The Whole Wage System Needs An Overhaul :

[Lite Beer]

EDITORIAL

The whole wage system needs an overhaul

By The Nation

Push for a Bt300 daily wage obscures need for greater skills, productivity, bargaining power

Pheu Thai's vow to implement a Bt300 minimum daily wage could be a "damned if you do, damned if don't" scenario for new Labour Minister Phadermchai Sasomsap. Although it is not known to what extent Phadermchai has been involved in the party's decision to announce the Bt300 minimum wage policy, he would be one of the key people to decide whether to go ahead with the policy, and how it is pursued.

The wage policy is not easy. While every party agrees that the current minimum wage is too low to keep up with productivity and GDP growth, leaders of industry have cried foul that a sudden rise to Bt300 per day is too drastic. But the labour representatives insist the new government will have to fulfil the promise it made to voters during the election.

Phadermchai will face a daunting task in having to protect the well-being of Thai workers while ensuring that compensation or the new wage don't turn into a double-edged sword. Big business operators claim such a wage hike could force many small and medium-sized factories to shut down. A sudden rise in the minimum wage could wreck the competitiveness of small and medium-sized industries because most of them are in high labour-intensive industries.

Shoe-making companies, for instance, say that labour costs account for 17-19 per cent of their production expenses. But big corporates have generally turned to automation and the labour cost might only be 10-12 per cent or less.

With opposition from some industrialists, Phadermchai and the Yingluck government will have to find the solution by balancing the interest of all parties.

The party recently floated an idea that it would cut the corporate income tax rate from 30 per cent to 23 per cent. But this might not benefit the affected small businesses. The fear is that big corporates which hire a small number of workers may get a free ride, because the corporate tax cut would be apply to all.

Some have proposed government coupons to make up the wage differential for industries that can't afford to pay their workers. But all these proposals are short-term ideas to enable the government get away with its Bt300-a-day promise.

What's unfortunate is the minimum wage issue takes attention away from the real issue that workers face. And that's the duty of Phadermchai: to get the public spotlight on the real issue.

The first thing the government should do is more fundamental: the entire wage system should be overhauled. It is ironic that while Thailand faces a shortage of labour, workers don't have strong bargaining power. According to Sakdina Chatkul na Ayutthaya, a labour expert, only 1.3 per cent of Thai workers are in unions.

In addition, the minimum wage should come from s scientific calculation based on a level of production, productivity and a level that will ensure the workers' well-being. The new labour minister should appoint independent bodies to decide the right minimum wage to ensure a fair rise. Presently, the minimum wage is a result of bargaining in a tripartite committee made up of representatives of employers, employees and the government.

While the discussion so far is concentrated on the size of the minimum wage, the other aspects of workers' well-being should also be considered.

Thai labour can be described as 3Ls: low-wage, long-time work and low productivity. From 2000 to 2007, the productivity of Thai workers increased by only 3 per cent compared to 5.3 per cent in Vietnam.

Phadermchai should promote the welfare of Thai workers by ensuring they have an opportunity to improve their technical skills to enable them to improve their livelihood.

In the meanwhile, the government must require that employers take care of their employees by providing fair treatment and proper welfare benefits.

Unfortunately, the other side of welfare benefits for workers has not been sufficiently addressed, as the minimum wage promise has blurred other issues behind the wage discussion.

Thai workers should have a chance to improve their skills to the point where they don't have to rely on the minimum wage to raise their worth. And that's the challenge that the Labour Ministry should strive to fulfil. Otherwise, the minimum wage will be politicised every election and such confusion does not bode well at all for industry or workers.

-- The Nation 2011-08-14

[thaiorchidsource]

It is a shame that the issue of wages was used to swing votes, and now there is no way out. The reality of the world economics and affect of the dollar conversion to baht in exports has been a very big hit for many export businesses. Just in July, the dollar to baht conversion from the dollar lost over 2%. Now to increase the minimun wage for those industries that are marginal will have only one result and that is them closing forever, or relocating to another country. The result is obvious with a rapid increase in poverty for minimun wage Thai workers . On the other side of the coin which everyone sees is the sharp increase in the cost of fuel, food, and chemicals needed for agriculture making life very difficult for minimun wage Thai workers. The only solution is a slow increase in wages over time to allow businesses to adjust their margins and operations, thusly keep their workers by staying in business The situation is far more complex than simply raising wages.

[scotbeve]

So strange..... it's been shown on Thai TV that basic laborers get much more than that already. For a fact, I've paid some of my semi-skilled workers more than 300 B 5 to 10 years ago... Guess the gluttonous large corporation owners will have to delay the newer model Mercedes's for this year!

[SICHONSTEVE]

It is a shame that the issue of wages was used to swing votes, and now there is no way out. The reality of the world economics and affect of the dollar conversion to baht in exports has been a very big hit for many export businesses. Just in July, the dollar to baht conversion from the dollar lost over 2%. Now to increase the minimun wage for those industries that are marginal will have only one result and that is them closing forever, or relocating to another country. The result is obvious with a rapid increase in poverty for minimun wage Thai workers . On the other side of the coin which everyone sees is the sharp increase in the cost of fuel, food, and chemicals needed for agriculture making life very difficult for minimun wage Thai workers. The only solution is a slow increase in wages over time to allow businesses to adjust their margins and operations, thusly keep their workers by staying in business The situation is far more complex than simply raising wages.

It's not a shame, It's a CRIME, that she used this tactic to garner votes. OK, it achieved it's aim but now she MUST fulfil her promise (pre-election sweetener) to the people simply for them to see that they were suckered into voting Pheu Thai on a flawed premis. They must learn the hard way - as it needs something bad to happen to make them come to their senses!!!!!

[dcutman]

Thai workers should have a chance to improve their skills to the point where they don't have to rely on the minimum wage to raise their worth. And that's the challenge that the Labour Ministry should strive to fulfil. Otherwise, the minimum wage will be politicised every election and such confusion does not bode well at all for industry or workers.

This the key to the wage debate. "IMPROVE THEIR SKILLS" Nothing else has to be said. There have been many article about, moving Thailand away from labor intensive products to value added products. The problem is, NO SKILLS, NO TRAINING. For the last five years or so Thai labor intensive markets have been moving to cambodia and Vietnam. (Thai government ecouraged and subsidised) All the while there has been no training programs to bring a Thai worker to a value added (high tech) type job.

Raising the minium wage 40 to 90% is not going to make a worker smarter or increase productivity. It was totally irrisponsible for the newly elected to make such a promice without these skills being in place. This process take years if not generations.

If implemented the way the PTP say it will. There will be some serious damage caused. Foriegn companies will move, unemployment will rise, and inflation will skyrocket. That is econ 101

Yes some of the other countries in SE Asia have higher wages and some have lower, but I think all have been training their workforce for the goal they have in mind.\

Unlike Thailand

[OzMick]

So strange..... it's been shown on Thai TV that basic laborers get much more than that already. For a fact, I've paid some of my semi-skilled workers more than 300 B 5 to 10 years ago... Guess the gluttonous large corporation owners will have to delay the newer model Mercedes's for this year!

I think that you should read the OP again. " Gluttonous large corporation owners" will get a corporate tax cut to offset increased labour costs. Small businesses who don't make enough to pay corporate tax get SFA.

Down the street from me is a wooden furniture-making business with 3 employees. Next to it is a metal-fabrication workshop with 5 employees. Then a big bike repair shop with about 10.

All 3 employers work the same long hours as their employees, and none drives a Benz or anything like it. They make a living, better than min wage but not huge, IMHO opinion fair because they put up the capital and take the risks, and this is the same throughout Thailand probably a million times over. If they are forced to lay off an employee each, the results will be horrendous.

As for basic labourers getting much more than min wage - you are living in a dream world. Many are getting less! Has it not occurred to you that those already receiving above B300/day might want a pro-rata rise.

Workers raising skill levels might happen a lot faster if the police cracked down (not another crack-down) on technical college students who seem to spend a lot of their time carrying out inter-college assaults and murders.

[Arkady]

Productivity is crucial here, as pointed out by The Nation. However, it needs to be measured in a way that is meaningful, rather than in the bog standard macro way. Like Vietnam now, Thailand achieved misleadingly high productivity gains in the late 80s/early 90s due to the large scale shift of low productivity agricultural workers on to light industrial conveyer belts. That shift has now slowed right down with the effect that we now see something like the real productivity gains comparing like for like. The macro calculation is important in that macro productivity gains times increases in the work force equals GDP growth. However, the current issue needs micro calculations of productivity gains by industry to understand what is happening and make meaningful comparisons with other economies.

Another important issue and probably the key to this problem is the shift to higher value added industries which is what causes the macro productivity gains described above. Thailand achieved one big jump from low productivity agricultural work to light assembly work which is relatively low value added but still much more efficient than Thailand's grossly inefficient system of small rice field holdings, much of which is on soil too poor to grow rice economically. Singapore in the late 80s decided it was time to phase out the light assembly work and move to higher tech industry. Their education system had already prepared the necessary work force and the government dropped the subsidies for the light assembly work, forcing them out to cheaper labour countries and a virtually seamless transient was stage managed from behind the scenes. Thailand on the other hand has no long range industrial planning worth a dam_n and all political parties have a vested interest in keeping the bulk of the electorate under educated and stupid in order to give their preposterous political platforms some credence. Now they are floundering with an excess of low value added sweat shop industries that Thais don't want to work in requiring a blind eye given to undocumented alien workers earning much less than even the current minimum wage accounting for about 10% of the work force and growing. Meanwhile there is no plan to attract higher value added industry; foreign investment laws remain stuck i the early 70s as Thailand's neighbours have all introduced modern investment codes; and there is no educated work force ready to work in higher tech industries, even if they miraculously decided to come.

Basically the position is hopeless. Chancer politicians have promised something in order to get their greasy hands on money and power without caring or about the underlying economic problems. The only possible result is significantly higher inflation and suffering for low wage workers, whether they are lucky enough to receive the minimum wage or not.

[Bakseedaa]

It is a shame that the issue of wages was used to swing votes, and now there is no way out. The reality of the world economics and affect of the dollar conversion to baht in exports has been a very big hit for many export businesses. Just in July, the dollar to baht conversion from the dollar lost over 2%. Now to increase the minimun wage for those industries that are marginal will have only one result and that is them closing forever, or relocating to another country. The result is obvious with a rapid increase in poverty for minimun wage Thai workers . On the other side of the coin which everyone sees is the sharp increase in the cost of fuel, food, and chemicals needed for agriculture making life very difficult for minimun wage Thai workers. The only solution is a slow increase in wages over time to allow businesses to adjust their margins and operations, thusly keep their workers by staying in business The situation is far more complex than simply raising wages.

It's not a shame, It's a CRIME, that she used this tactic to garner votes. OK, it achieved it's aim but now she MUST fulfil her promise (pre-election sweetener) to the people simply for them to see that they were suckered into voting Pheu Thai on a flawed premis. They must learn the hard way - as it needs something bad to happen to make them come to their senses!!!!!

The new government should make it number one priority to pay those needy peoples 300bahts per day...sooner the better , and maybe I will get more baht for my dollars...... good luck Yinluck...

[anterian]

If the minimum wage only applied to those in full time employment, not to casual labour and the self employed, as it does in most other countries, then many small enterprises will simply classify their workers as part time. In my village the proposed minimum wage will have no effect, there are a few full time employees, a bank chauffeur, a teacher, shop assistants, these are already over the minimum wage, the rest are for want of a better word self employed. Taxi drivers, market stall sellers, clothing home workers, building gangs etc.

[Thongkorn]

It will never happen < i cannot see any Thai company paying foreign workers the same as a Thai , mainly Burmese people who have to work for less than half a Thai wages

[OzMick]

If the minimum wage only applied to those in full time employment, not to casual labour and the self employed, as it does in most other countries, then many small enterprises will simply classify their workers as part time. In my village the proposed minimum wage will have no effect, there are a few full time employees, a bank chauffeur, a teacher, shop assistants, these are already over the minimum wage, the rest are for want of a better word self employed. Taxi drivers, market stall sellers, clothing home workers, building gangs etc.

What province is Potemkin in?

[tlansford]

At least this is correctly identified as an OPINION piece

[473geo]

If the minimum wage only applied to those in full time employment, not to casual labour and the self employed, as it does in most other countries, then many small enterprises will simply classify their workers as part time. In my village the proposed minimum wage will have no effect, there are a few full time employees, a bank chauffeur, a teacher, shop assistants, these are already over the minimum wage, the rest are for want of a better word self employed. Taxi drivers, market stall sellers, clothing home workers, building gangs etc.

Yep creating part time workers, self employed is always a ready made work around, of course such employers will run the risk of losing their valued employees to business that are prepared to pay the minimum wage

It would also be interesting to know what percentage of the 17-20% (labour costs) are currently being paid to employees under the minimum wage

I recall one article which suggested that against a possible GDP growth of 4.5% the implementation of the minimum wage would have a negative effect of 0.5%

[zzaa09]

So strange..... it's been shown on Thai TV that basic laborers get much more than that already. For a fact, I've paid some of my semi-skilled workers more than 300 B 5 to 10 years ago...

Indeed. These markers of "average" wages [b300 + per day] for skilled or semi-skilled common labourers applies to the hinterlands as well - it has for years.

[kraplung]

The minimum wage figures quoted per province only serve to enable the large employers to pay as little as possible. The minimum wage isn Thailand is clearly inadequate.

A far bigger issue will be the 15000 minimum for BA holders. This will create all sorts of problems especially in the civil service where new recruits will be earning as much or more than experienced staff on higher grades.