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

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Presentation on theme: "Increasing Demand for Skilled Workers in Thailand in the Era of Globalization Ruttiya Bhula-or Prepare for The International Development Economics Associates."— Presentation transcript:

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 1.Facts and Trends of Increasing Demand for Skilled Workers 2.Objectives of the Study 3.Fact Findings 4.Concluding Remarks

3 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 1. Facts and Trends of Increasing Demand for Skilled Workers

4 Facts: 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. 1. Facts and Trends of Increasing Demand for Skilled Workers

5 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: Thailand 1. Facts and Trends of Increasing Demand for Skilled Workers

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

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

8 The linkage of technical and skilled workersThe 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 various measures of technology and worker skills.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.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 firms 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.Baldwin et al. (1995) examined the factors influencing a firms 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. skilled complementarity Due to the skilled complementarity Empirical Studies about Increasing Demand for Skilled Workers 1. Facts and Trends of Increasing Demand for Skilled Workers

9 Berman, Somanathan, and Tan (2005) does not explicitly support the SBTC in the case of India.Berman, Somanathan, and Tan (2005) does not explicitly support the SBTC in the case of India. The reason is the matter of time.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.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.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.As the economy underwent a sharp reform and a manufacturing boom in the 1990s, raising the possibility that technology absorption accelerated. Empirical Studies about Increasing Demand for Skilled Workers Remarks: SBTC possibly comes late. 1. Facts and Trends of Increasing Demand for Skilled Workers

10 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

11 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

12 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 authors groupinghttp://www.nesdb.go.th/Portals/0/eco_datas/account/qgdp/data4_06/gdp2006q4.xls 1983 Overview Structural Changes of Thai Economy by Sector 2005

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

14 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 Decomposition Compare before and after the arrival of globalization to Thailand. 3. Findings

15 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). 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 sectors employment share, the greater effects on the within sector effect. So called WITHIN EFFECTS Decomposition In-dept details: Pattern changes 3. Findings

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

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

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

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

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

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

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

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

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

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

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 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. 4. Concluding Remarks Concluding Remarks

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

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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