Implications of Thailand’s Aging Population on the Labor Market
As if we did not have enough problems with how the world views Thailand’s current political situation, lately we have been seeing the following headlines in the news:
“NESDB Sounds Age and Labor Alarm”
“Meet the New Old Man of Asia: Thailand”
“Defer Retirements if Possible”
“Exports Fell for Second Straight Year, First Back- to- back Decline in 20 Years”
“Proportion of Working- age Population Going from 67% of Total Population to Only 55%”
Before we look at steps companies can take to improve or implement employment branding, which is pivotal to your success in talent acquisition, let’s set the stage and look at some demographic facts from global and Thai perspectives.
AGING FROM DECLINING FERTILITY AND DECREASING MORTALITY
In their report, World Population Ageing, United Nations’ Department of Economic and Social Affairs says that population aging is taking place in nearly all countries of the world. Aging results from decreasing mortality and, more importantly, declining fertility. This leads to a relative reduction in the proportion of children and to an increase in the share of people of working age. Globally, the number of elderly persons ( aged 60 years or over) is expected to more than double over the next 35 years.
Thailand’s Office of National Economic and Social Development Board ( NESDB) has said that almost one third of the peo- ple in Thailand will be over 60 years old by 2050 ( 35 years from now). In Malaysia this number is 20% and in the Philippines it is only 17%.
The fertility rate has been falling in most regions of the world over the last several decades, and this decline has been the main factor driving population aging. The world’s total fertility rate has dropped by about half, from 5.0 children per woman 60 years ago to 2.5 children per woman more recently. The decline in global fertility rates will continue during the coming decades.
An economist at Bank of America in Singapore has said that demographics are useful predictors of real GDP growth, and that Japan’s experience suggests an aging population will weigh on expansion and property.
WORKING- AGE POPULATION NOT MATCHING NEEDS OF MARKET
In their 2012- 2016 development plan NESDB reports that the current working age population does not have the pertinent education and skills to match the needs of the labor market. Additionally, the manufacturing sector has shifted its requirements from a high demand for lowskilled labor to requiring a work force that possesses the sophisticated management and technical skills necessary for manufacturing high quality and high value products.
NESDB concludes that underemployment is becoming a major concern, as most of the production sector has not yet shifted towards employing high- skilled workers instead of a labor- intensive workforce. The human resource development system does not yet have the capacity to bring the quality of the middle- and low- level workforce to higher levels. It is essential that the workforce possesses higher skills in order to compete with other AEC economies.
The proportion of the working- age population started to decline a few years ago. It means that more people exit the labor market than enter it and consequently there are less employees in the pool from which you hire. Thailand’s working population is expected to peak in 2017. Interestingly, China has hit their peak already; 2012 was the first year in 50 years that China had less people in the labor market than the year before.
In Thailand, the proportion of the working- age population was 67% a few years ago ( 42.9 million working- age people) but is now starting to decline. NESDB predicts that we will only have 35.2 million in the labor force, which will represent only 55.1% of Thailand’s total population in 25 years’ time.
DEFER RETIREMENT, if POSSIBLE
If your organization still has a 55- year retirement age, it is time to seriously consider a change to 60 or even 65 as many countries have in Europe. They say today’s 55- year- old baby boomer is yesterday’s 35- year- old Gen X. Healthy living, from dieting to exercising, are reasons why we are now in much better shape even late in our lives.
Putting off retirement would be an excellent option to Thailand’s contracting labor force and aging society. NESDB recently suggested that the private sector boosts the number of elderly people in the workforce. We should encourage senior people in our organizations to keep working after they reach retirement age. Companies should create jobs that suit the seniors’ lifestyles and career paths.
IMPLEMENT EMPLOYEE VALUE PROPOSITION
If you think it is increasingly difficult to find staff for your organization, I’m afraid you ain’t seen nothing yet! We are talking about a demographic time bomb, which refers to the shortage of labor and how it threatens the economies of countries around the world.
A shrinking workforce will inevitably affect your own company’s future growth potential. It may no longer be access to capital hindering or helping your business – it will be how successful you are at retaining your employees as well as how you acquire more talent for your organization.
Stop here for a moment – it is time, ladies and gentlemen, to act smarter than the company on the other side of the street. Apple, Google, Starbucks and 50 other global brands might not find it very difficult to attract and convince candidates to join their organizations. They have such strong name recognition that in their particular cases it is more of a seller’s market than buyer’s market. But the rest of us do not have the luxury of such high public visibility.
You must develop an Employee Value Proposition ( EVP) that clearly describes real needs and clarifies job expectations. Here are just a few of the many questions that will help you on the way. They must be answered before you start any sourcing of new staff. And let me warn you, it will take you the same amount of time, energy, and analysis that you put into your annual business plan and budget. There is no way you can develop an EVP between coffee breaks.
• Why would someone who is good at this type of work want this particular job?
• Why should anyone come and work
• What does this job offer that is unique or makes it most attractive to a potential candidate?
• Why is doing this job at your company better than doing the same job for a competitor?
• Why do people come to work at your company and why do they stay? Is it leading edge technology? Fast growth? Industry reputation? Work- life balance? How does it differentiate you from your primary competitors?
• What is your competitive compensation and benefits plan? 12 or 13 months guaranteed pay, sign- on bonus, performance incentives, company car, medical cover, provident fund, for employee or for family too? Flex time, free parking at the office building?
Remember, applicants or candidates are a perishable commodity. It is the only ‘ product’ I know of that can speak. They can say no to being ‘ sold’ to your organization. The better ones are quickly turned off by unresponsiveness, which is often interpreted as a lack of initiative or seriousness. Resumes may look like a pile of paperwork on your desk but they really are not. If you do not act with a sense of urgency and are not prepared with an intelligent EVP when meeting future employees, the contraction in the labor force will hit you hard before it hits your competitor.
Tom Sorensen is a Headhunter and Partner at Grant Thornton in Thailand. He can be contacted at tom. sorensen@ th. gt. com.