Transcript (Pholphirul and Kamlai, 2014) (1)

Piriya Pholphirul
National 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.
2.
3.
4.
5.
6.
7.
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.
Pholphirul, Piriya (2013) “Immigration, Job Vacancies, and Employment Dynamics:
Evidences from Thai Manufacturers”, Journal of Asian Economics, 24(1): 1-16
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
Manop, Nuntanit and Pholphirul, Piriya (2013) “Does Immigration Promote
International Trade?: Evidences from Thai Manufacturing Sector”, Journal of
Demography, 29(2): 59-79.
Rukumnuaykit, Pungpond and Pholphirul, Piriya (2013) “Employment of
Immigrants and Firm’s Competitiveness: Evidences from Thai Manufacturers”,
International Business Management, 7(5): 374-392.
Pholphirul, Piriya (2012) “Migration and Economic Sustainability in Thailand”, Journal of
Current Southeast Asian Affairs, 31 (3): 59-83
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 0.80.9 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 0.70.8
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 inflationtargeting 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








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
COSTS



Reduce native wage
Substitution of immigrants
and native workers
Uneven income
distribution
COSTS (ONLY FROM
UNSKILLED)
BENEFITS


Maintain high productivity
during old-age society
Promoting regional
Integration (e.g. AEC)




Lower productivity
Reduce tendency of R&D
investment
Lower tendency of skill
upgrade
Fiscal Burden

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)
Economics
Since Thailand is not a rich a
country to provide all of
Option 1
these three objective
Option 2
Prioritize should be therefore
mandatory
National
Security
slide 34
Option 3
Human
Rights
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