A job seeking theory with labor market analysis tools won 2010’s Economics Nobel Prize for Professors Peter Diamond, Dale Montensen and Christopher Pizaridez, answering useful questions for unemployment policy formulation regarding high unemployment rates in the midst of major recruitment searches, and examining economic policy effects on the unemployed.
Their core principle sees employers use job matching processes in order to hire, but where job seekers have dissatisfactory qualifications for employers or wage disagreements, they must continuously repeat this process, resulting in no employment, high work search costs and prolonged waiting despite many job vacancies and many unemployed workers. However, the market mechanism view of classical economists believes that “buyers and sellers can engage in immediate trade matches at no cost where complete information is available regarding goods and services price. Additionally, resource-usage will be most effective when the market mechanism determines the price in an environment of no excess demand or remaining supply.
These Nobel-winning economists apply their theory to the Decision Making Process (DMP) model, forming popular tools to analyze unemployment and its impacts, wage levels and job vacancies. As applying this theory could be beneficial to national labor policies and others in Thailand, I therefore make my policy recommendation, as follows:
Signal a standard for products and services
Where labor market information remains imperfect, many problems exist for Thailand, as employers demand labor, but find no workers due to overall labor quality being unmatched to labor requirements. Sometimes, information on employers and job seekers does not even exist, or is inadequate.
I therefore propose that the Government set standards for workers’ skills across various professions, establishing an Institute to test and certify standard skills, including skills used in development training courses, providing private sector skill-training support for certification by reliable well-known Institutes where names, work-skill levels and contact information is databased. Employers can then search this database, and know each worker’s skills. Thus labor supply costs decrease and the job seeking period wanes, while workers’ skill levels rise.
Develop labor market analysis tools
Current labor policies result from negotiations by the Tripartite Central Wage Committee. Although minimum wage guidelines state that various committees consider issues from a variety of related factors, necessary analytical tools lack, and scientific answers fail to provide appropriate wage determination and impacts at different levels. Changes to social security benefits are another issue.
I propose that the Ministry of Labor must develop appropriate tools to analyze the labor market, and especially to formulate economic models that can analyze the impacts from labor policies and other policies. (See my website comments, December 11, 2005, "How to set the minimum wage for the most benefit.")
Finally, my proposal regarding the Theory of Job Seeking applies knowledge to resolve problems and develop the country. It seems a loss if we learn that such knowledge exists in the world, but we cannot apply it as a real concept in our own country.
Article published in “Daily News Online,” Friday 15th October 2010; Article Column: “Concepts of Dr Dan”.
Dr Kriengsak Chareonwongsak
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com
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