2016 Oct 21
October 21, 2016

Thailand: Minimum wage pains

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After months of deliberation, the Central Wage Committee has agreed to increase the daily minimum wage in 69 of Thailand’s 77 provinces next year.

Daily minimum wage hikes of five, eight and 10 baht for three respective groups may be small, a 1.7% increment over a four-year period, but will continue to undermine Thailand’s regional competitiveness in the low-cost manufacturing hub of Asean.

These are the first increments in four years, following the major overhaul in 2013 which lifted the daily minimum wage significantly to 300 baht. The business community then criticised the move while labour unions praised it as a necessary step to bridge income disparity.

The new minimum wages are based on 10 factors, including gross domestic product growth, inflation and cost of living.

The 1.7% raise is slightly higher than the current inflation rate of 1.5%, and comes amid a sharp decline in oil prices, which has lowered the cost of goods and services.

The pay hikes this time round come as the country’s economy tries its best to stay afloat and as exports, a key driver of economic growth of this country, continue to fall.

The business community this time sees the rise as sensible. But they still caution that small and medium-sized enterprises (SMEs) could feel the pinch of higher wages, even though the impact is unlikely to be severe.

The decision will continue to undermine the country’s competitiveness and affect SMEs in labour-intensive industries such as agriculture, tourism and manufacturing.

The increments may not look very promising to labour unions, but for a country attempting to transition from low-level industries to higher ones, the wage hikes could affect the business community, which has been reeling from subdued global economic conditions.

The country’s labour unions, which had called for wage rises of up to 60 baht a day, should try to understand that the global economy has not been as conducive to keeping our economy booming as it had been in the past.

Unions’ demands, if met, would strangle the fragile manufacturing sector and could kill it off entirely as it struggles to survive in this bleak economic climate.

To deal with the country’s dim economic prospects and fading regional competitiveness, labour unions as well as employers and the government should shift their attention to skills-intensive industries and look at efforts to boost workers’ skills so they can capitalise on the growing need for a more sophisticated workforce.

The Asian Development Bank’s report last year pointed out that the Asean Economic Community will result in demand for skilled workers to serve expanding skill-intensive industries.

In the report, Thailand came third in a ranking of the region’s highest-skilled work forces between 2000-2012, behind Singapore and Malaysia.

It says future demand for diverse skills in Cambodia, Indonesia, Laos, Thailand and Vietnam will grow by over 40% by 2025 and that one-half of those gains will be in Indonesia.

Minimum wage increments help bridge income disparity gaps. But Thailand needs to focus more on moving up the skills ladder.

In this way, workers will not have to just wait for new rises in daily minimum wages but capitalise on being paid more as demand for skilled people moves in parallel with evolving manufacturing industries.

Improving skills can equip Thailand’s labour sector with more technologically-savvy and sophisticated workers so that the country does not risk a further loss of competitiveness amid a fast-changing region. Editorial, 21 October 2016

Source: http://www.bangkokpost.com/opinion/opinion/1115545/minimum-wage-pains