Sustained Inflation Changes Work Patterns in Lao PDR and Hits Poor the Hardest, World Bank Survey Finds

10/04/2024 09:43
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KPL (KPL) A prolonged period of high inflation has changed the job market in the Lao PDR, affected household living standards, and undermined human development, according to the latest World Bank household survey.


(KPL) A prolonged period of high inflation has changed the job market in the Lao PDR, affected household living standards, and undermined human development, according to the latest World Bank household survey.

Round 8 of the World Bank’s Rapid Monitoring Phone Surveys, conducted in January and February 2024, shows that an increasing number of Lao people entered employment in 2023, with workers shifting from service jobs — which are most affected by the depreciation of the kip and high inflation — to work in agriculture and manufacturing.

The number of people in salaried jobs and unpaid family work dropped while the number of self-employed workers rose. The proportion of self-employed workers surged to 45% in January 2024, up from 29% just a year prior. At the same time, wages grew in the second half of 2023 but not enough to keep up with inflation, while family business activities increased, providing income sources that almost kept pace with inflation.

Growth in average per capita household income increased by 25% in the year to December 2023, just above the inflation rate of 24%. However, income lagged behind inflation for more than 40% of households, meaning their purchasing power declined. Low-income households are more vulnerable, especially to food inflation, as their limited savings affect their ability to cope. Only 10% of such families report receiving government assistance to help them.

The impact of inflation on how much people spend on building human capital — health and education — has eased but has done so to a lesser extent among the poor. In January 2024, 34% of high-income households reported reducing education spending, compared to 45% of low-income households. As a result, persistent inflation could widen the “human capital gap” across income groups.

“While some groups are able to cope with long-running inflation, poorer families are falling further behind”, said Alex Kremer, Country Manager for the World Bank in Laos. “Low-income households report more children dropping out of school and more difficulty finding enough food to eat. This means inequality will increase and progress in development could reverse.”

School dropout rates remain high at 5%, with boys from low-income households having the highest reported instances of leaving school. Financial reasons, such as an inability to pay schooling costs or the need for children to work and support the family, were cited as the primary cause of school dropout.

Agricultural businesses reported the best performance among business activities in the survey, with farming activities growing steadily over the past year and offering higher returns than other sectors. About half of farming families grow crops for sale, while half consume their own produce instead of buying increasingly expensive food. A third of crop producers report growing cassava, a figure that rises to 42% among low-income farmers.

Increased food production and switching to cheaper food remain the most common strategies for coping with food inflation. However, after a protracted period of high inflation, more households are taking on additional work or borrowing from financial institutions. Respondents also report increasing problems accessing public services due to issues including lengthy process, understaffing, and difficulty in travelling to government offices.

KPL

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