Wage compensation differentials for job risk between formal and informal workers

Abstract

This research estimates compensating wage differentials for job risks for formal and informal workers in Thailand, the latter of whom are not covered by prevailing labor laws. Using data from the National Statistical Office’s Thai Labor Force Survey for years 2012 to 2018 merged with job fatality risk collected by the Social Security Office, the results show that the fatality risk rate has a positive, significant effect on wages. The value of statistical life for the median formal workers is 79.33 million baht compared to 41.5 million baht for the median informal worker. Also, we analyze the relationship between self-reported unsafe work conditions in the Labor Force Survey with wages. The results showed that the coefficient on safety issues for formal workers is positive, while the coefficient for informal workers is negative for both OLS and quantile regression in all wage distribution. All the results show that there is inequality in access to labor protection and the ability to negotiate with employers. This results in the compensation wage differentials for formal and informal workers.