Vertical and horizontal mismatches in Thailand and the wage penalty

The Thai labor market experiences increasing challenges due to disruptive technologies and demographic shifts. Furthermore, the COVID-19 pandemic outbreak has had a disruptive impact on Thailand's labor market, resulting in a loss of income and a reduction in working hours for workers. These effects are considered to be a cyclical factor of skill mismatch. This study aims to examine the incidence of vertical and horizontal mismatches and their impact on wages in Thailand before and during the COVID-19 pandemic by ordinary least squares, quantile regression, pooled ordinary least squares, and counterfactual decomposition, using data from the third quarter of 2018 to 2021 from Thailand's National Labor Force Survey. The findings suggest that the incidence of matched and overeducated workers continues to increase during the COVID-19 epidemic in comparison to the two previous years. While the proportion of undereducated workers remarkably decreases during the same period. Regarding horizontal mismatch, there is a marginal increase in field-of-study mismatch. Additionally, overeducated workers earn wage premiums, whereas undereducated and horizontally mismatched workers face wage penalties. The result also indicated that the COVID-19 pandemic has significant negative effects on overeducated workers.