and recruiting workers without permits (Articles 101, 102, 122 and 119)
[2] Royal Decree 595 for tax amnesty and tax holidays was a temporary opportunity for a voluntary self-disclosure to the Thai Revenue Department, eliminating any penal sanctions and included incentives of a zero rate for the first year and a reduced rate of 10 percent for the second year.