SMEs split on wage increase
Nearly half of the small and medium-sized enterprises in seven provinces do not agree with the government's Bt300 minimum-wage measure, out of concern that it will add to their business costs.
A survey conducted by Dhurakij Pundit University Research Centre (DPURC) reveals that two-thirds of SMEs are, however, ready for the new minimum wage.
About 51.1 per cent of the SMEs surveyed prefer the government to assist by way of wage subsidy rather than through a tax cut, while 40 per cent said they would increase their prices after the minimum-wage hike.
The DPURC conducted a survey of 512 SMEs across seven provinces – Bangkok, Nonthaburi, Pathum Thani, Samut Prakan, Samut Sakhon, Nakhon Pathom and Phuket – on issues related to the Bt300 minimum-wage scheme, which will come into effect on April 1. The survey was carried out from January 16-25.
Respondents were asked about the following: wages paid; wages as a proportion of total costs; perceptions on the new minimum wage; readiness to comply; perceptions on whether the new corporate income tax cut is sufficient; the most desirable mitigation measure; and short- and long-run adjustments.
There are about 880,000 SMEs in the seven surveyed provinces, with total employment of more |than 1 million workers in the area covered.
Some 54.5 per cent of the respondents pay their workers less than Bt300 per day, while 11.2 per cent of them pay Bt300 and 34.3 per cent pay more than Bt300.
The survey found that in the manufacturing sector, wages account for about 37.4 per cent of business costs for SMEs, while the figure is 42.1 per cent in the wholesale and retail sector, and 49.2 per cent in the service sector.
"Our survey found that about 53.4 per cent of the respondents agree with the new minimum wage, while 46.6 per cent of them do not. When asked about their readiness to comply, 66.3 per cent say they are ready to comply with the new minimum wage scheme, while 33.7 per cent are not," said DPURC director Kiatanantha Lounkaew.
He said about 52.1 per cent of those respondents not ready to comply reason that their businesses have not yet fully recovered from the recent flooding, while 28.4 per cent expect their business costs will be higher this year, and 15.5 per cent are not confident in the overall economic situation this year and the ability of the government to manage any repetition of the flood situation.
"Individual consumers want to keep their cash so they can better cope with any recurrence of the floods. This causes a huge decline of purchasing power in the market," Kiatanantha said.
As to the government’s measure to reduce corporate income tax from 30 per cent to 23 per cent, which is applicable to SMEs with an annual profit exceeding Bt1 million, about 49.3 per cent of the respondents believe the tax cut is sufficient to compensate for the added cost inherent in the minimum-wage hike.
However, 50.5 per cent of them consider it to be insufficient. They suggest the appropriate level of income tax charged to SMEs should be between 15 and 20 per cent.
When asked about the most desirable mitigation measures, about 51.1 per cent of the SMEs want government support in terms of a wage subsidy, while 20.7 per cent prefer a tax cut. About 17.2 per cent of the respondents also want government support with staff training and certification, and 10.4 per cent ask for a reduction in social-security contributions by employees.
As to short-run adjustments, about 58.2 per cent of the survey respondents said they would monitor workers more closely to increase productivity, while 35.3 per cent |will be more selective in their |hiring.
About 25.4 per cent will reduce overtime work and pay, while 15.3 per cent will outsource work. Only 2.1 per cent of respondents will either close down the business or change to other activities.
For long-run adjustments, about 45.3 per cent will substitute machinery for labour, while 30.7 per cent will reduce the number of staff.
About 19.5 per cent will restructure their business to be more efficient, and 4.5 per cent will either close down their business or move to neighbouring countries where wages are lower.
"In my point of view, the Bt300 minimum-wage scheme will lead to wage compression in the labour market and high-wage earners will be significantly affected. In the end, the country’s economic growth will be minimised," Kiatanantha said.
He added that the implementation of Asean Economic Community in 2015 would cause a huge inflow of labour with better English skills from neighbouring countries, which would lead to severe unemployment among the Thai workforce.
