Food Security Improves in Laos but Wages Fall Behind Inflation, Fueling Migration

High inflation in the Lao PDR is eroding 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 across Laos in May to June 2024 and published today at Champassak University, shows that while employment remained robust in the first half of the year, with less than 1% of respondents reporting being unemployed, average wages grew by 8% from January to May, significantly below the inflation rate of 26%. As a result, the proportion of households reporting a significant negative impact from inflation increased from 53% in January to 58% in June, while those registering improved income from the previous year declined from 62% in December 2023 to 56% in May 2024.

Persistent inflation has fueled outmigration, with the number of Lao migrant workers in Thailand now estimated to have surpassed pre-COVID-19 levels. Among international migrants, those who say higher pay and better employment prospects are their main reasons for leaving Laos rose from 73% in 2023 to 93% in 2024. Among migrants from low-income families, the ratio climbed from 88% to 99%.

Within Laos, high inflation, currency depreciation, and slow wage growth continue to encourage people to switch to jobs with higher returns, leaving the services industry to work in agriculture and manufacturing, and leaving wage jobs or unpaid family work to become self-employed. At the same time, more women are entering the workforce. Scaling up production of their own food remains the most widely adopted strategy among families for coping with rising food prices, with households also becoming increasingly reliant on foraging activities. Fewer households are taking on extra jobs or seeking loans from financial institutions. Less than 3% of households report having received government assistance to help them cope.

"While we see some good news from this latest survey, such as a drop in the number of families reducing food consumption or eating cheaper food, there are also some worrying findings," said Alex Kremer, World Bank Country Manager for the Lao PDR. "About 63% of low-income households still report reducing their food consumption, and nearly all the families surveyed say they are cutting back on meat and fish consumption. This reduction in protein intake is likely to further hinder progress in nutrition and child development across Laos."

Although food security is improving across much of the country, nearly a third of households remain food insecure, while concern about food security has increased from the previous year. The impact of inflation on schooling and health also continues to ease but remains significant: 31% and 34% of households report cutting education and healthcare spending due to inflation. In June 2024, 8% of school-age children were out of school, with the figure rising to 11% among children from low-income families. Around 82% of households report cutting back on their savings, a 12-percentage point increase from January 2024.

The World Bank began its series of Rapid Monitoring Phone Surveys of Households in the Lao PDR during the COVID-19 pandemic to monitor welfare. The first survey was conducted in mid-2020. The collected data offers insights into the effects of economic shocks on household well-being. The surveys are funded by the Australian Government and the European Union through the Lao PDR Third Public Financial Management Reform Program.