Global trade slump hits Asian labor

When Visut Charoenchai lost his job in January in a French-owned glass factory, his mother told him to come home. There's always rice here to eat, she said.

So far, Mr. Visut, the eldest son of a farming family, is resisting. His $850 of severance pay and unemployment checks cut him some slack as he hunts for a new job, chasing dead ends in this industrial zone. When he gets bored, he goes fishing at a nearby reservoir. "I'm trying to find work in a factory, but there's nothing going," he says.

As Thailand's export-led economy goes into rapid reverse, tens of thousands are being thrown out of work, sparking fears of mass unemployment and social unrest. Similar shocks are roiling other Southeast Asian exporters that had ramped up capacity to meet credit-driven appetite in the West for cheap goods and now face a yawning gap in demand that even the fattest stimulus packages are unlikely to fill.

While recession-hit city-states like Singapore and Hong Kong can afford to take care of their unemployed, laid-off workers in developing countries have much further to fall. Malaysia predicts that 4.5 percent of its workforce – nearly half a million people – will be out of work this year, up from 3.7 percent in 2008.In the Philippines, which already has the region's highest unemployment rate, electronics and textile plants are closing.

Social security nets for the jobless are patchy. Thailand's government pays Visut half of his $160 monthly salary for six months, then he's on his own. Countries like the Philippines and Indonesia, which so far hasn't felt the full force of the global downturn, lack any national benefits system.

This crisis hits workers hardest

The last time a major crisis swept the region in 1997-98, wealthy speculators in real-estate and financial securities were the first to take a hit. Bankers in Bangkok, ground zero of the meltdown, saw their assets – and bonuses – shrivel in value, triggering a collapse in the real economy.

By contrast, the current crisis has spared banks but hammered the industrial sector, particularly in export-oriented provinces like Rayong, a magnet for workers from the rural north. That means more hardship for poor families who rely on these breadwinners to tide them over after the harvest is sold.

"This time the economic shock will hit people at the level of the most vulnerable," says Ammar Siamwalla, a prominent Thai economist who advises the government.

Sema Suebtrakul, who runs a legal aid center for workers in Rayong, estimates that factories in the area have shed about 10,000 jobs since December. At the provincial labor office, which last year saw under 100 applicants a day, more than 700 people crowd inside on busy days to register for work.

The Thai government has said national unemployment could double this year to 1 million. Some economists say this prediction underestimates the global collapse in trade. Last year, exports of goods and services accounted for 73 percent of Thai GDP. In the last quarter of 2008, the economy shrank by 6 percent.

Slim pickings in the countryside

In the past, the fertile Thai countryside served as a social safety net during hard times. Laid-off migrants like Visut would return to work in the fields and wait until factories began hiring again. But while a few workers have left Rayong, many are sticking around, at least until their money runs out.

For most factory workers, going home is a last resort, says Lae Dilokvidhyarat, a labor economist at Chulalongkorn University in Bangkok. After several years away, migrant workers prefer urban lifestyles and want a better future for their children, not low-paid agrarian jobs that don't match their skills. "These people can't communicate with the buffaloes anymore," he says.

Moreover, farming isn't likely to pull Thailand out of its economic tailspin. Exports of farm goods, which spiked in value last year, have contracted in recent months. That means limited demand for laborers and less money flowing into the countryside.

"People are starting to go back to rural areas. But it's very different from the 1997 crisis because the agricultural sector was flourishing [then]. There isn't the capacity to absorb people laid off from industries," says Gwi-Yeop Son, the UN country chief in Bangkok.

During the last crisis, Thailand's devalued currency made its goods cheaper for overseas buyers. That spurred export growth, including of agricultural goods, that helped resuscitate its economy and provide jobs for millions of struggling workers. Exports of rice doubled in a decade to 10 million tons.

Now, a strong dollar is eroding the value of some Asian currencies. But even if exporters like Thailand did devalue, there's so little global demand for their goods that it probably wouldn't help, says Steve Kapsos, an economist at the International Labor Organization in Bangkok.

The glass that Visut made went to foreign-owned automakers in Rayong, which calls itself the "Detroit of the East." Over half of the 1.4 million cars and trucks produced here last year went abroad. But as sales slide, automakers like General Motors and Toyota are axing jobs and halting assembly lines, forcing suppliers to cut back.

Not all companies are shedding workers, though. Ford, which manufactures pickup trucks and SUVs under a joint venture with Mazda, says its 3,900 workforce is unchanged. It predicts a 20 percent drop in output from 175,000 units in 2008, when its plant ran at peak capacity. A new $500 million extension will begin producing fuel-efficient sedans early next year, says Dave Alden, president of Ford in Southeast Asia. "These are times when you do need to continue to invest. The business will come back," he says.

Mr. Sema, who became a union activist after losing his minimart in the 1997 crash, is also hopeful. "The people living in America, they buy something from Thailand ... When these people have no profit, they can't buy these things. So we wait for America to prosper," he says.