A. What is the Potential Impact of the Pandemic on Sectoral Reallocation?

1. The impact of the COVID-19 pandemic was not uniform across sectors. This is true globally, including for ASEAN countries. Two years into the pandemic, contact-intensive sectors in ASEAN countries saw their share in GDP decline in favor of financial and ICT services and manufacturing. While the impact on employment was milder, probably due to policy support measures, a broadly similar pattern is observed there too (Figure 1). Thailand is not an exception: the 2021 share of the accommodation and food services sector in GDP was about 3 percentage points below its level in 2019, while financial and ICT services and manufacturing sectors gained about 1 percentage point each. In terms of employment, the share of accommodation and food services declined by only 0.2 percentage points in 2021 compared with 2019. Interestingly, manufacturing and financial services also reduced their shares in employment, probably reflecting the ongoing digital transformation, a trend that was accelerated by the pandemic. The agriculture sector emerged as the biggest winner in terms of employment, since it acts as an employer of last resort in Thailand.

2. The pandemic seems to have induced a sizable resource reallocation. The sectoral stock return dispersion—a widely used indicator of reallocation—almost doubled at the onset of the pandemic (Barrero and others, 2020). In addition, firm-level earning projections by institutional brokers suggest that contact-intensive sectors will only barely surpass their 2019 level earnings in 2026, while earnings of manufacturing, ICT and financial services sectors will expand rapidly compared with 2019. The literature on the link between firm-level earnings forecasts and sectoral gross value added suggests that firm-level earnings forecasts are good predictors of future sectoral gross value added (IMF, 2021). Given the unfavorable earnings forecast for contact-intensive sectors, Asian economies, including Thailand, will likely see considerable sectoral shifts with notable implications for labor demand in the medium term.

ASEAN Countries: The Impact of COVID-19 on Sectoral Shares of GVA in GDP

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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ASEAN Countries: The Impact of COVID-19 on Sectoral Shares of GVA in GDP

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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ASEAN Countries: The Impact of COVID-19 on Sectoral Shares of GVA in GDP

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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ASEAN Countries: The Impact of COVID-19 on Sectoral Shares of Employment

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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ASEAN Countries: The Impact of COVID-19 on Sectoral Shares of Employment

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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ASEAN Countries: The Impact of COVID-19 on Sectoral Shares of Employment

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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Thailand and Selected Asian Countries: Advance Signs of Resource Reallocation

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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Thailand and Selected Asian Countries: Advance Signs of Resource Reallocation

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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Thailand and Selected Asian Countries: Advance Signs of Resource Reallocation

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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B. Will Currently-Available Skills Meet the Demands of the Post-Pandemic Economic Structure?

3. High-skilled workers are in great need in the sectors that are expected to expand post-pandemic, while Thailand’s labor market is mainly composed of low- and middle-skill requiring occupations. In 2020, more than 48 percent of the employed in Thailand were service and sales or agricultural workers, and about 22 percent of workers were employed in low skill requiring occupations. Only 15 percent of workers were managers, professionals, and technicians. Women are overrepresented in clerical support occupations, as services and sales workers and professionals, while the share of young people is relatively high in elementary and clerical support occupations, and as plant and machine operators. In the tourism sector, about 75 percent were service and sales workers, and 11 percent low skilled workers. In the agricultural sector that accounts for about 30 percent of total employment, 90 percent of the employed are agricultural, forestry and fishery workers. In contrast, professionals and managers are the key labor force in the high-tech sector, about 50 percent, followed by technicians (28 percent). The financial sector, while mainly composed of technicians (40 percent) and clerks (22 percent), requires a considerable number of professionals and managers (27 percent).

Thailand and Selected Asian Countries: Skill and Occupational Composition of Labor Force

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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Thailand and Selected Asian Countries: Skill and Occupational Composition of Labor Force

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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Thailand and Selected Asian Countries: Skill and Occupational Composition of Labor Force

Citation: IMF Staff Country Reports 2022, 301; 10.5089/9798400221316.002.A002

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C. What Does it Take to Move Across Occupations?

4. Labor mobility across occupations is a function of the transferability of skills between the origin and destination occupations. The labor literature suggests that the likelihood and cost of labor mobility across occupations largely depends on the similarity of the skill sets required by the origin and destination occupations (Shaw, 1984; Violante, 2002; Macaluso, 2017 Zuniga and Yuen, 2020). Following Gathmann and Schonberg (2020), we construct a measure of skill distance between occupation pairs, capturing the degree of skill dissimilarity required by the two occupations. The skill distance between low-skilled occupations and the managers and professionals is quite high about 0.8, indicating skills obtained by these workers do not line up with the skills required by professionals and managers (Table 1)². Similarly, the skill distance between agricultural workers that account for a large share of Thailand’s employment, and managers and professionals, is quite high at about 0.6.

^{Table 1.}

Thailand: Skill Distance Across Occupations

Sources: O*NET OnLine and IMF staff caluclations Note: Skill distance index measures the degree of skill dissimilarity required by two occupations. Skill distance=0 if two occupations require exactly the same skill set and =1 if

^{Table 1.}

Thailand: Skill Distance Across Occupations

Occupations	Managers	Professionals	Technicians and Associate Professionals	Clerical Support Workers	Services And Sales Workers	Agricultural, Forestry and Fishery	Related Trades Workers	Machine Operators and	Elementary Occupations
Managers	0.02
Professionals	0.24	0.24
Professionals	0.34	0.37	0.41
Clerical Support Workers	0.47	0.54	0.49	0.08
Services And Sales Workers	0.49	0.55	0.54	0.26	0.25
Skilled Agricultural, Forestry and Fishery Workers	0.58	0.69	0.59	0.15	0.21	0.00
Craft and Related Trades Workers	0.81	0.68	0.61	0.68	0.63	0.57	0.18
Plant and Machine Operators and Assemblers	0.87	0.80	0.66	0.47	0.46	0.31	0.25	0.10
Elementary Occupations	0.83	0.79	0.67	0.47	0.41	0.29	0.30	0.16	0.11

Sources: O*NET OnLine and IMF staff caluclations Note: Skill distance index measures the degree of skill dissimilarity required by two occupations. Skill distance=0 if two occupations require exactly the same skill set and =1 if

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^{Table 1.}

Thailand: Skill Distance Across Occupations

Occupations	Managers	Professionals	Technicians and Associate Professionals	Clerical Support Workers	Services And Sales Workers	Agricultural, Forestry and Fishery	Related Trades Workers	Machine Operators and	Elementary Occupations
Managers	0.02
Professionals	0.24	0.24
Professionals	0.34	0.37	0.41
Clerical Support Workers	0.47	0.54	0.49	0.08
Services And Sales Workers	0.49	0.55	0.54	0.26	0.25
Skilled Agricultural, Forestry and Fishery Workers	0.58	0.69	0.59	0.15	0.21	0.00
Craft and Related Trades Workers	0.81	0.68	0.61	0.68	0.63	0.57	0.18
Plant and Machine Operators and Assemblers	0.87	0.80	0.66	0.47	0.46	0.31	0.25	0.10
Elementary Occupations	0.83	0.79	0.67	0.47	0.41	0.29	0.30	0.16	0.11

Sources: O*NET OnLine and IMF staff caluclations Note: Skill distance index measures the degree of skill dissimilarity required by two occupations. Skill distance=0 if two occupations require exactly the same skill set and =1 if

5. Bridging the skill distance is costly. On average, the mobility cost to move to high-skill occupations from mid-to low skilled occupations is prohibitively high. For example, the cost of moving from services and sales occupation to technician is about 80 percent of Thailand’s average annual wage, while to manager it is 150 percent. On the other side, mobility cost between low skilled workers is not that high. For example, the cost of moving from agriculture to services is only 20 percent. (Table 2). Cross-occupation labor mobility costs largely depend on the skill distance between the sourcing and destination occupations, the worker’s initial skill levels, and the destination occupation’s entry cost. Naturally, it is more costly for the low-and-middle skilled workers to move to high-skilled-requiring occupations than the other way around.

^{Table 2.}

Thailand: Mobility Costs Across Occupations

(In percent of annual wage)

Source: IMF staff caluclations.

^{Table 2.}

Thailand: Mobility Costs Across Occupations

(In percent of annual wage)

Occupations (move to)	Managers	Professionals	Technicians and Associate Professionals	Clerical Support Workers	Services And Sales Workers	Plant and Machine Operators and Assemblers	Skilled Agricultural, Forestry and Fishery Workers	Elementary Occupations
Occupations (move from)
Managers	7
Professionals	47	65
Technicians and Associate Professionals	90	110	67
Clerical Support Workers	161	193	70	11
Services And Sales Workers	151	175	82	54	39
Plant and Machine Operators and Assemblers	281	276	105	92	62	11
Skilled Agricultural, Forestry and Fishery Workers	189	229	97	43	21	55	1
Elementary Occupations	268	273	106	92	57	12	12	10

Source: IMF staff caluclations.

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^{Table 2.}

Thailand: Mobility Costs Across Occupations

(In percent of annual wage)

Occupations (move to)	Managers	Professionals	Technicians and Associate Professionals	Clerical Support Workers	Services And Sales Workers	Plant and Machine Operators and Assemblers	Skilled Agricultural, Forestry and Fishery Workers	Elementary Occupations
Occupations (move from)
Managers	7
Professionals	47	65
Technicians and Associate Professionals	90	110	67
Clerical Support Workers	161	193	70	11
Services And Sales Workers	151	175	82	54	39
Plant and Machine Operators and Assemblers	281	276	105	92	62	11
Skilled Agricultural, Forestry and Fishery Workers	189	229	97	43	21	55	1
Elementary Occupations	268	273	106	92	57	12	12	10

Source: IMF staff caluclations.

6. The skill upgrade needed to achieve occupational mobility also takes time. Occupational training provides the chance for low-and-median skilled workers to update the existing skills and develop new professional competencies. However, this takes time. For example, for a service and sales worker to upgrade skills to move to a technician occupation takes on average 15 months, but to move to manager or professional it takes 26-33 months on average. For an agricultural worker, it will take more than 50 months to upgrade skills required for professionals. (Table 3).

^{Table 3.}

Thailand: Mobility Costs Across Occupations

(In months of additional training)

Source: IMF staff caluclations.

^{Table 3.}

Thailand: Mobility Costs Across Occupations

(In months of additional training)

Occupations (move to)	Managers	Professionals	Technicians and Associate Professionals	Clerical Support Workers	Services And Sales Workers	Plant and Machine Operators and Assemblers	Skilled Agricultural, Forestry and Fishery Workers	Elementary Occupations
Occupations (move from)
Managers	0.9
Professionals	5.4	9.8
Technicians and Associate Professionals	8.4	13.9	5.3
Clerical Support Workers	12.3	3.7	5.5	2.5
Services And Sales Workers	26.1	33.4	14.8	19.1	1.7
Plant and Machine Operators and Assemblers	34.4	40.9	16.4	26.4	2.2	0.6
Skilled Agricultural, Forestry and Fishery Workers	45.9	55.8	32.6	24.4	7.5	12.8	0.4
Elementary Occupations	29.9	36.9	13.1	23.7	2.1	0.7	3.4	1.4

Source: IMF staff caluclations.

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^{Table 3.}

Thailand: Mobility Costs Across Occupations

(In months of additional training)

Occupations (move to)	Managers	Professionals	Technicians and Associate Professionals	Clerical Support Workers	Services And Sales Workers	Plant and Machine Operators and Assemblers	Skilled Agricultural, Forestry and Fishery Workers	Elementary Occupations
Occupations (move from)
Managers	0.9
Professionals	5.4	9.8
Technicians and Associate Professionals	8.4	13.9	5.3
Clerical Support Workers	12.3	3.7	5.5	2.5
Services And Sales Workers	26.1	33.4	14.8	19.1	1.7
Plant and Machine Operators and Assemblers	34.4	40.9	16.4	26.4	2.2	0.6
Skilled Agricultural, Forestry and Fishery Workers	45.9	55.8	32.6	24.4	7.5	12.8	0.4
Elementary Occupations	29.9	36.9	13.1	23.7	2.1	0.7	3.4	1.4

Source: IMF staff caluclations.

D. How Can Policies Facilitate the Sectoral Reallocation of Labor?

7. Investments in education will help to bridge the gap in occupational composition and facilitate the needed cross-occupation mobility. Scaling-up in public spending on education for outcome-orientated occupational and on-the-job training will be needed to achieve skill upgrading. In this regard, the recent decision by the government to provide about 70,000 new graduates and unemployed with on-the-job training in the bio-circular and green (BCG) sector is timely. Increasing the attractiveness of training programs targeted to older people would mitigate the job losses among the elderly due to automation and digitalization (World Bank, 2021).³ Cooperation with employers will be critical for the success of these efforts. Achieving greater synergies between higher education and future skill needs and strengthening science-business linkages would also be important.

8. Talent attraction should complement skill upgrading, as nurturing talent often takes time. Recruitment of high-skilled non-resident workers can help close the skill gap. The synergy between the high-skilled non-resident workers and local workers can facilitate knowledge spillovers. Thus, streamlining the administrative barriers for hiring high-skilled non-resident workers will help Thailand better compete for external talents. The government acknowledges the need to attract high-skilled workers and recently launched a new long-term residence visa system for skilled professionals.

9. Leverage opportunities offered by the digital transformation. Thailand could leverage opportunities offered by the digital transformation to access the large pool of skilled labor abroad and offshore some economic activities.