Sustained Inflation in Laos Forces Shift in Employment Patterns, Hits Low-Income Families Hardest: World Bank Reveals

Inflation Limits Lao Families’ Recovery From COVID-19, World Bank Report Finds
Mothers and their children, Laos. ( Photo: World Bank )

Laos is grappling with significant shifts in its job market and socio-economic landscape as a result of prolonged inflation, as per the latest findings from the World Bank household survey.

Conducted between January and February 2024 as part of the World Bank’s Rapid Monitoring Phone Surveys, the eighth round of data collection revealed substantial changes in employment dynamics. A rising number of individuals in Laos have sought employment in sectors less affected by inflation, such as agriculture and manufacturing. Conversely, jobs in service industries, vulnerable to currency depreciation and high inflation, have witnessed a decline in demand.

Statistics from the survey show the magnitude of this shift. The proportion of self-employed workers surged to 45 percent in January 2024, an increase from the 29 percent recorded just a year earlier. Moreover, while wages experienced growth in the latter half of 2023, they failed to match the pace of inflation. Consequently, more individuals turned to self-employment and family business activities to buffer against the eroding purchasing power.

While overall household income showed a 25 percent growth rate by December 2023, barely exceeding the inflation rate of 24 percent, this trend did not shield a significant portion of households from declining purchasing power. Over 40 percent of households experienced income levels trailing behind the inflation rate, exacerbating financial strains, particularly among low-income families.

Alex Kremer, Country Manager for the World Bank in Laos, commented on the ramifications of this trend, stating, “While some groups are able to cope with long-running inflation, poorer families are falling further behind. 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.” 

Indeed, the survey revealed that financial constraints were a leading cause of school dropout, with 5 percent of students reported to have left school. Agricultural activities emerged as a resilient sector, with farming households reporting steady growth and higher returns compared to other industries. Notably, approximately half of farming families now grow crops for sale, with cassava cultivation particularly prevalent among low-income farmers.

Amidst the challenges posed by sustained inflation, households have resorted to various coping mechanisms. Strategies include increased food production for personal consumption, adopting cheaper food alternatives, and engaging in additional employment or borrowing from financial institutions. However, access to public services has been hindered by bureaucratic hurdles and logistical difficulties, further exacerbating the plight of vulnerable communities.