Impact of Global Economic Crisis on the Employment and Migrant ...

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llil1 orunlliunmmunm(4.25)unIf the is low or close to 0, the labor allocation must be equally arranged ( lil m). If theprobability to be caught is smaller than paying tax ( t ) and the marginal revenue products<strong>of</strong> formal and informal worker is identical (f = i ).< iEmployer’s first order conditions then yield the equilibrium wages as <strong>of</strong> the formal worker, theinformal worker, and the unregistered migrant workers as (4.26)- (4.28). Note again theregistered migrant high-skilled workers are treated as the formal workers. Assume that theis different between high and low skilled worker.w * /(1 t )(4.26)ififkifkfw * /(4.27)unLw * / (1 )(4.28)mimWhile k = H, L. Since ≥0, the equilibrium wage <strong>of</strong> informal workers then greater or at leastunequal to wage <strong>of</strong> unregistered migrant worker ( w i* ≥ wm*). The employment level is thengiven by (4.29).11H Hf H H H HH il * w * ( n n )( w n ) n w (4.29)fffmfm(iHfHf)*1i(HiHiH)*11Under the minimum wage set by the government, if the minimum wage (at least equal to the wf*substituted l mininto lf*, andtheLfwmin) is lower than or, the employment level with the minimum wage is then can beminwmininto*wf . Since only low skilled workers enjoys the benefit <strong>of</strong>m in1f( )*imm inm in( )* (Lf 1f 1i 1 un m* w * n w n w n wl (4.30)fminiimm)*11The minimum wages then not only effect on the employment <strong>of</strong> formal workers, but also othertypes <strong>of</strong> workers. If the wage is set by the monopsonistic employer (or government), thenumber <strong>of</strong> employment then adjust to it equilibrium. It should be noted that the minimum wageis set by the government for all sectors, which have various number <strong>of</strong> marginal revenueproducts ( w f* > w f*- wmin≥ 0), therefore it is possible to vary among sectors. IThe Philips curve is applied to find the relationship between the rate <strong>of</strong> change in real grosswage rate and the unemployment.
PP1L0LP1INDEXP0INDEXUNE1 11 phillips0 0UNELSLS1(4.31)o= benchmark, 1= proposed changeNote that Puzon (2009) found that the marginal effect <strong>of</strong> the employment to the inflation rateduring 2001 – 2006 <strong>of</strong> Thailand is -0.94 at more than 10 percent significance. It implies that theone unit change in unemployment effects on the inflation rate at about 0.94 unit. Then, in thisstudy, the phillips is set as 0.94.For high-skilled workers, the employment level is always determined by firms and plays on thecompetitive market. Yet for the low-skilled workers, the wage is set in the nominal rigid regimeD Mby binding the minimum wage( W W )LLThe binding <strong>of</strong> the minimum wage exits only in the low skilled and formal labour. The lowskilled and informal workers will be bound between the sustainable wage and the minimumwage as shown in equation 4.32.In MH W LW(4.32)L4.5 The rest <strong>of</strong> the worldThailand is the price taker in the world economy. The exchange rate is fixed leaving the tradebalance to be determined endogenously.The import price in Baht isPM i miWM( 1 t ) ER P i(4.33)EWEThe export price in Baht is P i ER P i(4.34)The balance <strong>of</strong> payments is defined as WM i WE iH G F (4.35)PMiPEiSiSiSiWEiWM iWhere P and P =World market price <strong>of</strong> exports and imports.saving <strong>of</strong> household, government and financial sector.H GSi, S andiFSirepresentThis section provides the framework <strong>of</strong> the study and the highlighted models in this study. Theresults are demonstrated and discuss in the following section.5. RESULT OF THE STUDY:IMPACT OF ECONOMIC GLOBALIZATION ON THE EMPLOYMENTThis section presents the results <strong>of</strong> the framework <strong>of</strong> the study in section III and IV. Theimpacts <strong>of</strong> economic crisis on the employment are measured. The estimated result iscompared to the based case (before the economic crisis) to provide comprehensive change <strong>of</strong>economic globalization on the employment.As can be seen in the Table 5.1, the low skilled worker <strong>of</strong> the manufacturing sector in Thailandhas severely suffered from the economic crisis by the reduction in employment at about 14
Page 3 and 4: Employment to population ratio, 15+
Page 5 and 6: into formal employment. This is sup
Page 7 and 8: workers. To capture all above affec
Page 9 and 10: The following section defines the i
Page 11 and 12: job seekers with high education pre
Page 13 and 14: Figure 4.1 Framework of</st
Page 15 and 16: political conflict and economic sta
Page 17 and 18: The informal workers who work infor
Page 19 and 20: (2) Low skillThe migrants compose <
Page 21 and 22: Note: * There are some foreign work
Page 23 and 24: Subject toGivenMiDDiDDiTCiP MiP Y(4
Page 25: 4.4 Labour marketLabour is measured
Page 29 and 30: However, the migrant worker within

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