Bank of Thailand Forecasts Rising Unemployment Amid Shift to Capital-Intensive Industries

The Bank of Thailand (BoT) anticipates a rise in unemployment as the nation's labor market undergoes a significant transformation. This shift sees a move away from labor-intensive industries towards those requiring greater capital intensity, driven by technological advancements and increased investment.

While overall investment has seen an expansion, particularly in the digital sector fueled by the AI boom, the nature of job creation has changed. Modern investment models emphasize advanced technology and capital intensity over manual labor. Consequently, the number of jobs created per unit of investment has decreased, meaning more capital is now needed to generate the same number of jobs as before.

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For example, a 100-unit investment used to create about 20 jobs, but now that same investment might only hire 10 people. We are using less labor than before, looking at this ratio.

Data from the Board of Investment (BoI) illustrates this trend, showing a decline in the number of workers required per unit of capital. The total labor demand has fluctuated, and while new businesses are being established, the number of jobs they create is insufficient to offset losses from closing businesses. The BoT expects this trend to continue, impacting both job security and employment levels in the near term.

Furthermore, the Thai economy faces challenges related to skills shortages within the workforce, particularly in areas requiring specific language and education competencies. To address this, businesses are increasingly hiring foreign workers and turning to contract and temporary staff to reduce costs and enhance flexibility in workforce management. Despite growth in technology exports, the benefits to the broader Thai economy remain limited, with a continued reliance on imports.

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The Thai economy remains limited, and the positive spillover to the broader Thai economy is limited.