Underemployment and Wage Penalty in Thailand

Akkaya Senkrua


Underemployment is a severe form of human resource underutilization. Nevertheless, underemployment has received little attention vis-à-vis unemployment. As a result, this research investigates the scale of underemployment in Thailand using time-related, income-related, and skill-related underemployment measures. In addition, this research also examines the effect of underemployment on earnings, i.e., wage penalty. The study relies on education as a skill proxy and overeducation as a labor underutilization proxy. By using the selection-corrected two-step method, the results indicate that the underemployment rate is highest under the skill-related method and that the wage penalty is highest under the income-related method. The findings also reveal that underemployed workers suffer wage penalties. In other words, underemployed workers earn less than correctly-matched workers. Specifically, this study aims to measure the extent of underemployment in Thailand and determine the effect of underemployment on earnings. This work's novelty lies in using different measures of underemployment to quantify the extent and effect of underemployment on earnings. Essentially, the scale of underemployment and wage penalty is influenced by the measures of underemployment.


Keywords: time-related underemployment, income-related underemployment, skill-related underemployment, overeducation, wage penalty.

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