Piriya PholphirulNational Institute of Development

Administration (NIDA)

Thailand has been an attractive destination of numerous migrant workers especially Myanmar, Lao PDR, and Cambodia.

In economic term, immigrants are an essential factor of production and laborers

In social sciences, migrants can brings to a number of social issues that may be existed in a host country.

What happen if that host country is still considered a “developing country” in which majority of immigrants are low-skilled

1. Pholphirul, Piriya, and Kamlai, Jongkon (2014) “How Much Do Low-Skilled Immigrants Contribute to the Thai Economy?: Analysis of Three Methodologies”, Asian Pacific Migration Journal, 23(1): 85-112.

2. Pholphirul, Piriya (2013) “Immigration, Job Vacancies, and Employment Dynamics: Evidences from Thai Manufacturers”, Journal of Asian Economics, 24(1): 1-16

3. Pholphirul, Piriya and Rukumnuaykit, Pungpond (2013) “Does Immigration Promotes Innovation in Developing Countries?: Evidences from Thai

Manufacturers”, AIM Policy Paper Series 14-009, Makati City: Asian Institute of Management

4. Manop, Nuntanit and Pholphirul, Piriya (2013) “Does Immigration Promote International Trade?: Evidences from Thai Manufacturing Sector”, Journal of Demography, 29(2): 59-79.

5. Rukumnuaykit, Pungpond and Pholphirul, Piriya (2013) “Employment of Immigrants and Firm’s Competitiveness: Evidences from Thai Manufacturers”, International Business Management, 7(5): 374-392.

6. Pholphirul, Piriya (2012) “Migration and Economic Sustainability in Thailand”, Journal of Current Southeast Asian Affairs, 31 (3): 59-83  

7. Pholphirul, Piriya and Rukumnuaykit, Pungpond (2010) “Economic Contribution of Migrant Workers to Thailand”, International Migration, 48(5): 174-202.

Thai Economists try quantifying economic contribution of immigration in terms of macroeconomy (different number come from different dataset and different methodology)

Sussangkarn (1996) used the SAM-CGE model: by accounting migrant population around 750,000, the migration flow raises about 0.55 percent of Thai GDP, or approximately $ 839 million (TDRI Quarterly Review, 1996)

Martin (2007): Foreign workers enhance around 1.25 percent of GDP or about $ 2 billion of the US$1700 billion of Thai GDP in 2005 (ILO report).

Pholphirul and Kamlai (2014) (1)uses another 3 different models (1. macroeconomic Simulation, growth accounting approach, and econometrics approach) and found that Immigrants to Thailand help increasing the country’s aggregate output (GDP) around to 0.75-1 percentage point of the real GDP

Rukumnuaykit and Pholphirul (2013) (5) applies the GMM Production function

Skilled immigrants contribute to more production than unskilled (especially in machinery and equipment and auto parts)

Labor-intensive production sectors (garment) receive highest contribution from unskilled immigrants

Kura et al (2009). claimed that maintaining competitiveness in the shrimp industry requires shrimp producers to pay low wages to immigrants

Kohpaiboon (2009) examined that some Thai export-oriented small clothing firms established along the border in Tak to employ cheap immigrants from Myanmar for low wages in order to gain cost competitiveness.

Rukumnuaykit and Pholphirul (2013) (5) found that a firm employing an additional 10 percent of unskilled immigrants could save approximately 5,746 Baht per person per year on wage expenditures. Such savings are even more prominent in labour-intensive industries, such as the textile

industry, (24,144 Baht per person per year)

Pholphirul (2013) (2) found that a firm with 10 percent higher of unskilled wages (in relative to total labor cost) last year is expected to increase employment of unskilled labor share by 1.6 percent. This is particularly true among labor-intensive sector, such as those in the garment industry

From Pholphirul (2013) (2)

(Using both Probit and Tobit regression) facing 10 percent of unskilled

vacancies in last period is expected to increase the probability to employ migrants workers by 0.8-0.9 percent or increase about 2-3 percent of share

Facing about 10 percent of skilled vacancies in last period is also expected to increase the probability to employ migrants workers by 0.7-0.8

Pholphirul (2013) (2) found that Number of days lost due to worker slowdown during the past year also force firms to seek migrant workers.

Facing 10 days more of worker slowdown is expected to increase probability to employ unskilled migrants by about 0.6-0.7 percent or increase of unskilled migrant shares by 2.1-2.3 percent

A number of day losses due to worker stoppage during the past year also force firms in auto part industry to employ more of unskilled migrants by 20.4 percent

These estimations are insignificant to demand of skilled migrants

Pholphirul and Kamlai (2014) (1) adopted a macroeconomic simulation model and found that firms will gain about 21 percent more profit from employing migrant workers

Rukumnuaykit and Pholphirul (2013) (5) used firm level data and found that firms in rubber and plastic firms will have about 8 percent higher probability to increase its investment as 10 percentages of unskilled immigrants are employed.

Manop and Pholphirul (2013) (4) found positive relationship between immigration and international trade (especially in the manufacturing sector)

Kamlai and Pholphirul (2014) (1) employing immigrant workers causes more import demand (of goods and services) by 1.65 percent

Rukumnuaykit and Pholphirul (2013) (5) used firm level data and found that A firm will have about 17.2 percentages more of

foreign ownership with 10 percentages more of skilled migrants.

Employing more 10 percent of unskilled migrants, on the other hand, reduce foreign ownership by 2.9 percent.

There is strong evidence supporting the argument that foreign direct investors are likely to concern with quality of labor instead of their cheaper cost

Pholphirul (2012) (6) explain that, due to employment of cheap immigration workers, firms will be able to maintain low prices which causes an strong ability of policymakers to maintain low inflation (BOT, 2009 and Vasuprasart, 2010)

This is even to support a success of inflation-targeting scheming during the decade.

Bryant and Rukumnuaykit (2013) 10 percentage increase of migrant share is found to cause only a reduction of 0.23 percent of domestic wage (much lower than Borjas’s study in the US)

Kulkolkarn and Potipiti (2007): Immigration does not reduce the wages of Thai workers (Chula Econ J, 2007).

Latthapipat (2010) Immigration reduces wage of unskilled Thai workers, but increase wage of skilled Thais (particularly in border area).

Pholphirul and Kamlai (2014) (1) Wage in agriculture is more depleted compared to other sectors (19.31 percent) comparing to manufacturing (4.35 percent) service sector (0.37 percent).

Pholphirul and Kamlai (2014) (1) found that substitution between immigrant workers and native Thai workers is higher in manufacturing sector. Steal jobs can be came from 1) similarity

of skill level, 2) high labor supply of domestic workers

Pholphirul and Rukumnuaykit (2010) (7) explained that immigration causes benefit to 1) capital owner and 2) immigrant workers themselves.Thai workers have to bear the cost

Results are reverse comparing to the case of USA, Using firm level data, 10% low skilled immigration reduce labor

productivity by 5% (Textile 15%) (Rukumnuaykit and Pholphirul, 2013) (5)

Using another methodology (sectoral level data), A 10 percent increase of immigrant share was found to reduce labor productivity by about 8.83 percent to -9.89 percent in manufacturing, and -13.51 percent in services (Pholphirul and Kamlai, 2014) (1)

Pholphirul and Rukumnuaykit (2013) (3) found that, contrary to developed countries in which immigrants are found to boost innovation, employing immigrants cause negative impacts on R&D Employing 10 percentage points more unskilled

immigrant workers (as compared to total number of unskilled laborers) decreases the probability of a firm investing in technology and innovation by around 2.2 percent (more magnitude in domestic firm).

This is explained by “Skilled-Biased Technological Change” Theory

Rukumnuaykit and Pholphirul (2013) (5) found that 10% low skilled immigration reduce R&D investment by 4% (worse in border provinces)

immigration cost to fiscal burden, social protection expenditure, and service delivery (Pholphirul, 2012) (6)

However, still not much research to estimate how large of this budget burden

BENEFIT COSTS

Reduce native wage Substitution of

immigrants and native workers

Uneven income distribution

Boost economic growth Increase production Save wage cost Reduce job vacancies Promote employment

dynamics Increase profit and

investment Attract foreign

investment (only from skilled migrants)

Maintain low inflation

BENEFITS COSTS (ONLY FROM UNSKILLED)

Lower productivity Reduce tendency of

R&D investment Lower tendency of

skill upgrade Fiscal Burden

Maintain high productivity during old-age society

Promoting regional Integration (e.g. AEC)

There are definite economic benefits from employing migrant workers (supplying labor demand, increase GDP and profit rate, enjoy lower wage cost, keep inflation low)

Benefits have to traded off with some cost (lower unskilled native wage, losing some jobs, unequal income distribution), but this is only in the short-run

Long term cost can be observed in term of lower labor productivity, lower tendency or R&D investment and skill upgrade, higher fiscal burden This should jeopardize long-term economic growth

Promoting skilled immigrant workers (especially for the STEM field) (to promote FDI and R&D investment)

Provide skill upgrade for immigrant workers

Promote temporary immigrants (reduce fiscal burden and promote employment dynamics)

slide 34

Since Thailand is not a rich a country to provide all of these three objective

Prioritize should be therefore mandatory

Economics

National Security

Human Rights

Option 1

Option 3

Option 2

pholphir@hotmail.pholphir@hotmail.comcom