Minimum wage hike was too hastily promised
The rise in wages has not boosted the economy as the govt hoped; now it will have to face wider repercussions as the policy is applied nationwide
The government is wrong in hoping that the minimum wage rise will inflate the economy. The latest research by the Thai Chamber of Commerce shows that the wage rise, applied two months ago in seven provinces, has done little to boost the gross domestic product (GDP), as the government had hoped.
The government’s plan was to use the minimum wage to drive the economy, but the actual GDP has risen by only 0.5 per cent. This is bad news. While the GDP figure did not rise as expected, labourers feared losing their jobs because employers might switch to using machinery to offset increased labour costs. Industries have complained that the wage rise affects the cost of production while productivity has not improved. Saha Group, for instance, has seen the costs of its companies rise by Bt1.5 billion per year because of the wage rise.
The Chamber of Commerce conducted the survey in the seven provinces that applied the minimum wage hike in April. Even in those provinces where the old minimum wage was closer to the new level, 13.25 per cent of the firms had reduced their workforce to cut costs that increased mainly due to the wage hike.
The big challenge will come when the new wage is applied nationwide, starting on January 1. The average wage upcountry is currently between Bt222 and Bt275. The new wage of Bt300 is therefore a big jump for many small employers.
The survey also showed that labourers have not enjoyed being able to spend extra money as a result of the higher wage. In fact, many felt negatively about future job prospects. Indeed, the wage rise has not resulted in higher economic growth because many labourers prefer to save their money for an uncertain future.
Labourers who depend on the minimum wage tend to be low-skilled workers who can often be replaced by machinery. The minimum wage hike was a popular issue during the election campaign last year, especially when politicians outdid their competitors by promising higher wages. But in reality these politicians need to consider other factors to ensure that the wage policy does not have more negative consequences than positive.
The Chamber of Commerce has shown, for instance, that the wage rise hurts small and medium-sized enterprises at a time when they should be strengthened. The big corporations, meanwhile, benefit from a corporate income-tax reduction.
Secondly, a rise in labour cost does not always result in increased productivity. Workers need to be trained to multi-task in order to raise their capacity in line with the increase in wages.
The government should have taken these factors into consideration before promising that the Bt300 minimum wage would be applied nationwide. It now has to go ahead with the wage hike to honour its election promise or be punished by the voters next time. Perhaps more importantly, the government now has to consider ways to prepare workers and private firms for the nationwide wage hike, which is only months away.
Training must be enhanced to improve the value of the workforce. Otherwise, corporations will readily switch to machinery, which is often cheaper than manpower. Technology and innovations should be promoted to create a competitive edge for Thai industries in the longer term. The country will not enjoy sustainable growth if it cannot move away from its current labour-intensive production base.
