Increasing Demand for Skilled Workers in Thailand in the Era of Globalization Ruttiya Bhula-or Prepare for The International Development Economics Associates.

Increasing Demand for Skilled Workers in Thailand in the Era of

Globalization

Ruttiya Bhula-or

Prepare for The International Development Economics Associates (IDEAs)’ workshop on

"Development Experiences and Policy Options for a Changing World”3-5th June, 2007

Tsinghua University, Beijing, China

Outline of the PresentationOutline of the Presentation

1. Facts and Trends of Increasing Demand for Skilled Workers

2. Objectives of the Study

3. Fact Findings

4. Concluding Remarks

Facts: International Facts: International ComparisonComparisonEmployment Growth of High-skilled and Low-

skilled Workers Average annual growth rates

Note 1.“High skilled” workers are defined here as those in the following occupational groups: Legislators, senior official and managers (ISCO-88 Group 1);

professionals (ISCO-88 Group 2); technicians and associate professionals (ISCO-88Group 3). All remaining occupational groups are classified as “low-skilled”. For Germany, ISCO-

88 Group 1 covers legislators and senior officials only and ISCO-88 Group 3 excludes teaching associate professionals so that highskilled workers are underestimated.

Source Colecchia, A. and G. Papaconstantinou (1996): 1996., "The Evolution of Skills in OECD Countries and the Role of Technology", OECD Science, Technology and

IndustryWorking Papers, 1996/8, OECD Publishing: 25


Facts: ThailandFacts: Thailand

Source Author calculation: raw data of Thai Labor Force Survey (the third quarter)

Employment Growth of High-skilled and Low-skilled Workers

Average annual growth rates during 2001-2005

Note 1.“High skilled” workers are defined here as those in the following occupational groups: Legislators, senior official and managers (ISCO-88 Group 1); professionals (ISCO-88 Group 2); technicians and associate professionals (ISCO-88Group 3). All remaining occupational groups are classified as “low-skilled”.

3.06%

1.36%

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%

White collar high skilledw orkers

Others


White collar high skilled workers,

3.1%

White collar Low skilled workers,

3.5%

Blue collar low skilled workers,

3.7%

Blue collar high skilled workers,

-0.2%-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Average Growth Rate of Employment Classified by Skilled Groups 2001 -2005

Source Labor Force Survey (the third quarter) during 2001 -2005

White-collar high-skilled (WH): Legislators, senior officials and managers (Group 1),Professionals (Group 2), Technicians and associate professionals (Group 3)

White-collar low-skilled (WL): Clerks, service workers (Group 4), Shop & market sales workers (Group 5)

Blue-collar high-skilled (BH): Skilled agricultural and fishery workers (Group 6), Craft & related trade workers (Group 7)

Blue-collar low-skilled (BL): Plant & machine operators and assemblers (Group 8), Elementary occupations (Group 9)

Facts: ThailandFacts: Thailand1. Facts and Trends of Increasing Demand for Skilled Workers

-

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005

Average wage

Legislators, senior officials and managers

Professionals

Technicians and associate professionals

Clerks

Service workers and shop and marker salesworkers

Skilled agricultural and fishery workers

Craft and related trades workers

Plant and machine operators and assemblers

Elementary Occupations

Source: Author calculation: raw data from the Labor Force Survey during 2001 -2005

Average Wage Average Wage Per Month Classified by Occupations Per Month Classified by Occupations (Baht)(Baht)

Facts: ThailandFacts: Thailand1. Facts and Trends of Increasing Demand for Skilled Workers

Empirical Studies about Increasing Empirical Studies about Increasing Demand Demand

for Skilled Workersfor Skilled Workers

•Berman, Bound, and Griliches (1994) Berman, Bound, and Griliches (1994) US US • Berman, Bound Berman, Bound and Machin (1998) Ex. UK, US, Aus, Japan•De Laine, Laplagne, and Stone (2000) Aus•Sasaki, and Sakura (2005) Japan•Sánchez-Páramo and Schady (2002) Argentina, Brazil, Chile, Colombia, and Mexico

Most Studies supports Skill- Biased Technological Change (SBTC)

As technological advances are continuously introduced into the labor market; the high-skilled workers will be in demand to serve

these advances.


• The linkage of technical and skilled workers The linkage of technical and skilled workers its relation to the skilled complementarity. its relation to the skilled complementarity.

• Many studies have examined the correlation between Many studies have examined the correlation between various measures of technology and worker skills.various measures of technology and worker skills.

• Berman, Bound, and Griliches (1994) skill upgrading or Berman, Bound, and Griliches (1994) skill upgrading or the increase in the wage share of white-collar workers the increase in the wage share of white-collar workers

is positively related to two aspects of technology: is positively related to two aspects of technology: computer expenditure and research and development. computer expenditure and research and development.

• Baldwin et al. (1995) examined the factors influencing Baldwin et al. (1995) examined the factors influencing a firm’s decision to train using Canadian statistical a firm’s decision to train using Canadian statistical surveys. Skill requirements increased in between 47 surveys. Skill requirements increased in between 47 and 59 per cent of firms adopting new technologies, and 59 per cent of firms adopting new technologies,

while only a negligible number of firms reported while only a negligible number of firms reported reduced skill requirements. reduced skill requirements.

Due to the skilled complementarityskilled complementarity

Empirical Studies about Increasing Empirical Studies about Increasing Demand Demand

for Skilled Workersfor Skilled Workers


• Berman, Somanathan, and Tan (2005) Berman, Somanathan, and Tan (2005) does not does not explicitly support the SBTC in the case of India.explicitly support the SBTC in the case of India.

• The reason is The reason is the matter of time.the matter of time. • While the 1980s was a period of falling skills While the 1980s was a period of falling skills

demand, the 1990s showed generally rising demand, the 1990s showed generally rising demand for skills, with variation across states. demand for skills, with variation across states.

• The increased output and capital-skill The increased output and capital-skill complementarities are claimed to be the best complementarities are claimed to be the best explanations of skill upgrading in the 1990s. explanations of skill upgrading in the 1990s.

• As the economy underwent a sharp reform and a As the economy underwent a sharp reform and a manufacturing boom in the 1990s, raising the manufacturing boom in the 1990s, raising the

possibility that technology absorption accelerated.possibility that technology absorption accelerated.

Empirical Studies about Empirical Studies about Increasing Demand Increasing Demand for Skilled Workersfor Skilled Workers

Remarks: SBTC possibly comes late.


Objectives of the study

• 1) To investigate the changing trend of skilled workers in the labor market

• 2)To explore the pattern of demand for high skilled workers before and after the

arrival of globalization to Thailand by calculating the within-sector effect (implies

SBTC) and the between-sector effect of each skilled labor market. The estimated

results will be compared.

2. Objectives of the Study

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

p

2006

p

Identify “When” we call the arrival of globalization

When Globalization has begun in Thailand

Note 1) The figures cover investment in non - bank sector only.2) Direct Investment = Equity Investment plus loans from related companies. Since 2001,

'Reinvested earnings' has been incorporated into direct investment as well.3) From April 2004 onwards inputs for private financial flow data are obtained through data sets

electronically.Source: Bank of Thailand

After

Net Flow of Foreign Direct Investment (Millions of Baht)

Apparently the beginning

of ‘Globalization

”

The most recent data available on Thai Labor

force Survey

Before

3. Findings

Manufacturing39.3%

Construction3.0%

Commerce17.5%

Transport9.9%

Services17.1%

Mining2.5%

Agriculture7.3%

Utility3.4%

2005

Mining1%

Transport7%

Services22%

Construction

5%

Commerce17%

Utility2%

Manufacturing

24%

Agriculture

19%

3. Findings

GDP share classified by sector

Source: National Economic and Social Development Board (NESDB). The data of the third quarter.

Available online http://www.nesdb.go.th/Portals/0/eco_datas/account/qgdp/data4_06/gdp2006q4.xls The

author’s grouping

1983

OverviewStructural Changes of Thai Economy by Sector

2005

Mining0.2%

Manufacturing

6.9%

Construction

2.1%

Utility0.4%

Services10.2%

Transportaion

2.2%

Agriculture

68.3%

Commerce

9.7%

Employment share classified by sector

Source: Thai Labor Force Survey

1983

Overview

Agriculture

42.2%

Mining

0.1%

Manufacturin

g

15.0%

Construction

5.2%

Commerce

17.5%

Services

16.7%

Transportaion

3.0%

Utility

0.3%

2005

Structural Changes of Labor Markets by Sector

3. Findings

In-dept details: Pattern changes

Decompose the Aggregate change in the share of high skill workers into the within industry and between industry is shown in (1).

Where i = 1, 2, … ,n industries. = the share of high-skilled workers

employed in industry I

= the share of employment in the sector to the total employment

ii

iii

i SPPSP

iP

iS

Decomposition

Compare before and after the arrival of globalization to Thailand.

3. Findings

The data used are mainly drawn from the raw data of Thai Labor Force Survey, Industrial Survey, National Statistics Office (NSO), Bank of Thailand (BOT), National Economic

and Social Development Board (NESDB).

ii

iPS

ii

iSP

The change in the total share of high-skilled workers due to shifts in employment shares between sectors with the different

proportions of high-skilled workers. So called BETWEEN EFFECTS represents the skilled biased technical

change effects, the change in the total share due to changes in the proportions of

high-skilled workers within sector. It reflects the reallocation of employment between industries within one sector. It

should be noted that the greater one sector’s employment share, the greater effects on the

within sector effect. So called WITHIN EFFECTS

Decomposition

In-dept details: Pattern changes

3. Findings

In-depth Details: The Whole Economy

1.8921.714

-0.628

0.318

1.264

2.032

-1.000

-0.500

-

0.500

1.000

1.500

2.000

2.500

1983-1987 2001-2005

Between

Within

Aggregatechange

Decomposition of Changes in the Economywide Share of High-Skilled Employment

Percentage

3. Findings

-0.01

-0.005

0

0.005

0.01

0.015

Between

Within

Aggregate change

-0.006

-0.004

-0.002

0

0.002

0.004

0.006

0.008

0.01

Between

Within

Aggregate change

In-depth Details: The Sectoral ComparisonDecomposition of Changes in the Economywide Share of High-

Skilled Employment

Percentage

1983-7

2001-5

3. Findings

In-depth Details: Agricultural Sector

The employment share 68% 43%

-0.004

-0.098

0.001

0.153

-0.003

0.055

-0.150

-0.100

-0.050

-

0.050

0.100

0.150

0.200

1983-1987 2001-2005

Between

Within

Aggregatechange


Percentage

3. Findings

In-depth Details: Commerce Sector

1.401

0.924

-0.350

1.051

0.555

-0.369

-0.600

-0.400

-0.200

-

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.600

1983-1987 2001-2005

Between

Within

Aggregatechange

The employment share 9.7% 17%Decomposition of Changes in the Economywide Share of High-Skilled Employment

Percentage

3. Findings

In-depth Details: Service Sector

0.285

0.592

-0.455

-0.170

0.708

0.116

-0.600

-0.400

-0.200

-

0.200

0.400

0.600

0.800

1983-1987 2001-2005

Between

Within

Aggregatechange


Percentage

3. Findings

In-depth Details: Manufacturing Sector

0.1330.151

0.034

0.287

0.167

0.438

-

0.050

0.100

0.150

0.200

0.250

0.300

0.350

0.400

0.450

0.500

1983-1987 2001-2005

Between

Within

Aggregatechange


Percentage

3. Findings

In-depth Details: Construction Sector

0.026

0.131

0.018

-0.017

0.044

0.114

-0.040

-0.020

-

0.020

0.040

0.060

0.080

0.100

0.120

0.140

1983-1987 2001-2005

Between

Within

Aggregatechange

The employment share 2.1% 5%


Percentage

3. Findings

In-depth Details: Transport Sector

0.037

0.017

0.069

0.106 0.105

0.088

-

0.020

0.040

0.060

0.080

0.100

0.120

1983-1987 2001-2005

Between

Within

Aggregatechange

The employment share 2.2% 3%


Percentage

3. Findings

In-depth Details: Utility Sector

0.015

-0.003

0.036

0.0480.051

0.045

-0.010

-

0.010

0.020

0.030

0.040

0.050

0.060

1983-1987 2001-2005

Between

Within

Aggregatechange

The employment share 0.4 % 0.3 %Decomposition of Changes in the Economywide Share of High-Skilled Employment

Percentage

3. Findings

In-depth Details: Mining Sector

0.018

0.013

0.018

0.011

-0.0004-0.0013

-0.005

0

0.005

0.01

0.015

0.02

1983-1987 2001-2005

Between

Within

Aggregatechange

The employment share 0.2% 0.1%Decomposition of Changes in the Economywide Share of High-Skilled Employment

Percentage

3. Findings


Concluding Remarks

•Physical, mathematical and engineering science professions / legislators and senior officials and stationary plant and related operators enjoyed a significant increase in employment. While teaching associate professionals were the most suffering occupation as its lowest negative growth during 2001 -2005•The decomposed results of the whole economy identify that between sector effect dominates the within sector effect. However, during the era of globalization the within effect has increased its significance.

•In the other words, it implies that the Thai economy is (also) likely in the realm of the

SBTC. .

The high-skilled workers will benefit from the higher The high-skilled workers will benefit from the higher demand for them.demand for them.

• The service sector reflects the largest share of high skilled workers to the economy. The commerce sector accounts for the second largest contribution and then

the manufacturing sector. • The service sector explicitly changes the pattern. The

SBTC has occupied the aggregate change in the later period.

• The manufacturing sector is the largest dominant sector of upskilling changes at more than 9 times.

• The transportation sector performs the upskilling change.

• The agricultural sector, accounting for more than 40 percent of employment, is also dominated by the SBTC. However, it is suffering from a decrease in

employment.


Concluding Remarks

- International comparison at the same International comparison at the same definition of skilled workersdefinition of skilled workers

- Extension of the scope of timeExtension of the scope of time- Linkage between SBTC and skilled Linkage between SBTC and skilled

complementaritycomplementarity


Concluding Remarks

•The Limitation of the StudyThe Limitation of the Study

- - Linkages of Linkages of Globalization, Changes in Globalization, Changes in Demand for Demand for Skilled Skilled Workers, and Investment in Human CapitalWorkers, and Investment in Human Capital

•Future PlanFuture Plan

Thank youThank you

Source David Held (2004) A Globalizing world? Culture, economics, polictics. Second edition. The Bath Press: p 100 Figure 3.6

Increasing Demand for Skilled Workers in Thailand in the Era of Globalization Ruttiya Bhula-or Prepare for The International Development Economics Associates.

Documents

high skilled workers

high skilled workers

skilled workers berman

skilled groups

fishery workers group

service workers group

highskilled workers

whitecollar highskilled