Minimum Wage Hike 'A Challenge' For Business: Thailand MPC

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WAGE

Minimum wage hike 'a challenge' for business: MPC

By The Nation

A sudden one-time rise in the minimum wage nationwide at a rate "faster than labour productivity growth" will pose a challenge to the business sector, the Bank of Thailand's Monetary Policy Committee (MPC) has warned.

In the minutes of its July 13 meeting, when the policy rate was raised for the fourth time this year to 3.25 per cent, the MPC said many members said the wage rise must be at levels commensurate with rising living costs. Many parties have voiced concerns over the Pheu Thai government's policy to raise the nationwide daily minimum wage to Bt300.

TMB Bank's research house said the move would push core inflation beyond 5 per cent, way above the BOT's 3-per-cent target.

June's headline inflation rate was 4.06 per cent, with the previous month's figure being 4.19 per cent. Core inflation rose 2.55 per cent in June, compared with 2.48 per cent in May.

The MPC said rising food and energy prices remained the key risks to the Thai economy amid robust growth and continued fiscal stimulus, prompting it to agree unanimously on another rate hike, according to the minutes of its July 13 meeting, released yesterday.

"Despite a slowdown in the rise of prepared-food prices, continued upward adjustments in the prices of prepared foods together with high energy prices resulted in inflationary pressure remaining at an elevated level," the minutes said.

The risks of inflation outweighed the risks to growth, especially in light of continued fiscal stimulus, which may add to inflationary pressure. "As a result, a continued increase in the policy rate would be needed to contain inflation, particularly as it is demand-driven," the minutes said.

Inflationary pressure remained a key risk in the second half of this year on persistently high prices of prepared food and fuel and a narrowing output gap that could allow greater pass-through of production costs to retail prices, it said.

Even if measures aimed at relieving the cost of living slow price rises, the incoming government's planned measures, including the increase in minimum wages, would add to price pressure and may accelerate inflationary expectations.

The policy-makers are also keeping an eye on the global economic recovery, the euro zone's sovereign debt problems and the fiscal-policy formulation of the incoming government.

There is considerable uncertainty surrounding more government spending, particularly next year, and fiscal prudence will be required, it said.

The incoming government should gradually phase in its spending over time, prioritise its projects and target those with the greatest need, according to the minutes.

Besides, it should put emphasis on investment to improve productive capacity for a sustainable increase in growth and living standards. Tax reform should be implemented to raise government revenue to cope with increasing expenditure.

-- The Nation 2011-07-28

[overhaul38]

I do think it is a struggle for the Thai worker to survive on the current minimum wage.

[dcutman]

I do think it is a struggle for the Thai worker to survive on the current minimum wage.

Well I think it is a struggle for anybody that live on a minimum wage.But increasing the minimum wage 40 to 90% overnight is a reckless idea. It is much less of a struggle on Thailands current minimum wage, than being unemployed.

Edited July 28, 2011 by dcutman

[kuffki]

I do think it is a struggle for the Thai worker to survive on the current minimum wage.

Perhaps you could name a country where workers on a minimum wage DO NOT struggle to survive

[Thaddeus]

I do think it is a struggle for the Thai worker to survive on the current minimum wage.

Nope, it's struggle for the Thai bloke I see daily who walks the road picking up plastic bags and discarded cans, but he appears to be quite happy and well fed.

People with a job, even on the current minimum are happier, with the promises of almost doubling their income, they are delirious.

Disappointment is a harsh mistress.

[Bagwan]

I preach to my Thai family that being, for want of a word, 'comfortable' depends not only on ones income but what one does with it. I've lost count of the Thais that I know who tell me that they have no money yet as a matter of course, live beyond their means. The amount that some of them owe scares the living daylights out of me. Certainly the closer family members accept and live by sensible priorities i.e. food, clothing, roof over head, saving for a rainy day, medical expenses and old age, and education come long before the latest craze or replacing perfectly adequate transport, white goods and other luxuries. How many 'ladies' moan about not having money to send home to Mama and their kids yet can afford to disfigure themselves with tattoos? What mental aberration drives the less well off to buy lottery tickets?

I recognise and support that incomes levels must rise and sweat shops dismantled but I wonder if this will really benefit the less fortunate. How many employers will ignore the law and tell their workers they can take it or leave it? How many jobs will cross borders to neighbouring countries? How wisely will those people who will have a little more money use it?

[givenall]

I do think it is a struggle for the Thai worker to survive on the current minimum wage.

Well I think it is a struggle for anybody that live on a minimum wage.But increasing the minimum wage 40 to 90% overnight is a reckless idea. It is much less of a struggle on Thailands current minimum wage, than being unemployed.

How would this effect business that pay purely by commissionand not salary. I would think they are not affected

[kuffki]

I do think it is a struggle for the Thai worker to survive on the current minimum wage.

Well I think it is a struggle for anybody that live on a minimum wage.But increasing the minimum wage 40 to 90% overnight is a reckless idea. It is much less of a struggle on Thailands current minimum wage, than being unemployed.

How would this effect business that pay purely by commissionand not salary. I would think they are not affected

Thats correct, this wil ONLY affect the giants since they the only ones who follow the law and funny enough the only ones who actually pay taxes.

[bushwacker]

Basic economics tells us that if you double (increase) wages without making any other changes then all you do is create inflation. The poor are not better off because their new income goes to buy the same things that are now at a higher price. And a lot of them are now unemployed because the big guys do not want to pay the increased wages and are demanding increased productivity. Like when I walk into Big C and see at sales person/shelf stocker on each and every aisle usually standing around picking pimples or their noses. If an increase in wages from 150 baht to 300 baht happens, how many pimples do you think the Big C management really want squeezed?

I went to Big C today and was going to buy my 250g of VPP coffee which is normally 110 Baht but now it is 150 baht and the new law is not in place yet. That is a 36% increase overnight. The sales staff is seeing nothing of it but the big companies are pulling in the money. If this goes through then the poor people will still be poor and the rich people will be richer. The middle guys like me and maybe you will move closer to the poor people's camp.

:jap:

[whybother]

I do think it is a struggle for the Thai worker to survive on the current minimum wage.

Well I think it is a struggle for anybody that live on a minimum wage.But increasing the minimum wage 40 to 90% overnight is a reckless idea. It is much less of a struggle on Thailands current minimum wage, than being unemployed.

How would this effect business that pay purely by commissionand not salary. I would think they are not affected

It will affect companies paying by commission if those people decide that it's better to go and work for someone for 300 baht per day.

If minimum wages go up to 300 baht per day, everyone earning between the current minimum and as much as 400 baht (or more) will want a pay increase.

[EirikJohannesen]

The last 10 years, candy and sweets be ruined Isaan. Herewhere I live, children have almost no teeth left and ice creamtrucks are queuing. They use 10% of their money on food and the rest on candy and alcohol.

[Amras]

You do know that those on minimum wages are often the most effected in any country, ie the above post regarding alcohol. It isn't just in Thailand. But people often do these things (ie drink) to escape the reality of the situation they are in. The money will purely be redistributed, prices may go up on some consumer items, but the poor will have more money to distribute to essentials (houses, bills etc). Whether they choose to do this will be another question. Or they money can be used to send the children to complete high school as many can't afford it on the current minimum wage. Really as westerners we can't afford a 20% change in costs when most of our money is coming in from overseas (except those who are genuinely working here on a Thai salary). Labour costs relative to material costs are pittance here compared to western countries where it's mostly the other way around (and they all manage to survive economically). I can't see how the idea of keeping Thailand and Thai's poor helps anyone but those few at the top exploiting them. Big companies can afford the costs in increase wages, but they want larger and larger profits every year. They increase their profits yet don't want to pay their workers (who are the ones that allow them to make those profits) an increase in wages. How can they not afford to put 10% of their net profits towards increasing the wages of their staff? It's us (as a generalization) that want more and more from our investments to satisfy our needs to have an over indulgent lifestyle that complain when our shares don't return. Yet for this to happen it has to be at the expense of someone being exploited at a pittance of a wage that they barely get by on. If it wasn't for the need to have multi nationals with hundreds of millions of billions of dollars of profit, nearly all could afford to pay a decent pay rise without increasing the cost of the goods. But they, the share holders the ones WHO ALREADY HAVE MONEY, don't want that. As long as they can go buy ignorantly ignoring how their profits are coming to them, they couldn't care less. I think's its quite poor that this still goes on.

[whatsupdoc]

You do know that those on minimum wages are often the most effected in any country, ie the above post regarding alcohol. It isn't just in Thailand. But people often do these things (ie drink) to escape the reality of the situation they are in. The money will purely be redistributed, prices may go up on some consumer items, but the poor will have more money to distribute to essentials (houses, bills etc). Whether they choose to do this will be another question. Or they money can be used to send the children to complete high school as many can't afford it on the current minimum wage. Really as westerners we can't afford a 20% change in costs when most of our money is coming in from overseas (except those who are genuinely working here on a Thai salary). Labour costs relative to material costs are pittance here compared to western countries where it's mostly the other way around (and they all manage to survive economically). I can't see how the idea of keeping Thailand and Thai's poor helps anyone but those few at the top exploiting them. Big companies can afford the costs in increase wages, but they want larger and larger profits every year. They increase their profits yet don't want to pay their workers (who are the ones that allow them to make those profits) an increase in wages. How can they not afford to put 10% of their net profits towards increasing the wages of their staff? It's us (as a generalization) that want more and more from our investments to satisfy our needs to have an over indulgent lifestyle that complain when our shares don't return. Yet for this to happen it has to be at the expense of someone being exploited at a pittance of a wage that they barely get by on. If it wasn't for the need to have multi nationals with hundreds of millions of billions of dollars of profit, nearly all could afford to pay a decent pay rise without increasing the cost of the goods. But they, the share holders the ones WHO ALREADY HAVE MONEY, don't want that. As long as they can go buy ignorantly ignoring how their profits are coming to them, they couldn't care less. I think's its quite poor that this still goes on.

Never had a business yourself, did you?

By the way, it will be the already struggling Small and Medium Enterprises that will be hardest hit, not the multinationals. And for quite a lot of poor workers life will be worse as well due to inflation and rising unemployment.

[Amras]

<br />

<br />You do know that those on minimum wages are often the most effected in any country, ie the above post regarding alcohol. It isn't just in Thailand. But people often do these things (ie drink) to escape the reality of the situation ...........I think's its quite poor that this still goes on.<br />

<br /><br />Never had a business yourself, did you?<br />By the way, it will be the already struggling Small and Medium Enterprises that will be hardest hit, not the multinationals. And for quite a lot of poor workers life will be worse as well due to inflation and rising unemployment.<br />

<br /><br /><br />

No, but I know a number of people who do have 'small businesses' and they manage fine. It's not easy, no, but if your lacking customers, well then you have to do something about it or go under. Just wanting to have your own successful business doesn't mean you will or should. Like anything, success comes to those who work hard. This doesn't excuse paying your staff a pittance of a wage just because your business is struggling. You decided to go into business so you have to take the ups and downs that come with that, otherwise be an employee and have none of the risk (or potential reward). It has nothing to do with

If the businesses are struggling then it's likely a fact of over supply to demand. Too many similar businesses offering the same product or service will make it much harder for those businesses to flourish regardless of the wage you pay the employees. It's as simply as that. A business won't be successful if there isn't enough demand for that industry unless your doing something dramatically different which most people don't go to the effort of wanting to do and hence their businesses fail. This still doesn't excuse not paying your employees enough and never can be used as an excuse.

[whatsupdoc]

No, but I know a number of people who do have 'small businesses' and they manage fine. It's not easy, no, but if your lacking customers, well then you have to do something about it or go under. Just wanting to have your own successful business doesn't mean you will or should. Like anything, success comes to those who work hard. This doesn't excuse paying your staff a pittance of a wage just because your business is struggling. You decided to go into business so you have to take the ups and downs that come with that, otherwise be an employee and have none of the risk (or potential reward). It has nothing to do with

If the businesses are struggling then it's likely a fact of over supply to demand. Too many similar businesses offering the same product or service will make it much harder for those businesses to flourish regardless of the wage you pay the employees. It's as simply as that. A business won't be successful if there isn't enough demand for that industry unless your doing something dramatically different which most people don't go to the effort of wanting to do and hence their businesses fail. This still doesn't excuse not paying your employees enough and never can be used as an excuse.

I think you overestimate the profits (if any) that SME's make. If the operating costs rise, so will the price for the end consumer (or the business in question will have to lay off staff). The only other alternative would be a rise in the productivity of the staff but that is rather unlikely.

If the end consumer is willing to accept higher prices, than there would be no need to lay off staff.

Are you willing to pay higher prices to give Thai workers a higher income? If nobody wants to, we'll see much higher unemployment and a lot of workers will be far worse off, like being out of a job and facing higher prices.

The minimum wage should rise gradually, a sudden large increase will send a shockwave through much of the economy, and as usual, the poorest will be hardest hit.