Small firms will struggle with wage hike: TDRI
While the rise in the minimum daily wage to Bt300 is good news for low-income labourers, sudden implementation of this could leave small and medium-sized enterprises unable to pay their workers, the Thailand Development Research Institute (TDRI) warned ye
TDRI researcher Dilaka Lathapipat said the wage hike could help cut income inequality, and boost workers' quality of life. But the measure threatened to have a serious negative impact on SMEs that weren't ready to pay their workers more, he said.
The minimum wage policy took effect in 7 provinces on April 1.
In his statement, Dilaka said that SMEs, or those which employ 10-99 workers, would be hit severely. Some could shut down buisness.
TDRI supported the wage hike. It research covering average wages during 1996-2010 shows that the inflation-adjusted wage had declined substantially after the financial crisis in 1997.
"Raising the minimum wage is a good policy. However, a sudden increase without supporting measures could send worse-than-expected impacts particularly to young workers (aged below 25) who possess low skills. They could lose jobs or being pushed to unofficial sectors, which pay the below-minimum wage and offer no welfare benefits," he said.
TDRI's wage model shows that every 1 per cent increase in wage would raise the actual wage of workers in non-agricultural sectors by 0.87 per cent.
However, Dilaka noted that the benefits would fall only to those who are able to hold their jobs. It is necessary to take into account the unemployment as well as job mobility.
His research focused on low-skill workers, with high school or below-high school education level. It shows that SMEs, which employ few workers, then to lay off the workers and they could be forced to serve household business without any pay or serve small agricultural business of which pay structure is unclear.
The research shows that as the minimum wage is raised by 40 per cent, the ratio of workers aged 15-24 would drop from 81 per cent of total workforce to 70 per cent. Half of the affected would be unemployed and the rest would be forced out of the labour market.
"This populist policy seems to be fair to workers, but a sudden increase could backfire particularly to weak SMEs. There must be measures to help them enhance productivity, to avoid lay-offs. All issues must be taken into account or this may turn to an honest blow to workers," Dilaka said.
