Wage Consequences of Rapid Tertiary Education Expansion in a Developing Economy: The Case of Thailand

Abstract

In recent years, Thailand has experienced the emergence of “overeducated” workers as the supply of university graduates in Thailand has outpaced growth in high‐skilled employment opportunities. Using the 2007 to 2009 Thai Labor Force Survey, this paper quantifies the incidence of overeducation and estimates overeducation wage penalties among male university graduates. The results show that the incidence of overeducation is greatest among younger cohorts. Quantile wage regression results suggest that overeducation wage penalties for older workers capture the impact of unobserved low ability on wages. In contrast, persistent wage penalties of 11–26% across the wage/ability distributions for younger workers are consistent with structural imbalances in the Thai labor market. These imbalances make it difficult for university graduates to find jobs commensurate with their level of formal education and to achieve their full earning power. The wage penalties are especially large for new entrants into the labor market.

Education–Occupation Mismatch and Its Wage Penalties in Informal Employment in Thailand

“…Thailand also saw a significant increase in the number of educational institutions at all levels, especially at the secondary and tertiary levels. For example, the number of higher education institutions rose from a handful in 1970 to 185 institutions in 2014 (Paweenawat and Vechbanyongratana 2015). The expansion of schools combined with changes in the compulsory education laws led to a steady increase in primary, secondary, and tertiary gross enrollment rates from 1971 to 2013, as shown in Figure 1.…”

“…Job analysis. This method follows systematic evaluation by professional job analysts such as the Dictionary of Occupational Titles published by the United States (US) Department of Labor or recommendations of minimum required degrees by Thailand's Ministry of Labor (e.g., Paweenawat and Vechbanyongratana 2015).…”

“…There are two recent studies on overeducation wage penalties specific to Thailand. The first by Paweenawat and Vechbanyongratana (2015) analyze wage penalties among male university graduates. The average wage penalty was found to be 19%, but when stratified by cohort, younger workers were found to have higher overeducation wage penalties that can be explained by an increasing supply of young university graduates and a dearth of commensurate jobs in the market.…”

“…A study by Mavromaras et al (2013) employs fixed effect and random effect models to panel data and finds that unobservable individual heterogeneity cannot explain all of the negative impact of overeducation and overskilling among working-age Australian men. Papers by McGuinness and Bennett (2007) and Paweenawat and Vechbanyongratana (2015) use a quantile approach to show that overeducation occurs at all points along the wage and ability distribution, which suggests that overeducation is not synonymous with low ability in Northern Ireland and Thailand, respectively. Specifically in the case of Thailand, overeducated male university graduates born between 1966 and 1985 face large overeducation wage penalties at all points along the ability distribution, which is consistent with an imbalance between the number of university graduates and jobs available in the economy (Paweenawat and Vechbanyongratana 2015).…”

Thailand’s education system and skills imbalances: Assessment and policy recommendations

“…The COVID-19 pandemic has allowed for exemplifying the importance of such strategy, with technological innovations crucial for the health sector developed by medical and engineering departments of several universities. While the Mahidol University has invented cheaper and faster COVID-19 tests (Bangkok Post, 2020 [42]), engineers at the Kasetsart University have presented a prototype of a disinfection robot to be used to disinfect high risk areas without putting sanitation workers at risk (Pattaya Mail, 2020 [43]).…”