Government takes a gamble to keep labour on side

The anxiety on the part of business owners over the imminent increase in the minimum wage is adding an extra dimension to the problem of rising living costs. The worrying inflation situation, which resulted in a public outcry over rising food prices, prompted Prime Minister Yingluck Shinawatra to call an urgent meeting with her economic big guns on Friday. Virtually no measures were announced after the meeting, and it seems that the controversial plan to increase the daily minimum wage to Bt300 will go ahead as planned.

According to senior officials coming out of the urgent meeting, Thailand’s inflation, which has been slightly higher than in the same period last year, was due to oil prices and last year’s flood crisis. But the situation had stabilised, and the cost of living should get back to normal soon, they said.

Perhaps the most significant thing from the meeting was that the government would go ahead with the minimum wage plan, which was a big part of its election promises. The logic used to back up the plan remains familiar – when grass-roots people have more money in their pockets, they will spend more, and that can only be good for the economy. The complications caused by the flood disaster, which sent many businesses reeling, cannot overcome the government’s determination to implement this contentious election vow.

On Thursday, more than 40 businesses sent representatives to the Administrative Court in a last-ditch effort to block the minimum wage plan. In their petition, which could affect a few million workers, the entrepreneurs said they could not afford the rise, particularly after business losses incurred during and after last year’s flood. There were also warnings that investors might relocate their operations out of Thailand to countries where labour is cheaper.

The onus is on the Administrative Court, which has a few days before the minimum wage plan goes into effect in selected parts of the country. The government has the labour movement on its side, although the latter has made it clear that workers will turn hostile toward the Yingluck administration if the wage promise falls through.

The minimum wage is always an issue that gets entangled with national politics. The game has changed, though, as the tripartite Central Wage Committee has been realigned by the government’s need to fulfil its election promise. In the past, the government often sided with employers when the labour side made demands to increase wages. Showdowns, which usually featured vociferous labour protests, always ended with a compromise, in which wage figures proposed by labour federations were cut down to levels found acceptable by business operators.

Today, with a Bt300 minimum wage being the platform of Pheu Thai Party’s election campaign, the issue is more politicised than ever before. Since Parliament is virtually helpless, business operators, who have lost leverage in the wage committee, are pinning their last hope on the Administrative Court. The judges face an unenviable task of weighing the opportunity to lift the income of poor people and the possible economic consequences of doing so.

Modern-day Thais have had glimpses of what it will be like when inflation bites. Real tests may come after April 1 when various businesses face a considerable rise in production costs. If the government’s confidence expressed after the urgent meeting on Friday proves to be based on sound analysis, then Thailand may be able to withstand the initial shocks of the daily wage hike. If the government was wrong, and the current rise in the cost of living is here to stay and is more complicated than flood-induced hiccups, then the Bt300 minimum wage will play a very big role in where the Thai economy will head this year.