Foreign Workers in Thai Manufacturing: Implications for Domestic Wages

Abstract

This study aims to promote a better understanding of the impact of foreign workers on domestic manufacturing wages with reference to Thailand, a country where foreign labor has played a major role in the manufacturing sector since the early 2000’s. In our core analysis, two approaches, simulation experiment and econometric analysis, are employed in a complementary manner. The key findings are consistent, and ensure that foreign workers are imported to fill jobs shunned by locals. The simulation experiment suggests that the entry of foreign workers causes depressing pressure on wages only affecting low-skilled Thai workers. Interestingly, the effect turns out to be positive in respect to other types of workers and higher-skilled labor in particular. In our econometric analysis, we find the significant negative impact of foreign worker dependency on real manufacturing wages, both in total and operational remuneration. However, the negative impacts become negligent overtime. Until 2011, we found the positive impact of foreign workers on both total and operational wages. The policy implication for the management of foreign workers to promote sustainable development is that facilitating the inflow of foreign workers at present could potentially promote the growth of domestic manufacturing wages instead of preventing such growth.

Keywords: International Migration; Foreign Workers; Wages; Asia; Thailand

Australian Academy of Business and Economics Review, vol 4, issue 2, April 2018, pp 112-136