The mismatch in thai labor market : overeducation
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2015
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2558
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239 leaves
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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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Akkaya Senkrua (2015). The mismatch in thai labor market : overeducation. Retrieved from: http://repository.nida.ac.th/handle/662723737/3504.
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The mismatch in thai labor market : overeducation
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Abstract
Greater educational accessibility in Thailand has considerably contributed to a
collective higher level of educational attainment of the Thai labor force. Nevertheless,
with the ease of access, the number of workers with overeducation has significantly
risen. Overeducation refers to a situation in which a person’s education attainment
exceeds the requirements of a job, giving rise to a variety of unfavorable outcomes for
individuals, employers and society.
This research examines three research questions: 1) Does the educational mismatch (i.e., overeducation) exist in Thailand’s labor market?; 2) Is the overeducation in the Thai labor market demand-driven or supply-driven?; 3) Do overeducated workers suffer any form of wage penalties and, if so, are the penalties identical across the earnings distribution? Quantitative analysis is thus employed using the 2006 and 2011 Labor Force Survey datasets. In addition, the samples are weighted so that they are representative of the entire population.
The classification of mismatched workers in this research work is based on the correspondence between the International Standard Classification of Occupations (ISCO) and the International Standard Classification of Education (ISCED) developed by the Organization of Economic Cooperation and Development (OECD). The workers are thus classified into overeducated, properly matched, and undereducated workers. The analysis reveals that the overeducation situation in the country has gone worse from 6.27% in 2006 to 8.51% in 2011. Workers with a college degree in social sciences accounted for the largest proportion (60%) of the overeducated employees. In addition, the likelihood of overeducation is subject to the chosen fields of study, in which the workers with a tertiary degree in medicine and those with a non-tertiary science degree are least likely to suffer from overeducation.
Additional attempts are also made to determine the plausible causes of overeducation to enable a better understanding of the mechanisms by which the demand and supply forces interacted. The findings identify two determinants of the current state of overeducation among Thai labor force: higher education being synonymous with “buying an insurance” and the education inflation. The former has been responsible for a multitude of workers pursuing college degree with the hope of finding a securing job, not matched job upon graduation, and the latter, i.e., an increase in the supply of college graduates lowers wages and leads to overeducation. Hence, effective management of the supply-side factors is a possible solution to tackle overeducation in the labor market.
The public sector and policymakers should make efforts to combat the overeducation problem due to the adverse effects of the mismatch on the workers’ incomes and their employers. This research finds that overeducation induces a negative effect on the employees’ earnings (i.e., a 30% underpayment) and that the penalties are different between men and women. Male employees encounter a more severe wage penalty than their female counterparts. Moreover, the overeducated workers with a tertiary degree face more severe wage penalties than the overeducated upper-secondary graduates, inadvertently contributing to the lower between-groups wage inequality.
This research also studies the relationship between overeducation and a lack of unobserved skills through quantile regression. The findings reveal a significantly greater negative effect of overeducation on the more skilled workers who are in the top segment of the wage distribution than those with less skilled of the same educational level, suggesting the absence of the correlation between overeducation and the lack of unobserved skills. Also, the greater accessibility to higher education contribute to an increased within-groups dispersion.
This dissertation concludes with the policy implications for mitigation of the overeducation problem through effective management of the supply-side factors: students and educational institutions. Government may increase private costs of college education in order to reduce the supply of college graduates. To be precise, government may reallocate its educational budget more to vocational education. Educational institutions should provide better guidances to students in making the choices of fields of study in order to reduce the incidence of overeducation. Students should be provided with job experience in college possibly through cooperative programs.
This research examines three research questions: 1) Does the educational mismatch (i.e., overeducation) exist in Thailand’s labor market?; 2) Is the overeducation in the Thai labor market demand-driven or supply-driven?; 3) Do overeducated workers suffer any form of wage penalties and, if so, are the penalties identical across the earnings distribution? Quantitative analysis is thus employed using the 2006 and 2011 Labor Force Survey datasets. In addition, the samples are weighted so that they are representative of the entire population.
The classification of mismatched workers in this research work is based on the correspondence between the International Standard Classification of Occupations (ISCO) and the International Standard Classification of Education (ISCED) developed by the Organization of Economic Cooperation and Development (OECD). The workers are thus classified into overeducated, properly matched, and undereducated workers. The analysis reveals that the overeducation situation in the country has gone worse from 6.27% in 2006 to 8.51% in 2011. Workers with a college degree in social sciences accounted for the largest proportion (60%) of the overeducated employees. In addition, the likelihood of overeducation is subject to the chosen fields of study, in which the workers with a tertiary degree in medicine and those with a non-tertiary science degree are least likely to suffer from overeducation.
Additional attempts are also made to determine the plausible causes of overeducation to enable a better understanding of the mechanisms by which the demand and supply forces interacted. The findings identify two determinants of the current state of overeducation among Thai labor force: higher education being synonymous with “buying an insurance” and the education inflation. The former has been responsible for a multitude of workers pursuing college degree with the hope of finding a securing job, not matched job upon graduation, and the latter, i.e., an increase in the supply of college graduates lowers wages and leads to overeducation. Hence, effective management of the supply-side factors is a possible solution to tackle overeducation in the labor market.
The public sector and policymakers should make efforts to combat the overeducation problem due to the adverse effects of the mismatch on the workers’ incomes and their employers. This research finds that overeducation induces a negative effect on the employees’ earnings (i.e., a 30% underpayment) and that the penalties are different between men and women. Male employees encounter a more severe wage penalty than their female counterparts. Moreover, the overeducated workers with a tertiary degree face more severe wage penalties than the overeducated upper-secondary graduates, inadvertently contributing to the lower between-groups wage inequality.
This research also studies the relationship between overeducation and a lack of unobserved skills through quantile regression. The findings reveal a significantly greater negative effect of overeducation on the more skilled workers who are in the top segment of the wage distribution than those with less skilled of the same educational level, suggesting the absence of the correlation between overeducation and the lack of unobserved skills. Also, the greater accessibility to higher education contribute to an increased within-groups dispersion.
This dissertation concludes with the policy implications for mitigation of the overeducation problem through effective management of the supply-side factors: students and educational institutions. Government may increase private costs of college education in order to reduce the supply of college graduates. To be precise, government may reallocate its educational budget more to vocational education. Educational institutions should provide better guidances to students in making the choices of fields of study in order to reduce the incidence of overeducation. Students should be provided with job experience in college possibly through cooperative programs.
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Dissertation (Ph.D. (Economics))--National Institute of Development Administration, 2015.