Contractors claim wage costs, labour shortage could hurt economy

The wage increase not only contributed to the labour shortage, but also affected those projects bid on before the hike, Aungsurus Areekul, president of the association, which is under His Majesty the King’s patronage, said yesterday.

He thinks the labour shortage will grow severer especially with the government’s Bt2-trillion infrastructure mega-project, which is in the pipeline. If the government fails to come up with measures promptly to resolve this problem, the economic damage could run in the trillions, he told a seminar organised by the association to raise awareness of this "crisis in the making" as well as opportunities.

The association will seek preliminary urgent assistance from the government by submitting a proposal to Prime Minister Yingluck Shinawatra consisting of five points:

Temporarily lower the escalation factor from 4 per cent to 2 per cent to help boost working capital during the adjustment period to upgrade labour skills. The escalation cost is the change in the cost/price of specific goods/services over a period.

Allow the free relocation of migrant workers to various pending project sites nationwide.

Extend state construction contracts nationwide to 180 days, as the labour shortage makes it difficult for construction companies to meet contract deadlines.

Use a fixed rate of 0.01 per cent per day for fines on past-deadline state jobs to lessen the impact of the labour shortage on construction companies that may fail to complete projects on time.

Allow contractors to guarantee their own job performance after six months of work instead of using bank guarantees in order to reduce unnecessary expenses, such as bank fees, which would help improve liquidity.

This proposal should be applied to all state contracts awarded from April 1, 2012, to April 22 this year.

In the past year, the value of the construction business grew 17.3 per cent to Bt927.94 billion and employed 2.8 million workers, of whom 200,000 were foreigners. Labour accounted for 25 per cent of total construction costs.

This year, the industry is expected to expand 8.5 per cent, raising investments to Bt990 billion.

The government meant well with the wage increase – to raise the quality of life for blue-collar workers – but it may have overlooked a side effect, Aungsurus said. Improving incomes nationwide drove workers out of the construction industry and into other, "more comfortable" jobs, such as at factories.

More foreign workers had to be hired as replacements at the same wage as Thai workers. However, their work and communication skills are lacking. The cost of construction materials was also driven up as manufacturers incurred higher labour expenses, he added.