High Inflation in Laos Erodes Living Standards, Drives Outmigration and Workforce Shifts: World Bank Survey

The persistent inflation has accelerated outmigration, with the number of Lao migrant workers in Thailand exceeding pre-COVID-19 levels.

 High inflation in the Lao People's Democratic Republic (PDR) is severely impacting living standards, reshaping the labor force, and pushing many workers to seek employment abroad, according to the latest World Bank Household Monitoring Survey.

The ninth round of the World Bank’s Rapid Monitoring Phone Surveys, conducted between May and June 2024 and presented at Champassak University, reveals that while employment remained strong with less than 1% unemployment, average wages increased by just 8% from January to May, falling significantly short of the 26% inflation rate. Consequently, the proportion of households experiencing a significant negative impact from inflation rose from 53% in January to 58% in June. Additionally, households reporting improved income decreased from 62% in December 2023 to 56% in May 2024.

The persistent inflation has accelerated outmigration, with the number of Lao migrant workers in Thailand exceeding pre-COVID-19 levels. Among international migrants, those citing higher pay and better job prospects as their primary reasons for leaving Laos surged from 73% in 2023 to 93% in 2024. This trend is even more pronounced among migrants from low-income families, where the ratio climbed from 88% to 99%.

Within Laos, high inflation, currency depreciation, and sluggish wage growth are prompting individuals to shift to more profitable sectors, with many leaving the services industry for agriculture and manufacturing or moving from wage jobs and unpaid family work to self-employment. More women are also entering the workforce. To cope with rising food prices, families are increasingly producing their own food and relying on foraging, while fewer households are taking on extra jobs or seeking loans. Government assistance remains minimal, with less than 3% of households reporting support.

“While some positive trends, such as a decrease in families reducing food consumption, are evident, there are also troubling findings,” said Alex Kremer, World Bank Country Manager for the Lao PDR. “Around 63% of low-income households are still cutting food consumption, and nearly all families are reducing their intake of meat and fish, which could impede progress in nutrition and child development.”

Food security has improved across much of the country, but nearly a third of households remain food insecure, with concerns about food security rising from the previous year. The impact of inflation on education and healthcare is also ongoing: 31% and 34% of households report cutting education and healthcare spending, respectively. In June 2024, 8% of school-age children were out of school, increasing to 11% among low-income families. Additionally, 82% of households are cutting back on savings, a 12-percentage point increase from January 2024.

The World Bank’s Rapid Monitoring Phone Surveys, initiated during the COVID-19 pandemic, provide valuable insights into the effects of economic shocks on household well-being. Funded by the Australian Government and the European Union through the Lao PDR Third Public Financial Management Reform Program, these surveys continue to track the impact of economic challenges on Laotian households.