From Thailand to Joblessness: Cambodia's Returning Migrants Expose Deep Economic Vulnerabilities

An ILO study warns that the return of up to 950,000 Cambodian workers from Thailand could deepen unemployment, informal work and household financial insecurity, with over 90% of the labour shock absorbed outside formal employment. Cambodia must expand formal job opportunities, strengthen skills recognition, attract private investment and mobilise international development support to turn the migration crisis into an opportunity for sustainable economic growth.

Cambodia is facing a major employment and economic challenge following the sudden return of up to 950,000 migrant workers from Thailand in 2025. A 2026 working paper by the International Labour Organization (ILO), authored by Xiao Jiang, Chan Mono Oum, Lehua Jin and Xi Kang, examines how this unprecedented labour-supply shock is affecting employment, household incomes and economic development. The study, When the Border Closes: A Demand-Driven Spatial Model of Mass Return Migration in Cambodia, warns that more than 90 percent of the additional workforce is absorbed into informal employment or non-employment. Its findings highlight the urgent need for stronger job creation, private investment, skills development and targeted government support.

Nearly One Million Returnees, but Where Are the Jobs?

The return of an estimated 820,000 to 950,000 Cambodian workers, equivalent to nearly 10 percent of the country's labour force, has exposed serious weaknesses in the domestic employment market. More than 70 percent returned to provinces bordering Thailand, where formal jobs are limited and economic opportunities remain concentrated in agriculture and informal businesses.

The study simulates the return of 910,000 workers, including 864,500 unskilled and 45,500 skilled individuals. Its findings suggest that border provinces absorb approximately 446,800 additional workers into informal employment, while another 265,600 enter non-employment. Formal employment increases by only 68,000 positions, pushing the formal employment share down from 16.5 percent to 15.1 percent.

Urban areas face similar pressures. Informal employment increases by 121,100 workers, compared with only 6,000 additional formal jobs.

These projections reveal a fundamental challenge for economic planning: a larger workforce does not automatically produce more productive jobs. Without stronger business demand and investment, returning migrants risk entering low-paying work with little income security or social protection.

Skills Without Certificates: Cambodia's Hidden Workforce Problem

The report identifies education and skills recognition as major barriers to reintegration. Approximately 42.5 percent of returnees completed only primary education, 33.3 percent never attended school and 89 percent lacked formally recognised skills.

However, many gained valuable experience abroad. Before returning, 35 percent worked in construction, 29 percent in manufacturing, 19 percent in services and 16 percent in agriculture.

The difference between skilled and unskilled workers is striking. Around 52 percent of skilled returnees enter formal employment in the model, compared with just 12 percent of unskilled workers. Among unskilled returnees, approximately 60 percent move into informal employment and 28 percent remain non-employed.

The study also finds that returning migrants face disadvantages even when their qualifications are comparable to those of domestic workers. In services, these barriers are estimated to be equivalent to an additional 1.55 million Cambodian riel annually.

As a result, returnees face estimated welfare losses of 4.23 to 4.73 percent because of returnee-specific employment barriers.

For businesses, this represents a missed opportunity to recruit experienced workers. Competency-based hiring, recognition of prior learning and employer-led training could help manufacturers, construction firms and service providers use this workforce more effectively.

Border Economies Need Investment, Not Just More Workers

The geographical concentration of returnees creates another challenge. Formal employment opportunities are largely concentrated around Phnom Penh and other urban centres, while many workers remain in border provinces.

The researchers estimate that moving between border and urban labour markets involves an annualised cost equivalent to approximately nine million Cambodian riel, roughly seven months of average unskilled formal earnings.

Transport assistance, relocation support and better job-matching services could reduce these barriers. However, the study emphasises that improving mobility will have limited impact if businesses cannot create additional vacancies.

For the government, expanding infrastructure, agro-processing, manufacturing and labour-intensive construction in border regions could help generate employment while strengthening local economies.

Private investors could benefit from a larger labour pool, particularly in industries that can use experience gained in Thailand. Yet weak consumer spending, limited financing and inadequate infrastructure could discourage expansion.

The policy priority is therefore to stimulate business investment and formal employment rather than simply shift workers between regions or industries.

A New Policy Test for Government and Development Partners

The findings point towards a coordinated response combining employment support, economic investment and household protection.

Cambodia could expand skills certification, vocational training, recruitment partnerships and employment services to connect returnees with suitable vacancies. Targeted financial assistance could also help households facing lost remittances, outstanding debts and reduced purchasing power.

International development partners can support these efforts through financing for workforce development, employment services, social protection and regional infrastructure. Their programmes could prioritise measurable outcomes such as formal job placements, improved earnings and reduced household vulnerability.

The researchers propose examining five policy options: improved access to formal service-sector jobs, mobility assistance, stronger demand for services in border provinces, employment-linked transfers and a combination of financial support and demand expansion.

These proposals require further testing before their effectiveness can be established. The study also recommends stronger household surveys to assess poverty, inequality and the different effects on vulnerable families.

For Cambodia, the central lesson is clear: bringing workers home is only the beginning of economic reintegration. Turning mass return migration into a development opportunity will depend on creating productive jobs, encouraging private investment and ensuring that returning workers can earn stable incomes rather than remain trapped in informal employment.