Jobs and crisis: was it so bad?

29 November 1999

How many people lost jobs and livelihood in the crisis? Earlier this year, both the World Bank and ADB rushed out reports designed to show that things had not been so bad. An unemployment rate of 5.2 percent (February 1999) is not a disaster. But data on the labour force from early this year give a fuller and darker picture.

We can now see that the crisis impact had two stages. The first stage extended over the year from mid-97 to mid-98. The impact was felt mainly in Bangkok and the other urban areas.

When the IMF deliberately threw the economy into reverse in late 1997, lots of urban people lost their jobs. By February 1998, there was almost a million fewer people working in construction alone. Industry had already shed 70,000 jobs and would go on shedding through mid-1998. Factory layoffs peaked over May-July 1998 as owners fired workers before the August deadline for higher compensation payments.

Urban unemployment rose, but only by 300,000 between August 1997 and 1998. With no social security, people could not remained unemployed for long. In a survey of laid-off factory workers, a third had taken a sweat-shop job with lower pay, lousier conditions, and no job security. Many others had set themselves up in vending, petty services, and other informal jobs. By February 1998, the numbers working in commerce and services had risen by half-a-million.

Besides, unemployment was only a small part of the story. On the one hand, many firms did not want to fork out large compensation payments. They kept their workers but gave them less work and less pay. On the other, many laid-off people took on new jobs with limited hours and low pay. In Bangkok, the numbers working less than 20 hours per week soared from almost nothing to over 700,000 by February 1998 - around 1-in-6 of the city’s working population.

Calculated on the basis of the number of hours worked, urban employment dropped by about 20 percent. This was much more of a shock than the simple unemployment rate suggests. Wages also took more of a hit than employment. The average real wage in the Bangkok private sector dropped by 16 percent.

This "urban" stage of the crisis impact peaked in mid-1998. By early 1999, the urban job market had begun to stabilise. Between February 1998 and February 1999, jobs were still shrinking in construction, industry and finance. But the shrinkage had slowed to only half the rate of the previous year. The urban unemployment rate reached 4.4 percent. But the numbers working part-time dropped back from the 1998 high to more normal levels. This was probably because it is difficult to survive in the city on half-wages for a long time. By early 1999, those who still had a job in the city were working longer hours to compensate for the lower wage rates.

To understand how the urban job market had stabilised, we have to look outside the city. The second stage of the crisis impact was focused in the villages.

In February 1999, there was almost a million (905,626) more people working in agriculture than a year earlier. Most of these were "own account" or "unpaid family workers" - farmers and their family members who would normally migrate in the dry season to earn some extra money outside the village. On top of this, over the previous two years the numbers of rural unemployed had risen by 0.7 million, and the numbers working part-time by 0.6 million. On top of this again, another million people were "waiting for the agricultural season", which is surveyspeak for "sitting around in the village with nothing to do". This was about 0.6 million more than usual at this time of year. Add all these increases together, and one finds almost 3 million extra people.

In past crises of the urban economy, the village had always been the cushion. At the start of this crisis, many people questioned whether this mechanism would still work. City migrants would not want to go back to the village, some economists said. They had forgotten how to farm. Agriculture could not suddenly expand.

True, many migrants were reluctant to go back to the village. They did not want to be a burden to their families. They knew they would have little to do. But by late last year, many of those who had lost jobs and livelihood in the city had exhausted their savings. The end of the year provided the occasion to go back to the village "to help on the harvest" without loss of face. This backflow involved around two to three million people.

Of course, this backflow did not expand the village economy. So most did not stay for long. They rested for a time, and then they went out to look for work again. But jobs have been hard to find. The survey shows that the average time taken looking for a job in the city has increased from 69 days before the crisis to 162 days early this year. People have been shuttling back-and-forth. Off to the city in search of cash. Back to the village when hope and savings are exhausted. A few days ago, Chang Noi ran into a northeasterner walking down a Bangkok street calling out "long bamboos". He had six poles over his shoulder, total retail value 90 baht. His group had clubbed together to buy the diesel to come to Bangkok with a truck-load of bamboo. He reckoned to sell one shoulder-load a day.

Moreover, this back-and-forth works like a filter. Those migrating back from city to village mostly have an elementary education, cover the age-range 20-40, and used to work in industry and construction. Those flowing back from village to city include more with a secondary education, more in the younger age-range of 13-20, and more destined for jobs in services. This circular flow is filtering out the older and less skilled, in favour of the younger and better educated.

Thailand’s job market is like a concertina. When this urban-based crisis first hit, the pressure was felt in the city. Some urban people fell totally out of work, but many more survived with less pay, shorter hours and nastier conditions. But after a time, the concertina transferred the pressure on from the city to the villages. Millions of people gave up hanging on by their fingernails in the city. After they left, the urban job market stabilised. The rural economy did not expand but up to three million more people were now depending on it for survival. This form of the crisis impact is less visible, less dramatic, less simple to understand than a sharp hike in the unemployment rate. But it is no less painful.

The concertina works the other way too. Although the economy has turned around, it will take time for the effect to work its way through. As the demand for workers revives, it will first take up the slack of unemployed in the city. Only gradually will it pull people back from the villages. Farmers are complaining about low crop prices because the prices are indeed low, but also because they have seen their savings reduced by the labour backflow, and because they know they cannot rely on the urban job market for earning supplementary income in the near future. These protests will not suddenly disappear. If you are planning a provincial car journey, look out for the piles of cassava, sugarcane, rice, garlic, rubber, maize, soybean, limes….

[Sauwalak Kittipraphat and Chettha Inthrawithak, ‘Adjustment of the Thai labour market in the economic crisis’, TDRI]