Why is the unemployment rate in Thailand so low? The views expressed here are those of authors and are not official views of JRI or ESRI Shotaro Kuma...
Why is the unemployment rate in Thailand so low? The views expressed here are those of authors and are not official views of JRI or ESRI Shotaro Kumagai Japan Research Institute (Cooperative researcher @ ESRI) 2012/8/3
2
International Comparison of Unemployment • Thailand’s unemployment rate has been lower than that of other countries
(2010 ) France United States United Kingdom Russia Germany Brazil Japan China
14
Indonesia Malaysia
12 10 8
Philippines Indonesia Vietnam Myanmar Brunei Malaysia Singapore Thailand
6 4 2 0 0
（Soutce）IMF
Thailand Philippines Vietnam
（％）
2
4
6
8
10 （％）
1995 97 （Source）IMF
99
01
03
05
07
09 （Year）
3
Some Possibilities 1. Agricultural sector/ Informal sector 2. Difference of definition of LFS 3. Underemployment 4. Inadequate unemployment insurance 5. Low minimum wage 6. Demography (Aging and low birth rate)
4
Employments in agriculture • Higher share than developed countries • Not much difference with Indonesia and Philippines < Share of employment in agriculture > (2010) （％） （％） 0
20
40
60
70
Vietnam Thailand
65
Indonesia Philippines Malaysia
55
Japan Canada Australia US UK Eurozone （Source）Ｗｏｒｌｄ Bank、OECD （注）ASEAN countries ratios are latest
Thailand Indonesia Philippines Vietnam
60
50 45 40 35 30 1998 2000
02
（Source）World Bank
04
06
08
10 （Year）
5
Wage inequality and unemployment • Decrease of wage inequality contributed to lower unemployment rate? • The main factor of wage inequality decrease is the price increase of agriculture products • This is global phenomenon, not Thailand unique situation
< Global food price and wage inequality in Thailand > (Times）
(2002-04＝100） 300 Wage inequality between 250 agriculture and non agriculture (Right, inverse scale)
1.5 2.0
200
2.5 150 3.0 100 3.5
50 FAO Food Price Index(Left)
0 2001
4.0 03
05
07
(Source）BOT、Bloomberg.L.P
09
11 (Y/Q）
6
Agricultural sector really absorb unemployment ?
• Employment share in agriculture didn’t increase after Lehman shock
（％）
< Employment share in agriculture and non labor force share >
45 40 35
• The share of non –labor force also didn’t increase
30 25
Non labor force share Employment share in agriculture sector
20 2006 （Source）BOT
07
08
09
10 （Y/Q）
7
Informal sector (Self employed) • Although Thailand self employed share is high, the share is between that of Indonesia and Philippines
< Self employed worker’s share to total employment> (％）
80 70 60 50
• (From next slides), Focus on the difference among Thailand ,Indonesia, and Philippines
40 30 20 Indonesia Phiippines
10
Malaysia Thailand
0 1998
00
02
(Source）World Bank
04
06
08
10 (Year）
8
Difference of definition of LFS • Unemployment in Indonesia includes persons who give (stop) up searching jobs Japan
Thailand
Minimum Age of Labor Force Minimum work hours for being regarded employments
Philipiness Over age 15
At least 1 hour work during survey periods
Unpaid Family workers Definition of unemployment
Labor Force(Self employed) ①No job ②Available for work （Include people who give up searching jobs or waiting appropriate times）
①No job ②Available for work ③Seeking jobs
Seasonal Inactive Labor
Labor Force （Employment） (Note3）
Maximum Frequency of Survey ①Sample Size（Quarterly、household ②No of household in 2009 (thousands ③Sample coverage（①÷②）
Indonesia
Monthly
Labor Force（Not included Non- labor force employment） Monthly
Labor Force （Employment）
Quarterly
Quarterly
40,000
78,363
41,000
299,200
51950
19570
18450
58420
0.08
0.40
0.22
0.51
（Source）ＩＭＦ、ILO、Various Statistics （Note1）As for the number of sample, IMF SDDS is referred. （Note2）Number of household in Japan is 2010's one. （Note3）LFS in Japan didn't divide employments who stop working into seasonal inactive labor and other.
9
Treatment of Seasonal Inactive labor < Unemployment in Thailand >
• The effect of difference with respect to the treatment of seasonal inactive labor is small
(％）
< 2010 >
5.0
Seasonal inactive labor = Labor force Seasonal inactive labor = non labor force
4.5 4.0 3.5
• Although there exits some difference, these are not main factors
3.0 2.5 2.0 1.5
• How about the effect of questionnaire?
1.0 1998 2000 (Source）BOT、NSO
02
04
06
08
10 (Year）
10
Underemployment • The share of short working hours in Thailand is lower than those of Philippines and Indonesia < Employment share by working hours > (Thailand and Philippines) (Indonesia) (％）
20-29 hours Less than 20 hours
(％）
30
16
20-24 hours
14
25 20
12
15
10
10
Less than 20 hours
8
5
6
0 Philippines Thaiand
Philippines Thaiand
Philippines Thaiand
Philippines Thaiand
Philippines Thaiand
04
05
06
07
08
09
Philippines Thaiand
Philippines Thaiand
Thailand 2003
4
10
0
2 1996 97
(Source）BOT、NSO
(Year）
(Source）ILO
98
99 2000 01
02
03
(Year）
11
Unemployment and Underemployment in Thailand • If the unemployment rate decreased because unemployment is absorbed as underemployment, the share of underemployment should increase when the unemployment rate increases
Unemployment Insurance • Philippines and Indonesia don’t have adequate systems
Thailand
Unemployment Insurace ・Start from January 2004 ・50％ of salary for involuntary unemployment (Maximum 240 days) ・30％ of salary for voluntary unemployment (Maximum 90 days)
Payment for layoff ・30 days salary (Employment with more than 120 days work) ・90 days salary (Employment with more than 1 year work) ・Payments for unused paid holidays
Uunemployment insurace system does not exist
・The higher one between 1month salary or average wage (Restructure) ・The higher one between 50% of 1month salary or average wage (Stop business)
Uuemployment insurance system does not exist
・As a general rule, the payments of layoff which didn't make agreement is the matter of labor dispute institutions ・Even if an agreement are made, companies have to compensate employments for loss (*Detail of payments is not available)
Phillipines
Indonesia
（Source）MHLW、JETRO 、JIL
13
Minimum wage • The real minimum wage in Thailand didn’t increase at all
（1999Ｑ1＝100）
（1995＝100）
170 160 150 140 130 120 110 100 90 80 70
180 170
Philippines Thailand Indonesia
160
Nominal Real
150 140 130 120 110 100 90
1995
00
05
10 （Year）
（Source）IFS、Various Statistics （Note）Thailand's Minimum wage is Bangkok's wage
80 1999
02
（Source）BOT、NSO
05
08
11 （Y/Q）
14
Demography • The speed of aging in Thailand is faster than that of other countries （％）
4.0
（％）
Indonesia Philippines Thailand
3.5 3.0
65 60
2.5
55
2.0 50
1.5
Thailand Indonesia Philippines Malaysia Vietnum
45
1.0 0.5 1980
85
90
（Source）United Nations
95
2000
05
10 （Year）
40 1990
95
（Source）United Nations
00
05
10 （Year）
15
The effect of low birth rate on unemployment
• Unemployment rate of people age between 15 and 29 had dropped so much
（％）
9 8
Total 20-24 30-34
15-19 25-29 35-39
7 6
5
The labor market in Thailand is actually tightened (not just the appearance)
2
4 3 1 0 2002 03 04 05 06 07 08 09 10 11 （Source）NSO (Note) One year moving average
（Y/Q）
16
Relationship between unemployment rate and prices • Given the low unemployment rate, recent inflation rate is moderate (CPI、％） 8
(Average Wage、％）
(2008Q1）
20
6
15
4
(2002Q1）
10 5
2 0
(2008Q1）
(2011Q4）
(2012年Q1）
0
▲2
(2009Q2）
▲5
(2009Q1）
(2002Q1）
▲ 10
▲4 0.0 (Source）BOT
1.0
2.0
3.0
(Unenmployment、％）
0.0 (Source）BOT
1.0
2.0
3.0
(Unenployment、％）
17
Hypotheses 1. Unemployment does not affect inflation? 2. Phillips curve has shifted (flattened) after the Lehman shock? 3. The effect of low unemployment has not yet appeared (inflation rate will increase soon)? •
Check these hypothesizes through estimating the Phillips curve.
18
Estimate equation (Simple estimation)
• • • •
π= consumer price index growth rate c = constant im=import price index growth rate dummy=0(Before 2008Q3),1(after 2008Q3)
• Some variations With constant /without constant With dummy/without dummy Whole periods/ before2008Q3
19
The results of estimation
～2008Q3
No Dummy
Whole periods
With Dummy
C With constant
0.930349** (-2.101089)
Without Constant
With constant
1.263299** (2.605597)
Without Constant
With constant
Without Constant
-0.083759 (-0.116060)
π（-1） 0.837681**
π（-2） -0.437216**
1/U（-1） 1.684723**
ｉｍ 0.090134**
Dummy
(-3.582918)
(2.327344)
(2.461522)
(-3.188213)
0.850767**
-0.393879**
2.736437**
0.074529*
-1.819291**
(-3.121883
(4.988462)
(1.981443)
1.061992**
-0.545765**
0.041947
0.070813*
(6.997939)
(-4.133517)
(0.073222)
(1.740322)
1.130936**
-0.50711**
1.187028**
0.044057
(7.010563)
(-3.583980)
(2.992056)
(1.036529)
0.496543*
-0.019292
3.061429*
0.15023**
(1.890036)
(-0.084931)
(2.042720)
(3.446980)
1.130936**
-0.507711**
1.187028**
0.044057
(7.010563)
** 5% significant, *10% significant
(-3.583980)
(2.992056)
(1.036529)
D.W
-1.574561**
(5.512655)
(5.341666)
Adjusted R2
0.787293
1.747728
0.765932
1.706394
0.729958
1.790418
0.685293
1.710366
0.853671
1.901166
0.685293
1.710366
(-3.613570)
20
Implications of estimation 1. Unemployment rate effect on inflation (statistically significant)
2. The effect of unemployment on inflation decreased 3. The possibility of shift (flatten) Phillips curve
21
Prospects of my research 1. Detail survey about the employment policy in each country 2. Quantitative analysis •
The effect of minimum wage and demography to unemployment
3. Estimate structural unemployment •
Vacancy /job application data
4. To find the factors behind a shifted (flattened) Phillips curve 5. Unemployment & Phillips curve movement after 2012/April •
