Pheu Thai Victory & The Minimum Wage

[MHM]

A Pheu Thai pledge is to raise the minimum wage 30% to 300 baht a day, or 9300 baht a month. This is going to have major implications for small and medium business as their payroll will grow dramatically. Staff are likely to be laid off and unemployment will rise, while the increases will drive inflationary pressures in the economy.

How are small business owners planning and preparing for this? As a small business owner myself I simply cannot see how I can keep all current staff on the new pay rate, and they are staff I need and do not want to release. I need a minimum of 4 for the work permit, OK, but what of the others? Will staff incur income tax on 9300 a month? I find it very hard to see how to get around these changes and keep an effective and efficient business.

[Soutpeel]

I wouldnt worry too much.....do you really think this is going to happen.....populist election promises only, like the I-pads, building a dam around BKK, (then again might happen, big possibilities for little brown envelopes.... ) THB 15,000/m starting salaries for graduates etc etc

As we know on a worldwide scale politicans are bare faced liars

[livinthailandos]

Im in a similiar position as you. but before I post much I tell you what i've heard from what others have said which is

1. all politicians around the world promise many things during their campaign speeches just to get elected

2. Actually executing those plans and promises is a very different issue

I think before anything else can be really said have to see what the actual details are and if there are any loop holes. Also we don't even know if the minimum wage will be passed or not. Don't even know if they'll still be in power to make it happen. I know right now their in power but as past events have shown nothing is sure in thailand.

If at any case or point minimum wage is raised you need to either adapt and change maybe do more with less staff. personally what thailand needs to do, is wage hikes over time but only with real government stability.

[Rosco911]

Our company is in the same situation.

Its fine to say raise the minimum wage, we all want more money but in a lot of companies this would not cause redundancies but closures.

The problems we experience in our line of manufacturing is the skilled and semi skilled are very often of poor standard in relation to other Asian and western countries meaning more staff to do the same job.

The money would be far better of spent on training workers that would benifit Thailand and it's investors in the long term.

Simply raising salaries for people with little or no skills is not the answer to encourage manufacturing companies to stay or invest in Thailand.

I believe as everyone does that the promise of more money was only used to gain votes.

I sincerely hope it was or there will be very troubled times ahead.

[midas]

Our company is in the same situation.

Its fine to say raise the minimum wage, we all want more money but in a lot of companies this would not cause redundancies but closures.

The problems we experience in our line of manufacturing is the skilled and semi skilled are very often of poor standard in relation to other Asian and western countries meaning more staff to do the same job.

The money would be far better of spent on training workers that would benifit Thailand and it's investors in the long term.

Simply raising salaries for people with little or no skills is not the answer to encourage manufacturing companies to stay or invest in Thailand.

I believe as everyone does that the promise of more money was only used to gain votes.

I sincerely hope it was or there will be very troubled times ahead.

I disagree because wage increases are already happening in China and India so somehow I can't see Thailand falling behind. And so coupled with increases in food prices in Thailand IMO such wage increases here are inevitable.

http://www.dailymotion.com/video/x4k2cy_too-late-for-outsourcing_news

[CWMcMurray]

minimum wage increase are inevitable and happen in all countries...

I m sure there will be min wage hikes, but it is not likely to be a 30% immediate hike...

What is more likely is maybe around 5-10% immediate hike and then a planned phasing in of scheduled min wage hikes over the next 10 yrs...

This way they can give a little something immediately and give businesses time to plan and accommodate for the future hikes into their business.

If done in this way, they could arguably say that they kept their campaign promise but still instituted wage hikes in a way that most businesses will be able to handle.

Another alternative could be a larger min wage hike coupled with a tax cut or other possible tax incentives that businesses could qualify for in order to offset the additional labor costs.

There are many ways that a wage hike could be implemented without 'crushing' businesses, but it is just matter of how it is done.... I guess we will all just have to wait and see

[midas]

minimum wage increase are inevitable and happen in all countries...

I m sure there will be min wage hikes, but it is not likely to be a 30% immediate hike...

What is more likely is maybe around 5-10% immediate hike and then a planned phasing in of scheduled min wage hikes over the next 10 yrs...

This way they can give a little something immediately and give businesses time to plan and accommodate for the future hikes into their business.

If done in this way, they could arguably say that they kept their campaign promise but still instituted wage hikes in a way that most businesses will be able to handle.

Another alternative could be a larger min wage hike coupled with a tax cut or other possible tax incentives that businesses could qualify for in order to offset the additional labor costs.

There are many ways that a wage hike could be implemented without 'crushing' businesses, but it is just matter of how it is done.... I guess we will all just have to wait and see

" scheduled min wage hikes over the next 10 yrs..."

More like 10 months.

Even the Democrats promised to lift the minimum wage by 25 percent over two years had they won.

http://suphaninsure.com/wizContent.asp?wizConID=31539&txtmMenu_ID=7

[thaimate]

Up the mimimum wage and expect to see more self service petrol stations ,less staff in stores ,and less cleaners ect ect ect , wages go up staff go down ,so it was in the UK when the min wage came in.

[dave111223]

A Pheu Thai pledge is to raise the minimum wage 30% to 300 baht a day, or 9300 baht a month

Where did you get 9300THB per month? Is just like an official number of "If you are paid monthly you must get at least 9300", or did you just multiple 300 * 31 (If so not all months have 31 days, and do you actually make your employees work 7 days a week?)

I'd say that 25 working days per month would be more of a reasonable assumption than 31, which would be a monthly wage of 7500... and i can't imagine you are paying your employees much less than this now?

[CWMcMurray]

I would guess that all of the people screaming about how the additional cost of min wage rates would put companies out of business will be happy to see this...

If corporate taxes are reduced from 30% to 23% next year that should more than pay for the additional labor costs...

Revenue Deapertment Agrees to Tax Cut

[CWMcMurray]

minimum wage increase are inevitable and happen in all countries...

Another alternative could be a larger min wage hike coupled with a tax cut or other possible tax incentives that businesses could qualify for in order to offset the additional labor costs.

There are many ways that a wage hike could be implemented without 'crushing' businesses, but it is just matter of how it is done.... I guess we will all just have to wait and see

" scheduled min wage hikes over the next 10 yrs..."

More like 10 months.

Even the Democrats promised to lift the minimum wage by 25 percent over two years had they won.

http://suphaninsure....9&txtmMenu_ID=7

It looks like they went for the second option.... immediate increase of 30% of Min Wage coupled with a significant corporate tax deduction...

Looks like they will reduce from 30% to 23% next year

[EvilDrSomkid]

A Pheu Thai pledge is to raise the minimum wage 30% to 300 baht a day, or 9300 baht a month

Where did you get 9300THB per month? Is just like an official number of "If you are paid monthly you must get at least 9300", or did you just multiple 300 * 31 (If so not all months have 31 days, and do you actually make your employees work 7 days a week?)

I'd say that 25 working days per month would be more of a reasonable assumption than 31, which would be a monthly wage of 7500... and i can't imagine you are paying your employees much less than this now?

Normally, it is 22 working days per month. Current minimum wage is 5500 baht pm. That translates to 250 a day.

Now, if the wage gets increased to 300, that means new min. wage will be 6600. Nowhere close to 9300.

[gregb]

minimum wage increase are inevitable and happen in all countries...

Another alternative could be a larger min wage hike coupled with a tax cut or other possible tax incentives that businesses could qualify for in order to offset the additional labor costs.

There are many ways that a wage hike could be implemented without 'crushing' businesses, but it is just matter of how it is done.... I guess we will all just have to wait and see

" scheduled min wage hikes over the next 10 yrs..."

More like 10 months.

Even the Democrats promised to lift the minimum wage by 25 percent over two years had they won.

http://suphaninsure....9&txtmMenu_ID=7

It looks like they went for the second option.... immediate increase of 30% of Min Wage coupled with a significant corporate tax deduction...

Looks like they will reduce from 30% to 23% next year

Let's do some simple math here. I asked a friend in electronics manufacturing and he said in his factory, labor accounted for about 10% of the variable cost of a product. So that means, a 30% increase in minimum wage would mean a 3% increase in cost (Even the techs who are making more than minimum wage will still need a boost if suddenly minimum wage rises to match their salary). Now, let's see where the break even point is with that 7% reduction in taxes. Let's assume that there is no fixed overhead and every bit of money is treated as corporate earnings before being sent through to the shareholders. Then that means 0.07*(the sales price minus 1.03*cost) = 0.03*cost, or in other words, any factory that sells their product with less than a factor of 45.8% markup (31.4% margin) is going to lose money in this deal.

And that includes nothing for overhead, and assumes the company has done nothing to reduce their tax liability. I can think of exactly 0 manufacturing companies where these low wage earners are employed that will even come close to breaking even or ahead on this system. (I would not be a bit surprised to find there are several Shin companies that will make out quite well though.) A 7% reduction in taxes is nearly meaningless for factories that operate in today's economy when compared with a 3% increase in cost. And companies that are making enough for this tax break to help are generally already paying much better than minimum wage because they need skilled labor to do a high value add.

So basically, the tax break will accomplish nothing. (But it might increase the fortune of Thaksin and Yingluck.) In the end, sham tax reduction or not, I'm quite sure you will see this wage hike limited to specific areas in such a way that it won't mean anything. There is no way Thailand can afford to increase the minimum wage and still remain competitive. A 1% difference in cost can make the difference between success and bankruptcy. Who cares about tax breaks on profits when you are insolvent?

[thaicbr]

A Pheu Thai pledge is to raise the minimum wage 30% to 300 baht a day, or 9300 baht a month

Where did you get 9300THB per month? Is just like an official number of "If you are paid monthly you must get at least 9300", or did you just multiple 300 * 31 (If so not all months have 31 days, and do you actually make your employees work 7 days a week?)

I'd say that 25 working days per month would be more of a reasonable assumption than 31, which would be a monthly wage of 7500... and i can't imagine you are paying your employees much less than this now?

Normally, it is 22 working days per month. Current minimum wage is 5500 baht pm. That translates to 250 a day.

Now, if the wage gets increased to 300, that means new min. wage will be 6600. Nowhere close to 9300.

My god. This post is full of inaccurate info.

The Thai minimum wage is based on a daily figure from 151b in Phayoi to 206b in Bkk (2010). Therefore IF an employee works 7 days a week for a 31 day month it would be 6386b if in Bkk.and 4681 in Phayoi... on the new 300b a day it would be 9300b. That is a BIG increase in basic wages. And as many people are saying is not sustainable however the Phua Thai party spin it.

Some one noted that the Democrates said 25% over 2 years a IMHO A much which better forward thinking plan (forward thinking is VERY unusual) here

my source for the min wage...http://www.mondaq.com/article.asp?articleid=92556

Edited July 9, 2011 by thaicbr