Influence of human capital on retirement preparation : empirical evidence from Thailand

Abstract

This study has two main objectives. The first objective is to compare the values of individual Human Capital Indices (HCIs) in different groups and different years. The second objective is to examine and support the components of the Human Capital Index that determine the preparation of the pre-retirement population in Thailand. This study uses secondary data from the National Statistical Office’s National Survey of Older Persons in Thailand from surveys conducted in 2011, 2014, and 2017. It also uses data such as the number of doctors per 1,000 population from the Ministry of Public Health, in order to study the effect of policy variables on retirement preparation among the Thai pre-retirement population.

Since the first goal of this study was to measure and compare the values of individuals’ human capital in our sample, we created a new instrument, a Human Capital Index (HCI) for the pre-retirement population in Thailand, which is consistent with both human capital theory and the WHO concept of functional ability. The results of the HCIs in different groups of data (in 2011, 2014, and 2017) can be summarized as follows: first, the mean HCIs of males is higher than that of females. Second, people who lived in urban areas had a higher average HCI value than did people who lived in rural areas. Third, people who lived in Bangkok had a higher HCI when compared to those living in other regions, on average. Fourth, people who had a high average annual income tended to have a higher HCI in every survey, and the people who lived in the top 10 provinces (in terms of GPP) had higher HCIs than did people who lived in the bottom 10 provinces. Lastly, the mean HCIs among the pre-retirement group (50–59 years) were higher than they were for people aged 60 years and above. Moreover, people aged 60 years and above had a chance of a decrease in their HCIs as they aged.

To achieve the second purpose of this study, which was to examine the components in the Human Capital Index that determined the preparation of the pre-retirement population in Thailand, the determinants of retirement preparation were identified by employing logit, probit regression and Ordinary Least Square (OLS) estimation. The dependent variables of this research were confined to 6 dimensions: (1) housing, (2) financial security, (3) physical health, (4) leisure activities and social relationship activities, (5) safe environment (home adaptation) preparation, and (6) overall preparation index. Independent variables included Human Capital Index components (level of education, occupational skills, training and health status index), policy variables, specific variables of each model, and other variables as control variables.

Results show that education level is positively associated with financial security and also has a positive effect on the overall preparation index. Moreover, occupational skill and training are positively associated with housing and financial security preparation and have a positive effect on physical health and on leisure activities and social relationship activities preparation. Additionally, the health status index is positively associated with housing preparation and also has a positive effect on physical health preparation. Hence, promoting these components in the Human Capital Index (HCI) can be a key factor in encouraging preparation among the pre-retirement population in Thailand. This can be helpful in improving the quality of the Thai pre-retirement population and well-being of the elderly in their old age and in future years.

These findings can be the foundation for suggestions regarding how to support and promote key components in the Human Capital Index. The government should support not only school and university education but also promote lifelong learning for the Thai population. Moreover, the government should promote skill development for the pre-retirement population, providing re-training courses that provide the opportunity for people to update their skills in order to meet the needs and demands of the labor sector. Such courses can increase the level of skills and increase income from their occupations, which will encourage them to prepare for their old age in terms of financial security, etc. And participating in occupational clubs or taking re-training courses will also increase preparation in social relationship activities.

In addition, the public sector should provide free or inexpensive vaccines to build up disease resistance among the population as well as promoting physical activity in order to help older persons maintain mobility as well as cognitive function.