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
<Internal Use Only>
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
<Unemployment rate >
(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 ,Underemploym
ent ,Seasonal inactive labor >
(％）
3.5
Unemployment
Underemployment
Seasonal inactive labor
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2002 03 04 05 06 07 08 09 10 11
(Source）BOT、NSO
(Y/Q）
12
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
<Average wage in Thailand>
<Real minimum wage>
（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
<Growth rate of the number of
people age between 15-65>
（％）
Indonesia
Philippines
Thailand
3.5
3.0
<Share of people age between
15-34 to total>
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 by Age: Thailand>
• 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
<Implication from
above figures>
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
<Phillips Curve>
(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
•
The minimum wage increased from this April