Thailand and Industrial Restructuring: Government Policies and the Labor Situation Since 1997

Abstract

In Thailand, the recent Asian economic crisis has been used by the government to accelerate the ongoing industrial restructuring toward a more market-oriented allocation of resources. Under the crisis, while mergers and takeovers in the banking sector have led to downsizing and many layoffs of white-collar workers in the financial institutions, wage and employment flexibility in the manufacturing sector is being rigorously pursued under the Structural Adjustment Program. Minimum wage has been deregulated. By decentralization of minimum wage setting to the Regional Tripartite Committee where labor has weak representation, such reform paves the way for wage to be flexible downward. New workers would be rehired as subcontract workers or trainees. But what becomes a problem is that such flexibility aims to strive for competition by the lower end, leading to increased fragmentation of labor, welfare reduction, and jobless growth for Thai workers.