Labour Flexibility and productivity: an Inquiry into the Thai Labour Regime

Knowledge is presented as the new driving force of competitiveness. It is usually defined as including formal innovation such as R&D and all forms of learning opportunities occurring during economic activities like work and relations with suppliers and customers. Our communication will focus on knowledge, labour markets and work in the context of Thailand. Thailand is an interesting case because it is representative of second-tier high-growth Asian economies, and most of all, because it is a full-employment economy. This means that if workers are not satisfied with their job, they can easily change their employer. If the company wants to retain them, they have to offer something in exchange: higher wages, bonus, and welfare allowances. This has consequences for the diffusion of knowledge. When workers' mobility is high and employment tenure low, workers are the conduits through which knowledge is transferred across firms, leading to possible increases in productivity. When firms prefer to create an internal labour market in order to retain their workers and accumulate knowledge internally, the diffusion of knowledge relies on linkages between firms and their customers. Our objective is to assess the viability of these scenarios in Thailand. We start with a short analysis of the state of science, technology and education in Thailand (section 1). The conclusion is that formal knowledge is lagging behind and that improvements will take time. The diffusion of knowledge through workers' mobility does not seem viable at this stage and the accumulation of knowledge in internal labour market is a better option. Because internal labour markets involve high employment tenure, we then turn to the analysis of mobility and employment tenure (section 2). The objective is to see if there is any tendency towards the strengthening of internal labour markets. We use an in-depth field survey realised by the Centre for Education and Labour Studies (Chiang Mai University, Thailand). This is the first nation-wide survey on these topics. A questionnaire has been applied to interview 1543 industrial workers, staff employees and engineers in 85 private and state companies and to 1567 self-employed and 454 employees of the informal sector. Data on education, workers mobility, employment tenure, wages, bonuses and welfare have been collected and are analysed in the paper. The results show that several elements characteristics of internal labour markets are present in big companies with higher than average technological intensity. International comparisons show that average employment tenure in Thailand is intermediate, inferior to the European and Japanese levels but close to the US level, and much higher than in Latin American countries. We conclude that Thailand has the potential to improve its competitiveness by upgrading the level and the quality of education and by strengthening internal labour markets. Competitiveness could be based on the accumulation of knowledge with a positive impact on productivity rather than cheap labour.