Formal and Informal Employment: An Analysis of Spatial Inequality and Policy Proposals for Employment

Abstract

This study aims to analyze the dynamics of Thailand’s labor market in terms of formal and informal employment, as well as spatial inequality at the provincial level. The study employs panel data at the provincial level obtained from the National Statistical Office, covering the period 2014–2024 (B.E. 2557–2567), and applies a Random-effects econometric model under the framework of the Dual Labor Market theory to examine the relationships between economic growth (GPP), production structure, and employment patterns. The findings provide clear empirical evidence of the existence of a dual labor market in Thailand. Formal employment is positively associated with economic growth and tends to be concentrated in major economic centers, whereas informal employment remains closely linked to the agricultural sector and is more prevalent in less developed regions, particularly the Northeast. Moreover, economic growth has a positive effect on both types of employment, reflecting a “growth paradox,” in which economic expansion does not necessarily lead to a widespread increase in quality employment. From a structural perspective, Thailand’s labor market is undergoing significant transformation, including the transition to an aging workforce and the expansion of the gig economy in the post-COVID-19 era. While these changes increase labor market flexibility, they also heighten labor vulnerability, especially among informal workers. These findings lead to key policy implications: (1) the adoption of place-based labor policies to reduce regional disparities; (2) the promotion of transitions from informal to formal employment through institutional mechanisms and economic incentives; and (3) the development of proactive employment programs, such as workfare schemes, to mitigate short-term labor market fluctuations. Importantly, labor policies should shift their focus from merely achieving “full employment” to ensuring “decent work” in order to enhance workers’ quality of life and support sustainable economic development in the long term.