A New Set of Populist Policies

Latest government measures propose policy measures to help Thailand’s informal workers and reduce economic and social inequalities, as follows:

Firstly, persuading informal worker entry to the social security system via reduced social security contributions. Special target policies will also legalize motorcycle taxi drivers, help taxi drivers, free location monopolies for street vendors and improve after-dusk worker security.

Secondly, price controls set on necessary foods will come from increased competition in the feed industry, enforcing the Competition Law, increasing technology usage in production and also by listing eggs as regulated products.

Thirdly, energy prices will be restructured, fixing low LPG price; and diesel at 30 baht per litre. Gas price may float for motor vehicle usage. Disused gas subsidy budget will subsidize diesel price, keeping permanent exemptions for households using less than 90 units of electricity per month.

While the government seeks to build popularity before next year’s election, attempts to implement policies for the poor, especially informal workers, lines up with my own long-held policy proposals for these groups, though I do have the following criticisms:

Not all informal workers are covered
Many informal workers can scarcely live on their earnings and lack sufficient income to pay contributions, so despite the government’s claim to cover all, only high riskers will participate in the programme, possibly increasing the social security fund burden. Compulsory or universal insurance systems would more efficiently cover all workers, with the government’s system able to provide extra welfare care for workers.

Disconnected, insufficient support for other welfare programmes
Government policy seem scattered and lacks linkage with other existing programmes that could be included to provide welfare for all the people rather than relying solely on state agencies for their public welfare contributions.

No empowering policies
Besides many good policies to aid or support informal workers, most policies are still state operated, or provided, but no policy has been introduced to enhance productivity or competitiveness, increase knowledge, skills and the ability of earn a living for people to live sustainably within contexts of intense competition.

Inefficient in economic perspective
Government intervention with the market mechanism may cause economic inefficiency, for example, prohibiting prime location monopolies for street vendors may seem beneficial for equal opportunity, but vendor selection for this policy may not reduce inequality because the right to trade in a good location may not be won by the most effective vendors, so the state cannot benefit by full tax collection from them. In my opinion, the government should auction the right to specific location leases, in order to find the most efficient vendors. This will increase state revenues both by auction and sales taxation and the government can reach and help more poor people.

Informal workers are important and deserve help for a good life, having been long-neglected. So, I agree with the government trying to help this group of workers. However, the government’s policies seem scattered and disconnected with other welfare programmes. Therefore, from an economic perspective, it may be inefficient and ineffective to sustainably reduce inequality.

Dr Kriengsak Chareonwongsak
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com