Impediments to income mobility in Thailand

Education and capital are the major impediments to income mobility in Thailand and some regions such as the northeast face significant barriers. Economist Sethaput Suthiwart-Narueput uses research findings to explain why this is the case.

Click button to listen to Climbing Income Ladder and rightclick to download

This is the second part of a long article. Read the first part here and the whole article here.

Climbing the income ladder in Thailand [Part II] by Sethaput Suthiwart-Narueput

Children in school
The really big boost to Khun Sompong's income [Khun Sompong is a representative or "hypothetical" farmer in the Northeast, see part I] would be to work as a professional. The average household income for a professional worker in Bangkok is well over twice that of a factory or service worker, and over 9 times that of a farmer in the Northeast.

But such work typically requires a college degree, and only 16% of the Thai labour force possesses one.

At the very top of the income ladder is the Bangkok entrepreneur, who earns about 25% more than our professional. But becoming an entrepreneur requires not only myriad skills and business acumen, but also access to financing, which remains problematic for many, especially upcountry. Bangkok accounts for only 10% of the population but 74% of total loans.

The above highlights where the obstacles to upward income mobility for our hypothetical farmer lie. Labour mobility is high in Thailand. There are few obstacles to moving from rural to urban areas or from one region to another.

The first few small steps up the income ladder are therefore readily available. But subsequent steps up the ladder require skills, education, or access to capital.

Furthermore, as expenses are also higher, the initial increases in income do not always result in a much better standard of living.

While the data do indicate that household savings increase slightly as we move up the income ladder, it is also striking how little they increase until we reach professional workers.

It may be too late for Khun Sompong to reach the upper parts of the income ladder as he may not have the requisite education.

But if he can send his kids to school, then perhaps at least his kids can get there. But the data indicate that for many, household savings are not enough to finance education for their children. For example, the average self-employed household in the Northeast earns about 58,000 baht annually, but has 46,000 baht in expenses before any education spending. The resulting 12,000 in savings before education expenses, is inadequate for even upper vocational education fees (15,000 baht), much less university (35,000 baht).

Without education, it is difficult to move up to the higher rungs of the income ladder. Younger people (aged 25-30) with a tertiary (upper vocational or university) education earn twice as much as those with only a primary education. As they age, this difference increases even more sharply. By the time people get closer to retirement (aged 50-55), this multiple increases to over five times.

Without education, it is hard to see the income gap between different groups closing in any meaningful way.

In 1990, Bangkok entrepreneurs earned over 2 times and 10 times what Bangkok factory workers and Northeast farmers did, respectively. By 2007, these multiples had increased to over 3 times and 12 times, respectively.

For the good of all, much more needs to be done to provide people with real opportunities to move up the income ladder. This will help put things on a more solid footing. Just think of an actual ladder. If the ladder is on unsettled or unstable ground, it is not good for anyone on the ladder, but it is particularly unpleasant for those who are higher up on it.

Sethaput Suthiwart-Narueput is with the SCB Economic Intelligence Center (EIC). The views expressed here are his own and not necessarily those of SCB or its affiliates. Email
sethaput.suthiwartnarueput@scb.co.th

(Source: Bangkok Post, Climbing the income ladder in Thailand, 15/09/2010, link

income - money that people receive from work or some other source, used for household consumption and savings รายได้
climbing the income ladder - when a person increases their earnings during their life (hopefully providing a better future for their children through education and family business)
obstacles - problems that prevent goals from being achieved, things that makes it difficult to go somewhere or do something อุปสรรค
impediment - same as "obstacle"
mobility - when people can move and travel easy from place to place
upward income mobility - when people have opportunities to increase their income over their life
boost - to increase; to strengthen เพิ่ม; ทำให้มีกำลังมากขึ้น
household - a group of people, often a family, who live together ครัวเรือน
typically - usually; normally อย่างเป็นแบบฉบับ
labour force - all the people who are working or looking for work in a country
entrepreneur - someone who starts their own business, especially when this involves risks นักลงทุนทางการเงิน
myriad - a very large number, almost too many to count
skills - a type of work or task requiring special training and knowledge ทักษะ ความสามารถเฉพาะทาง
acumen - ability to understand a situation quickly and make good decisions based on this 
access - the ability to get something สิทธิหรือโอกาสในการใช้
finance - to provide money for something จัดหาเงินทุนให้
problematic - causing or involving problems ก่อปัญหา
remains problematic - there are still problems
upcountry - outside of Bangkok to the north and northeast
population - all the people living in a country or a region (See Wikipedia)
highlights - shows
labour mobility - when people have opportunities to move to new jobs 
hypothetical - based on possible situations or events, not actual ones
rural - connected with the countryside outside big towns and cities ในชนบท, บ้านนอก
urban - in a city or town ในเมือง
subsequent - happening afterwards
capital - money invested in a business (See glossary)
initial - early; first, happening at the beginning of a process ในเบื้องต้น
standard of living - the kind of life a person has depending on their income (See Wikipedia)
data - facts or information used for making calculations or decisions ข้อมูล
striking - very noticeable เด่นชัด
professional - work that needs special skills, training, tests, certificates and qualifications
requisite - necessary for some purpose, necessary to achieve some goal
indicate - show
self-employed - does not work for a company (income may come from running a small business or farming)
annually - happening every year ทุกๆปีด
inadequate - not enough, or not good enough for a particular purpose อย่างไม่เพียงพอ
vocational - teaching the skills necessary for particular jobs การสอนวิชาชีพ
fees - money that you pay to be allowed to do something ค่าธรรมเนียม
rungs - the many steps on a ladder
primary - first and most important
primary education - the first stage of required education, typically starting around 5 to 6 years old (See Wikipedia)
age - grow older
retirement - when a person stops working around age 60 after many years of work การเกษียรอายุ
gap - a large difference between people or groups ช่องว่าง
meaningful - serious, useful, and important มีความหมาย สลักสำคัญ
income gap - big differences in income
entrepreneurs - business people เจ้าของกิจการ
multiples- when something is 1, 2, 3, .... etc times larger than something else (1X, 2X, 3X...) (example: 40 is ten times larger than 4)
provide - to give someone something that they want or need
opportunities - situations in which it is possible to do what you want or need to do
put things on a more solid footing - create a good foundation or base (for what you are doing)
foundation - the most basic part of a system from which the rest develops, the firm bottom part of a building that supports the rest of the building พื้นฐาน
actual - real; existing in fact จริง
unsettled - changing; not stable ไม่สงบ, ไม่มั่นคง
unstable - not firm and not likely to support something well ที่ไม่แน่น ที่ไม่แข็งแรง
affiliates - companies connected with in some way with a larger company

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer