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Increasing Demand for Skilled Workers in Thailand in the Era of Globalization

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

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Increasing Demand for Skilled Workers in Thailand in the Era of Globalization

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  1. 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

  2. Outline of the Presentation • Facts and Trends of Increasing Demand for Skilled Workers • Objectives of the Study • Fact Findings • Concluding Remarks

  3. 1. Facts and Trends of Increasing Demand for Skilled Workers Facts: International Comparison Employment 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

  4. 1. Facts and Trends of Increasing Demand for Skilled Workers Facts: Thailand Employment Growth of High-skilled and Low-skilled Workers Average annual growth rates during 2001-2005 Source Author calculation: raw data of Thai Labor Force Survey (the third quarter) 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”.

  5. 1. Facts and Trends of Increasing Demand for Skilled Workers Facts: Thailand Average Growth Rate of Employment Classified by Skilled Groups2001 -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) Source Labor Force Survey (the third quarter) during 2001 -2005

  6. 1. Facts and Trends of Increasing Demand for Skilled Workers Facts: Thailand Average Wage Per Month Classified by Occupations (Baht) Source: Author calculation: raw data from the Labor Force Survey during 2001 -2005

  7. 1. Facts and Trends of Increasing Demand for Skilled Workers Empirical Studies about Increasing Demand for Skilled Workers 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. • Berman, Bound, and Griliches (1994) US • 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

  8. 1. Facts and Trends of Increasing Demand for Skilled Workers Empirical Studies about Increasing Demand for Skilled Workers • The linkage of technical and skilled workers  its relation to the skilled complementarity. • Many studies have examined the correlation between various measures of technology and worker skills. • Berman, Bound, and Griliches (1994) skill upgrading or the increase in the wage share of white-collar workers is positively related to two aspects of technology: computer expenditure and research and development. • Baldwin et al. (1995) examined the factors influencing a firm’s decision to train using Canadian statistical surveys. Skill requirements increased in between 47 and 59 per cent of firms adopting new technologies, while only a negligible number of firms reported reduced skill requirements. Due to the skilled complementarity

  9. 1. Facts and Trends of Increasing Demand for Skilled Workers Empirical Studies about Increasing Demand for Skilled Workers Remarks: SBTC possibly comes late. • Berman, Somanathan, and Tan (2005) does not explicitly support the SBTC in the case of India. • The reason is the matter of time. • While the 1980s was a period of falling skills demand, the 1990s showed generally rising demand for skills, with variation across states. • The increased output and capital-skill complementarities are claimed to be the best explanations of skill upgrading in the 1990s. • As the economy underwent a sharp reform and a manufacturing boom in the 1990s, raising the possibility that technology absorption accelerated.

  10. 2. Objectives of the Study 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.

  11. 3. Findings When Globalization has begun in Thailand Identify “When”we call the arrival of globalization Net Flow of Foreign Direct Investment (Millions of Baht) Before After Apparently the beginning of ‘Globalization” The most recent data available on Thai Labor force Survey 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

  12. 3. Findings Overview Structural Changes of Thai Economyby Sector GDP share classified by sector 1983 2005 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

  13. 3. Findings Overview Structural Changes of Labor Markets by Sector Employment share classified by sector 1983 2005 Source: Thai Labor Force Survey

  14. 3. Findings In-dept details: Pattern changes Decomposition 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 Compare before and after the arrival of globalization to Thailand.

  15. 3. Findings In-dept details: Pattern changes Decomposition 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 • 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).

  16. 3. Findings In-depth Details: The Whole Economy Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  17. 3. Findings In-depth Details: The Sectoral Comparison Percentage Decomposition of Changes in the Economywide Share of High-Skilled Employment 1983-7 2001-5

  18. 3. Findings In-depth Details: Agricultural Sector The employment share 68%  43% Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  19. 3. Findings In-depth Details: Commerce Sector The employment share 9.7%  17% Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  20. 3. Findings In-depth Details: Service Sector The employment share 10.2%  17% Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  21. 3. Findings In-depth Details: Manufacturing Sector The employment share 6.9%  15% Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  22. 3. Findings In-depth Details: Construction Sector The employment share 2.1%  5% Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  23. 3. Findings In-depth Details: Transport Sector The employment share 2.2%  3% Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  24. 3. Findings In-depth Details: Utility Sector The employment share 0.4 %  0.3 % Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  25. 3. Findings In-depth Details: Mining Sector The employment share 0.2%  0.1% Decomposition of Changes in the Economywide Share of High-Skilled Employment Percentage

  26. 4. Concluding Remarks 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 demand for them.

  27. 4. Concluding Remarks Concluding Remarks • 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.

  28. 4. Concluding Remarks Concluding Remarks • The Limitation of the Study • International comparison at the same definition of skilled workers • Extension of the scope of time • Linkage between SBTC and skilled complementarity • Future Plan - Linkages of Globalization, Changes in Demand for Skilled Workers, and Investment in Human Capital

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

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