How Manufacturers In Thailand Are Coping With Minimum Wage Hike

[webfact]

WAGE HIKE

Manufacturers, SMEs seek to raise productivity

BUSINESS REPORTERS

THE NATION

BANGKOK: -- Manufacturers are closely monitoring the impact of the rise in the minimum wage that took effect in seven provinces, including Bangkok yesterday, anticipating the need for further mechanisation to increase productivity.

Moreover, they will focus further on training to give their workers multiple skills.

The government's policy to raise the daily minimum wage to Bt300 has been implemented as planned in Bangkok, Phuket, Nakhon Pathom, Samut Prakan, Samut Sakhon, Pathum Thani, and Nonthaburi. The wage will be increased in the remaining provinces next year.

According to the Labour Ministry, there are roughly 38.7 million labourers in the Thai economy, of whom 14.6 million are in the labour system, and 24.1 million are outside the system.

Previously, the Thailand Development Research Institute (TDRI) said manufacturers must increase productivity of their workers by 8 per cent if they |want to survive after the implementation of the daily minimum wage. Without government support, the manufacturers must |initiate in-house training programmes.

"Companies that cannot adjust their costs and improve labour productivity by 8 per cent are |likely to face difficulty in operat-ing their businesses," said Yongyuth Chalamwong, the TDRI's labour development research director.

Yongyuth said small and medium-sized enterprises would inevitably be affected by the wage hike. These workers are the target group for whom the government must have training programmes to improve their skills.

A Bank of Thailand study suggests that the wage increase will slow growth of gross domestic product by 1.7 percentage points, while employment (based on the 14.6-million figure above) will decrease by about 4.5 per cent, accounting for about 600,000-700,000 workers. (Based on the higher 38.7-million figure, the reduction is closer to 1.5 per cent.) The inflation rate is likely to increase by 1 percentage point, while consumption demand from the private sector will drop by 1.7 per cent.

However, the Fiscal Policy Office says the wage hike will not affect goods prices much.

Boonchai Charassangsomboon, executive director of the FPO's macroeconomic policy bureau, said the rise in the minimum wage to Bt300 per day for labourers and Bt15,000 per month for state officials would boost the inflation rate by a manageable level of about 0.7 percentage point. Meanwhile the wage policies will result in a 12-per-cent rise in overall income for the whole country, according to the office's calculation.

Of greater inflationary concern is the rise of crude-oil prices. The FPO projects headline inflation this year at 3.6 per cent, slightly down from 3.7 per cent last year. It said the rise in oil prices should decelerate this year because of the fragile global recovery.

Sompop Manarungsan, pre-sident of the Panyapiwat Institute of Technology, said a lot of sup-|pliers to CP All's 7-Eleven con-venience stores had contacted |the institution asking for ideas |on how to improve labour productivity to offset their rising labour costs.

He said Panyapiwat provided training for workers and management courses such as logistics and marketing strategy.

Small firms may choose to cut some jobs and retain staff who are able to improve productivity, he said. Machinery will be introduced to replace some workers. Some manufacturers may pass their additional costs on to consumers, but that is not easy because of high competition.

Sompop said the situation for manufacturers was complicated by the government policy of controlling prices carried out by the Commerce Ministry. Price controls do not give manufacturers incentives to produce more goods. Some may opt to exit businesses, creating a market condition conducive to monopoly. Thus the good intention of the government to protect consumers in fact leads to price rises, he lamented.

ELECTRICAL AND ELECTRONICS

Apichart Leeissaranukul, executive vice president of Thai Stanley Electric, said the company was increasing its productivity and efficiency by implementing what it calls the Stanley New Approach for High Productivity (SNAP), a measure it has adopted for years. The principle of SNAP is that the company reduces time wastage in the production process by making work flow as efficiently as possible. It has a training course for all staff to learn how to work with the highest efficiency.

He said Thai Stanley had three companies under its umbrella with a total of 7,000 workers. The wage increase that took effect on April 1 will increase the company's labour cost by 25 per cent, while total operating costs will rise by 3 per cent. As a result of the wage policy, each worker's monthly income will rise by Bt2,500.

"We have to increase our |productivity to cover the in-creased wage cost. We do not |know yet whether or not we can make it.

"It is not only Thai Stanley's own business that is our concern, but also our suppliers, which are second- and third-tier manufacturers. We have to visit them more and ask them if there is anything that we can help them with so we can survive together," he said.

Kobkarn Wattanavrangkul, chairwoman of Toshiba Thailand, said the company planned to monitor the impact of rising wages closely every six months, as it would affect the whole supply chain.

The company is also struggling to maintain suppliers in Thailand as the cost of production will rise along with the higher cost of labour. Kobkarn said many Thai SMEs would find it more difficult to stay in business in this country as many companies are shifting to source their raw materials from China to reduce their production costs.

To offset the higher cost of labour, Toshiba plans to import machinery and focus more on automation in view of the higher cost of labour and shortage of manpower in Thailand, she |added.

GARMENTS

Sukij Kongpiyajarn, president of the Thai Garment Manufacturing Association, said manufacturers in this industry were trying to increase productivity by at least 10 per cent and reduce working hours by rough-|ly the same percentage as ways |to relieve the impact from the |wage increase. The industry so far has no idea whether these measures will be fruitful for all manufacturers and keep them in business.

"We expect to have a clear picture by early next year. It is possible that about 20 per cent of the SMEs [in the traditionally low-wage and labour-intensive garment industry] will not survive after being forced by raise wages," he said.

Sukij believes that the top 15 companies in this industry will not make any new investments in Thailand. Besides the increased wage, the labour shortage is another factor that encourages them to move out of this country. Those companies now prefer to pour their money into less developed neighbouring countries such |as Vietnam and Cambodia to |avoid the impact of higher wage costs.

According to Sukij, there |about a million labourers in the garment and textile industries in Thailand.

"We cannot stop the government hiking the minimum wage. If the policy finally has a big impact on labour in the garment industry, we plan to ask the government to set up a coaching centre aimed at improving production technology and to help manufacturers improve their productivity. So we may save some of them that are strong enough to continue their production," he said.

FOOD AND BEVERAGE

Thai Union Frozen Products, the country's leading exporter of canned and frozen seafood, plans to increase production capacity by installing more machinery to replace labourers, while also marking up retail prices to offset higher production costs.

Wai Yat Paco Lee, TUF's financial controller, said the firm had reduced the number of labourers over the past two years by investing Bt3 billion annually to increase production efficiency and using more machinery and high-technology equipment.

However, he said the company would also need to raise prices and push some of the burden on to consumers. Currently, about 10 per cent of production costs are labour wages. The firm may need to increase retail prices by about 1-2 per cent, while seeking other measures to make up for higher production costs, Lee said.

Thapana Sirivadhanabhakdi, president and chief executive officer of Thai Beverage, said the company agreed with the government policy to increase wages as it would raise the living standards of grass-roots Thais.

"In the private sector, we all know the way to deal with the new wage hike. Staff training and development will be in focus to make them able to do many jobs and with higher productivity," Thapana said.

ENTERTAINMENT

Leading entertainment and event firms plan to slash overtime and some operational costs to offset the increase in the minimum wage.

Pornpan Techarungchaikul, chief operating officer for RS, a leading music and entertainment company, said overtime payments would automatically be lowered. The company will then consider cutting accommodation and |transport costs as well as food expenses for on-site productions if needed.

Meanwhile, the company is focusing on human-resource development with knowledge- and skill-based training to improve employees' performance and productivity. These projects include competency-based training, and both public and in-house training in line with knowledge, attitude and skill development.

Pornpan added that RS was expanding into broadcasting businesses such as satellite television and pay-TV channels, so it needs more television programmes to complete such services. The broadcasting rights to Spain's La Liga soccer tournaments for the 2013-2015 seasons, which were recently acquired by the company, are among the examples for pay-TV service. So the company will need more employees for the expansion.

Kreingkrai Kanjanapokin, co-CEO of Index Creative Village, a leading event agency, said the company wanted to make sure the impact of the wage hike is substantial before making any major moves in response.

However, his firm has to conduct cost management with suppliers. Under this policy, the company is likely to increase client service fees in the near future, he added.

SMES

The new minimum wage is a serious concern for small and medium-sized enterprises, |which face not only high staff turnover but also competition for labour.

Kritsada Sarakoon, marketing director of Sushi Boy Co, said he had to adjust salaries for all staff since the implementation of the increased daily minimum wage. In addition, the Japanese-cuisine company is looking into employ-ing daily workers rather than |permanent staff. Stringent conditions will also be implemented for new recruitment to ensure that new hires will stay with the company.

"SMEs like my company are at risk as we have higher costs but can't adjust retail prices or reduce quality and quantity. Instead, we have to reduce our margin and boost sales to survive," Kritsada said.

Moreover, labour-intensive businesses face fierce headhunt-ing competition as some companies offer higher wages than the government's minimum. For instance, some of Kritsada's |outlets in shopping malls have |to offer Bt310-Bt320 per day |for new recruits to outbid competitors.

Chanida Hathaipantalux, a director of VR Union Co, said the company would mechanise more under its long-term plan to reduce labour costs in the future. It addition, in-house training will be set up to develop its labourers' skills and productivity.

An auto dealer who asked for anonymity said increases in car prices and improvement of labour productivity were the main strategies she was employing to deal with higher salary costs.

"We have also set an increased target for revenue for each profit unit, let's say 20 per cent more. Overtime is cut and no more workforce is recruited," she said.

HOTELS

Chanin Donavanik, chief executive of Dusit International, announced last week that the company would not recruit new staff even to replace those who resign. Normally, the company recruits an average of 200-300 new staff per year.

The policy will allow the company to control costs after the implementation of the new wage policy. Before April 1, salaries accounted for 16-20 per cent of the group's total costs. The minimum-wage hike comes after room rates have dropped over the past five years.

"It is unavoidable to accept the government policy but it will have a serious effect on the industry," Chanin said.

Sampan Panpat, an honorary adviser to the Thai Hotels Association, said hoteliers, especially small and medium-sized ones, would find it even harder to run their business. Some will have to go out of business or end up being acquired by bigger players in the long run if they cannot handle this financial challenge. To survive, some will choose to combine service charges into their workers' monthly salaries.

He said the wage hike would |hit operating costs hard. It is |difficult for hotel operators to increase their room rates as competition is getting fiercer, driven by the large supply of rooms in the market.

Currently, there are about 6,700 legal hotels nationwide, and 7,000 illegal ones. About 3,000 are SMEs, especially hotels with about 50 rooms. There are 500,000 people working in this industry, with a 50:50 ratio in legal and illegal hotels. For small hotels, labour makes up about 22 per cent of the total operating cost.

Supamit Kitjapipat, managing director of Theeppipat Development Co, operator of Siripanna Villa Resort and Spa in Chiang Mai, said it would cut down on unnecessary expenditure. Existing employees will be trained to be more productive. They will also be asked to work more after other employees resign. At the same time, the firm will look for ways to increase sales.

DIRECT SELLING

Danai Deerojanawong, managing director of Better Way (Thailand), a local direct-selling company and owner of the Mistine cosmetics brand, said the increase in the minimum wage would result in a 6-per-cent increase in overall operation costs and higher labour costs by 12-13 per cent.

"What we have been doing to tackle the wage hike is to manage our costs, focusing on minimum and maximum purchasing volumes for more efficient bargaining with suppliers. We will be looking for product sourcing, packaging and labelling, and to develop product formulas by concentrating on cost-effectiveness," Danai said.

-- The Nation 2012-04-02

[sparebox2]

Govt make a wrong policy.

Now many business will have to close, i.e. more lay off of poor workers.

[webfact]

Wage Hike Pressures Small and Medium Hotel Operators

BANGKOK: -- The Thai Hotels Association said the new wage policy has a serious effect on the hotel industry since some Small and Medium entrepreneurs will be forced to close down their business.

Honorary adviser to the Thai Hotels Association, Sampan Paenpat, said the Labor Ministry provided a brief policy for hoteliers regarding the minimum wage increase by setting out two main measures of which hotel businesses could manage their labor costs.

First of all, some hotel operators will choose to separate service charges from their workers' monthly salaries.

Consequently, workers' taxation will not take service charges into account.

On the other hand, some said service charges collected and distributed to workers should be considered wages.

Therefore, employees' income tax payment must base on monthly income combined with service charges.

Meanwhile, the Thai Hotels Association or THA pointed out that the government's wage hike policy has a drastic effect on the hotel industry, especially small and medium sized hotels in provinces.

Sampan said that SMEs ran by Thais account for 25 percent in the tourism market while the remaining 75 percent are dominated by large corporations.

He voiced concern that some SME hoteliers will face bankruptcy or end up being acquired by bigger players in the long run due to their financial burden.

Labor Ministry permanent secretary Somkiat Chayasriwong said the advantages of the wage hike policy outweigh the disadvantages.

He stated that the policy helps workers cope with the rising costs of living and also increases their purchasing power, which will eventually make the entrepreneurs recoup their losses.

In the meantime, he insisted the new daily minimum wage will increase burden on entrepreneurs only in short term.

He said the ministry will assess the policy's effectiveness again.

Moreover, Somkiat urged entrepreneurs who are facing financial problems to consult with the Transparency Center or provincial labor offices nationwide.

-- Tan Network 2012-04-02

[4evermaat]

was the title correct or was the article post incorrect?

"2nd best time to plant a tree is today." Sent from TV android app.

[waza]

I guess the crunch is labour costs in Thailand are no longer an incentive for manufacturers to set up operations there. Those that are already there must offset the wage rise through productivity increases, automation or moving offshore. Great to see a well thought out policy of this government is having the desired effect of lifting workers living standards and stimulating foriegn investment.

[givenall]

Govt make a wrong policy.

Now many business will have to close, i.e. more lay off of poor workers.

I wouldn’t read too much to this report, it is biased report. It is the government reporting and they are the one who are responsible for the increase.

All I know i see all store, restaurants, etc have fewer employees these days and of course it means worse service. I think this is the way of future, less people, still same attitude about work, meaning the customer service will suffer

[AngryParent]

Does the 300 Baht pay rise (with increased efficency) apply to bargirls too? Just asking

Edited April 2, 2012 by AngryParent

[tlansford]

Govt make a wrong policy.

Now many business will have to close, i.e. more lay off of poor workers.

I wouldn’t read too much to this report, it is biased report. It is the government reporting and they are the one who are responsible for the increase.

All I know i see all store, restaurants, etc have fewer employees these days and of course it means worse service. I think this is the way of future, less people, still same attitude about work, meaning the customer service will suffer

It is The Nation and TANN reporting, but it is still biased.

If a hotel, restaurant, or SME says that it will go out of business due to paying approximately 60 Bhat more per day to a worker, then it is either 1) lying, or 2) already going out of business.

[tlansford]

I wonder how Buchholz likes his crow-yang ?

http://thaifinancialpost.com/2012/04/01/minimum-wage-hike-to-increase-purchasing-power-and-improve-economy/

With the implementation of the minimum wage increase, labour wage in all provinces across the country increases by 39.5% from the usual provincial rate, except 7 provinces, namely Bangkok, Nonthaburi, Pathum Thani, Nakhon Pathom, Samut Prakan, Samut Sakhon and Phuket, where the minimum daily wage will go up to 300 baht.

...

With the exception of the seven pilot provinces mentioned above, the 300-baht minimum wage will be applied to the rest of the country starting on 1 January 2013.

[bigbamboo]

Govt make a wrong policy.

Now many business will have to close, i.e. more lay off of poor workers.

I wouldn’t read too much to this report, it is biased report. It is the government reporting and they are the one who are responsible for the increase.

All I know i see all store, restaurants, etc have fewer employees these days and of course it means worse service. I think this is the way of future, less people, still same attitude about work, meaning the customer service will suffer

It is The Nation and TANN reporting, but it is still biased.

If a hotel, restaurant, or SME says that it will go out of business due to paying approximately 60 Bhat more per day to a worker, then it is either 1) lying, or 2) already going out of business.

Tiansford is right here. It should also be noted that with rampant inflation of the basics most poor people need to buy even a 300 baht minimum wage would still be just the equivalent in real terms of the old minimum of not so very long ago.

[trainman34014]

Everyone who has had any experience in business knows the fastest way to reduce costs, is to reduce staff numbers. Knowing that this was coming surely most manufacturers in Thailand will already have figured out what this new basic wage is going to cost them and will have been implementing ways to combat it. It won't take long for Foreign companies to either up sticks and move to another manufacturing base or reduce staff and other costs to get the bottom line back in order. In the long term this will not benefit Thailand or the Thai people. Many of the working class folks will end up out of work or doing jobs with low pay outside of industries ring fenced by the new rate.

[Katipo]

My company is just reducing overtime, not having staff work on Sundays, and looking closely at employee numbers. I would be surprised if anyone is taking home much more money at the end of the month, although they might find themselves with more free time. Given the long hours most labourers work this might be good for their overall health.... assuming they don't spend that extra time spending the extra money they haven't earnt due to this increase.

[nietzche]

We all know where artificial price floors regarding labour lead! A few factors that may be considered:

- An increase in the minimum wage by 50% causes an increase in prices of non discretionary items (food, gas, etc.)

- Real purchasing power of minimum wage workers increases, while purchasing power of the lower middle class decreases.

- Inflation will make the already expensive imported goods even more out of reach

- Will make Thailand less competitive on the global market leading to a decrease in Foreign Direct Investment

- Substantially higher rate of unemployed

- Decreased in government revenue:

- Those making less that 150,000 baht/year tax exempt. After the minimum wage increase these people will still be tax exempt (no additional tax revenue from this demographic)

- Reduced net profits of private organizations and High earning individuals (shareholders, etc.) will lead to lower government tax revenues.

- How much more productive can an Asian factory worker be????

I mean seriously! This is like Greece on Steroids!

Apparently also, the starting salary for government workers with bachelor degrees will rise from 8,000 baht/month to 15,000 baht/month

Where is the money coming from???

[nietzche]

Govt make a wrong policy.

Now many business will have to close, i.e. more lay off of poor workers.

I wouldn’t read too much to this report, it is biased report. It is the government reporting and they are the one who are responsible for the increase.

All I know i see all store, restaurants, etc have fewer employees these days and of course it means worse service. I think this is the way of future, less people, still same attitude about work, meaning the customer service will suffer

It is The Nation and TANN reporting, but it is still biased.

If a hotel, restaurant, or SME says that it will go out of business due to paying approximately 60 Bhat more per day to a worker, then it is either 1) lying, or 2) already going out of business.

Tiansford is right here. It should also be noted that with rampant inflation of the basics most poor people need to buy even a 300 baht minimum wage would still be just the equivalent in real terms of the old minimum of not so very long ago.

It is also worth noting that a large portion of the Thai population being self-employed will also likely suffer given that their incomes will be unaffected (likely decrease if they have employees)

Small business is the cornerstone of any modern economy, accounting for almost 50% of U.S. GDP

The U.S. economy has reacted to minimum wage floors over the years by seeing an influx of illegal labor (primarily from Mexico).

How will the Thai economy react given that Myanmar is seeing Massive amounts of investment pouring in from the U.S and China and many of the undocumented Burmese workers in Thailand may soon be drawn back home due to an increase in the availability of jobs?

A massive increase in government spending needs to be balanced by an increase in government revenues. Given that government revenues will most likely decrease, the only logical way this policy can be financed is through debt.

[tlansford]

We all know where artificial price floors regarding labour lead! A few factors that may be considered:

- An increase in the minimum wage by 50% causes an increase in prices of non discretionary items (food, gas, etc.)

- Real purchasing power of minimum wage workers increases, while purchasing power of the lower middle class decreases.

- Inflation will make the already expensive imported goods even more out of reach

- Will make Thailand less competitive on the global market leading to a decrease in Foreign Direct Investment

- Substantially higher rate of unemployed

- Decreased in government revenue:

- Those making less that 150,000 baht/year tax exempt. After the minimum wage increase these people will still be tax exempt (no additional tax revenue from this demographic)

- Reduced net profits of private organizations and High earning individuals (shareholders, etc.) will lead to lower government tax revenues.

- How much more productive can an Asian factory worker be????

I mean seriously! This is like Greece on Steroids!

Apparently also, the starting salary for government workers with bachelor degrees will rise from 8,000 baht/month to 15,000 baht/month

Where is the money coming from???

You make many claims about the detrimental effects of raising the minimum wage without a shred of evidence. Just a couple of examples :

- higher gas prices - not minimum wage

- higher food prices ? non-processed food won't change due to min wage

- less competitive for FDI - a myth - most foreign companies don't pay min wage.

- higher unemployment ? Not due to minimum wage (note previous post - if a company can't pay 60 B more per day...)

- decreased gov( revenue ? How? Not due to the min wage

Minimum wage is exactly that - a minimum. It is a floor so that when a person works all day, that they have a chance to be able to feed and shelter themselves based on that pay.

Nothing more, nothing less.

On the other hand, one can see already from the news reports since the announcement, that companies will be exploiting this to raise prices (not due to the min wage) and blame it on the minimum wage hike. I have no doubt that this will happen in certain sectors.

[Jingthing]

Thailand can become a wealthier nation by increasing the productivity of its human capital. Yes, businesses should lay off some workers and find ways to get more value from the remaining workers. So much employment in Thailand is obviously socially based. You see all these massage shops with 30 people sitting around for hours, doing nothing, it's absurd.

[nietzche]

We all know where artificial price floors regarding labour lead! A few factors that may be considered:

- An increase in the minimum wage by 50% causes an increase in prices of non discretionary items (food, gas, etc.)

- Real purchasing power of minimum wage workers increases, while purchasing power of the lower middle class decreases.

- Inflation will make the already expensive imported goods even more out of reach

- Will make Thailand less competitive on the global market leading to a decrease in Foreign Direct Investment

- Substantially higher rate of unemployed

- Decreased in government revenue:

- Those making less that 150,000 baht/year tax exempt. After the minimum wage increase these people will still be tax exempt (no additional tax revenue from this demographic)

- Reduced net profits of private organizations and High earning individuals (shareholders, etc.) will lead to lower government tax revenues.

- How much more productive can an Asian factory worker be????

I mean seriously! This is like Greece on Steroids!

Apparently also, the starting salary for government workers with bachelor degrees will rise from 8,000 baht/month to 15,000 baht/month

Where is the money coming from???

You make many claims about the detrimental effects of raising the minimum wage without a shred of evidence. Just a couple of examples :

- higher gas prices - not minimum wage

- higher food prices ? non-processed food won't change due to min wage

- less competitive for FDI - a myth - most foreign companies don't pay min wage.

- higher unemployment ? Not due to minimum wage (note previous post - if a company can't pay 60 B more per day...)

- decreased gov( revenue ? How? Not due to the min wage

Minimum wage is exactly that - a minimum. It is a floor so that when a person works all day, that they have a chance to be able to feed and shelter themselves based on that pay.

Nothing more, nothing less.

On the other hand, one can see already from the news reports since the announcement, that companies will be exploiting this to raise prices (not due to the min wage) and blame it on the minimum wage hike. I have no doubt that this will happen in certain sectors.

With all due respect, you cannot seriously be questioning the cause and effect relationships here. This is economics 101. Pleas allow me to explain each of your points:

Higher gas prices: An unsubstantiated increase in the Thai money supply will lead to a relative devaluation in the currency (inflation). The amount of goods in the economy will remain stable meaning in simple terms that "we have more baht chasing the same resources" causing a relative increase in the price of the said resources. Commodity prices will increase when a domestic economy sees increased levels of inflation. Gas, food, grain, etc. are commodities. The prices are determined on the basis of global supply and demand. Therefore, with a devaluation of the Baht relative to other currencies, it will require more Thai Baht to purchase commodities.

Higher food prices: (Please see above explanation)

Less competitive for FDI: Increased labour costs lead to an increase in production costs. There is a proven statistical correlation between increases in production costs within a domestic economy and exports (Economics 101)

Higher unemployment: Companies will account for an increase in labour costs by reducing employees and (attempting) to increase worker productivity. Profit margins in manufacturing are already slim.

I am not saying that those on minimum wage in Thailand are not entitled to a higher quality of life (I believe they are), but this policy is contrary to generally accepted economic theory.

I am not trying to start an argument, however, the issues I raised regarding increases in commodity prices, inflation, increased unemployment, were also quoted in the original article.

[tlansford]

We all know where artificial price floors regarding labour lead! A few factors that may be considered:

- An increase in the minimum wage by 50% causes an increase in prices of non discretionary items (food, gas, etc.)

- Real purchasing power of minimum wage workers increases, while purchasing power of the lower middle class decreases.

- Inflation will make the already expensive imported goods even more out of reach

- Will make Thailand less competitive on the global market leading to a decrease in Foreign Direct Investment

- Substantially higher rate of unemployed

- Decreased in government revenue:

- Those making less that 150,000 baht/year tax exempt. After the minimum wage increase these people will still be tax exempt (no additional tax revenue from this demographic)

- Reduced net profits of private organizations and High earning individuals (shareholders, etc.) will lead to lower government tax revenues.

- How much more productive can an Asian factory worker be????

I mean seriously! This is like Greece on Steroids!

Apparently also, the starting salary for government workers with bachelor degrees will rise from 8,000 baht/month to 15,000 baht/month

Where is the money coming from???

You make many claims about the detrimental effects of raising the minimum wage without a shred of evidence. Just a couple of examples :

- higher gas prices - not minimum wage

- higher food prices ? non-processed food won't change due to min wage

- less competitive for FDI - a myth - most foreign companies don't pay min wage.

- higher unemployment ? Not due to minimum wage (note previous post - if a company can't pay 60 B more per day...)

- decreased gov( revenue ? How? Not due to the min wage

Minimum wage is exactly that - a minimum. It is a floor so that when a person works all day, that they have a chance to be able to feed and shelter themselves based on that pay.

Nothing more, nothing less.

On the other hand, one can see already from the news reports since the announcement, that companies will be exploiting this to raise prices (not due to the min wage) and blame it on the minimum wage hike. I have no doubt that this will happen in certain sectors.

With all due respect, you cannot seriously be questioning the cause and effect relationships here. This is economics 101. Pleas allow me to explain each of your points:

Higher gas prices: An unsubstantiated increase in the Thai money supply will lead to a relative devaluation in the currency (inflation). The amount of goods in the economy will remain stable meaning in simple terms that "we have more baht chasing the same resources" causing a relative increase in the price of the said resources. Commodity prices will increase when a domestic economy sees increased levels of inflation. Gas, food, grain, etc. are commodities. The prices are determined on the basis of global supply and demand. Therefore, with a devaluation of the Baht relative to other currencies, it will require more Thai Baht to purchase commodities.

Higher food prices: (Please see above explanation)

Less competitive for FDI: Increased labour costs lead to an increase in production costs. There is a proven statistical correlation between increases in production costs within a domestic economy and exports (Economics 101)

Higher unemployment: Companies will account for an increase in labour costs by reducing employees and (attempting) to increase worker productivity. Profit margins in manufacturing are already slim.

I am not saying that those on minimum wage in Thailand are not entitled to a higher quality of life (I believe they are), but this policy is contrary to generally accepted economic theory.

I am not trying to start an argument, however, the issues I raised regarding increases in commodity prices, inflation, increased unemployment, were also quoted in the original article.

I also am not interested in an argument. But I also understand economics 101, and, for example, an increase in the price of gasoline is definitely not related to the Thai minimum wage. And for FDI, sure the minimum wage is higher and which FDI will that really impact? Electronics? Automotive? Any other serious manufacturing operation? Very few pay the minimum wage, and for those which do, the increase of 60B/day will amount to (literally) a fraction of a bhat / piece increase in costs. Even the textile industry will be nominally affected because much of their work is piece-work and not covered by the minimum wage.

But it is clear that the business lobby will make hay out of this - they already received an across-the-board corp tax cut...

[nietzche]

We all know where artificial price floors regarding labour lead! A few factors that may be considered:

- An increase in the minimum wage by 50% causes an increase in prices of non discretionary items (food, gas, etc.)

- Real purchasing power of minimum wage workers increases, while purchasing power of the lower middle class decreases.

- Inflation will make the already expensive imported goods even more out of reach

- Will make Thailand less competitive on the global market leading to a decrease in Foreign Direct Investment

- Substantially higher rate of unemployed

- Decreased in government revenue:

- Those making less that 150,000 baht/year tax exempt. After the minimum wage increase these people will still be tax exempt (no additional tax revenue from this demographic)

- Reduced net profits of private organizations and High earning individuals (shareholders, etc.) will lead to lower government tax revenues.

- How much more productive can an Asian factory worker be????

I mean seriously! This is like Greece on Steroids!

Apparently also, the starting salary for government workers with bachelor degrees will rise from 8,000 baht/month to 15,000 baht/month

Where is the money coming from???

You make many claims about the detrimental effects of raising the minimum wage without a shred of evidence. Just a couple of examples :

- higher gas prices - not minimum wage

- higher food prices ? non-processed food won't change due to min wage

- less competitive for FDI - a myth - most foreign companies don't pay min wage.

- higher unemployment ? Not due to minimum wage (note previous post - if a company can't pay 60 B more per day...)

- decreased gov( revenue ? How? Not due to the min wage

Minimum wage is exactly that - a minimum. It is a floor so that when a person works all day, that they have a chance to be able to feed and shelter themselves based on that pay.

Nothing more, nothing less.

On the other hand, one can see already from the news reports since the announcement, that companies will be exploiting this to raise prices (not due to the min wage) and blame it on the minimum wage hike. I have no doubt that this will happen in certain sectors.

With all due respect, you cannot seriously be questioning the cause and effect relationships here. This is economics 101. Pleas allow me to explain each of your points:

Higher gas prices: An unsubstantiated increase in the Thai money supply will lead to a relative devaluation in the currency (inflation). The amount of goods in the economy will remain stable meaning in simple terms that "we have more baht chasing the same resources" causing a relative increase in the price of the said resources. Commodity prices will increase when a domestic economy sees increased levels of inflation. Gas, food, grain, etc. are commodities. The prices are determined on the basis of global supply and demand. Therefore, with a devaluation of the Baht relative to other currencies, it will require more Thai Baht to purchase commodities.

Higher food prices: (Please see above explanation)

Less competitive for FDI: Increased labour costs lead to an increase in production costs. There is a proven statistical correlation between increases in production costs within a domestic economy and exports (Economics 101)

Higher unemployment: Companies will account for an increase in labour costs by reducing employees and (attempting) to increase worker productivity. Profit margins in manufacturing are already slim.

I am not saying that those on minimum wage in Thailand are not entitled to a higher quality of life (I believe they are), but this policy is contrary to generally accepted economic theory.

I am not trying to start an argument, however, the issues I raised regarding increases in commodity prices, inflation, increased unemployment, were also quoted in the original article.

I also am not interested in an argument. But I also understand economics 101, and, for example, an increase in the price of gasoline is definitely not related to the Thai minimum wage. And for FDI, sure the minimum wage is higher and which FDI will that really impact? Electronics? Automotive? Any other serious manufacturing operation? Very few pay the minimum wage, and for those which do, the increase of 60B/day will amount to (literally) a fraction of a bhat / piece increase in costs. Even the textile industry will be nominally affected because much of their work is piece-work and not covered by the minimum wage.

But it is clear that the business lobby will make hay out of this - they already received an across-the-board corp tax cut...

I am somewhat open to your suggestions regarding FDI, however, I will not budge on the increase in commodity prices. The minimum wage is related to the money supply, which is "indirectly" related to the "consumption function". Those on lower incomes will consume a larger percentage of an increase in income on non-discretionary items causing a relative increase in commodity prices.

[redroo]

AND it won't even effect those CEO bonuses of a few mill each year.

The people of thailand deserve a lot better and more than being ript off and exsploited

by foreign corperations

[sparebox2]

Thailand can become a wealthier nation by increasing the productivity of its human capital. Yes, businesses should lay off some workers and find ways to get more value from the remaining workers. So much employment in Thailand is obviously socially based. You see all these massage shops with 30 people sitting around for hours, doing nothing, it's absurd.

Thailand can become a wealthier nation by devaluating the Baht. Suddenly I can have a lot more baht for my dollar pound franc escudo mark yen, rupee, etc overnight.

[DixiePig]

_{I own a small business in Chiang Mai and employ Thai workers. I support the increase. I do not currently pay 300B because my competitors don't. If we all have to it will be a level playing field. i will not leave Thailand because of this, indeed, perhaps the Thai worker will have more disposable income and spend it.}

Edited April 2, 2012 by metisdead
Font size reset to normal.

[DixiePig]

I would suggest that anyone opposed to the 300B minimum wage try to live on 150B per day. The opponents of this proposal all live a lot better than that

[birdpooguava]

Empirical evidence done by economists over the past 50 years has shown minimal correlation between increases in the minimum wage and increases in unemployment.

"..study after study shows that there is simply no evidence that raising the minimum wage has led to higher unemployment, and there is substantial evidence that a responsible minimum wage increase does not affect employment rates at all." Democratic Staff of the Committee on Health, Education, Labor and Pensions Committee, United States Senate, July 1, 2004,

[rubl]

Boonchai Charassangsomboon, executive director of the FPO's macroeconomic policy bureau, said the rise in the minimum wage to Bt300 per day for labourers and Bt15,000 per month for state officials would boost the inflation rate by a manageable level of about 0.7 percentage point. Meanwhile the wage policies will result in a 12-per-cent rise in overall income for the whole country, according to the office's calculation.

A 12% rise in overall income, but only a 0.7% increase in inflation. Maybe I should have studied Economics rather than Mathematics, but somehow this doesn't add up for me.

BTW I assume that the normal, yearly adjustment of the minimum wage has been done for all those not being lucky enough to work in one of the seven provinces where it's now 300B/day ?

[pattayaorganic]

I would suggest that anyone opposed to the 300B minimum wage try to live on 150B per day. The opponents of this proposal all live a lot better than that

You just don't get it. You are totally ignoring the powerful force of the market. Labor is the same as any other good in economic terms, decreased cost increases demand and visa versa. If you want to help the farmers and you think the price of rice is too low, you don't double the price of rice and use taxes to make up the difference. The market is already telling you that there is too much rice, if you increase the price signal, the result is even more unneeded rice. What Thai farmers need to do is diversify into other, higher value crops.

Similarly, if your goal is to improve the lot of the poorer workers, you don't just raise the mimimum wage (as those above economics 101, increased labor costs decrease labor demand). Please try to find me a peer reviewed economics paper that shows a clear overall benefit for increased minimum wage if you want to try to make this argument by looking at only one side of the equation.

If you want to improve the lot of the poor, study after study after study shows the same answer. You invest in EDUCATION which leads to higher PRODUCTIVITY and skills that are in demand can receive higher compensation for their work with a net overall economic benefit.

Just as it is futile for the government to go against market forces for rice prices, the same goes for labor. These mistakes have been repeated ad infinitum by many a government and the result is always the same.

So for those that want to poo poo about social fairness, the true social equity can ONLY come with EDUCATION and this means investment in exposing teachers to leading edge, proven education methods, infrastructure as libraries, a vocational education system to educate semi-skilled workers and the next generation of farmers, etc.

Then and ONLY THEN can Thailand enjoy true prosperity.

The sad thing is that the current government only pays lip service to helping the poor, but in the end, they get their votes and they couldn't care less about the true difficulties of the poor in this country. If I saw PT or even T taking sincere steps to addressing the real needs of the countries (esp. rural) poor, I would give them my full support.

Unfortunately that is not the case...

[birdpooguava]

Boonchai Charassangsomboon, executive director of the FPO's macroeconomic policy bureau, said the rise in the minimum wage to Bt300 per day for labourers and Bt15,000 per month for state officials would boost the inflation rate by a manageable level of about 0.7 percentage point. Meanwhile the wage policies will result in a 12-per-cent rise in overall income for the whole country, according to the office's calculation.

A 12% rise in overall income, but only a 0.7% increase in inflation. Maybe I should have studied Economics rather than Mathematics, but somehow this doesn't add up for me.

BTW I assume that the normal, yearly adjustment of the minimum wage has been done for all those not being lucky enough to work in one of the seven provinces where it's now 300B/day ?

Try reading The General Theory of Employment, Interest & Money then.

Edited April 2, 2012 by birdpooguava

[garrya]

I would suggest that anyone opposed to the 300B minimum wage try to live on 150B per day. The opponents of this proposal all live a lot better than that

You just don't get it. You are totally ignoring the powerful force of the market. Labor is the same as any other good in economic terms, decreased cost increases demand and visa versa. If you want to help the farmers and you think the price of rice is too low, you don't double the price of rice and use taxes to make up the difference. The market is already telling you that there is too much rice, if you increase the price signal, the result is even more unneeded rice. What Thai farmers need to do is diversify into other, higher value crops.

Similarly, if your goal is to improve the lot of the poorer workers, you don't just raise the mimimum wage (as those above economics 101, increased labor costs decrease labor demand). Please try to find me a peer reviewed economics paper that shows a clear overall benefit for increased minimum wage if you want to try to make this argument by looking at only one side of the equation.

If you want to improve the lot of the poor, study after study after study shows the same answer. You invest in EDUCATION which leads to higher PRODUCTIVITY and skills that are in demand can receive higher compensation for their work with a net overall economic benefit.

Just as it is futile for the government to go against market forces for rice prices, the same goes for labor. These mistakes have been repeated ad infinitum by many a government and the result is always the same.

So for those that want to poo poo about social fairness, the true social equity can ONLY come with EDUCATION and this means investment in exposing teachers to leading edge, proven education methods, infrastructure as libraries, a vocational education system to educate semi-skilled workers and the next generation of farmers, etc.

Then and ONLY THEN can Thailand enjoy true prosperity.

The sad thing is that the current government only pays lip service to helping the poor, but in the end, they get their votes and they couldn't care less about the true difficulties of the poor in this country. If I saw PT or even T taking sincere steps to addressing the real needs of the countries (esp. rural) poor, I would give them my full support.

Unfortunately that is not the case...

They probably don`t need your support so as your ideas. Let this alone, and see what happens. Anyone, who is a bit more intelligent knows that economic doctrines are options. Its don`t bring the same result in different environment. Nice idea to improve the education but I can hardly believe that Thailand will ever change their education system. The cost of living keeps rising, and have been rising sharply. How long should these people wait for higher salaries as their money worth far less then 2 years ago.

[tlansford]

Boonchai Charassangsomboon, executive director of the FPO's macroeconomic policy bureau, said the rise in the minimum wage to Bt300 per day for labourers and Bt15,000 per month for state officials would boost the inflation rate by a manageable level of about 0.7 percentage point. Meanwhile the wage policies will result in a 12-per-cent rise in overall income for the whole country, according to the office's calculation.

A 12% rise in overall income, but only a 0.7% increase in inflation. Maybe I should have studied Economics rather than Mathematics, but somehow this doesn't add up for me.

BTW I assume that the normal, yearly adjustment of the minimum wage has been done for all those not being lucky enough to work in one of the seven provinces where it's now 300B/day ?

the 70 other provinces received a 39.5 % increase in the min-wage and go to 300B/day January 1 2013.

[rubl]

Boonchai Charassangsomboon, executive director of the FPO's macroeconomic policy bureau, said the rise in the minimum wage to Bt300 per day for labourers and Bt15,000 per month for state officials would boost the inflation rate by a manageable level of about 0.7 percentage point. Meanwhile the wage policies will result in a 12-per-cent rise in overall income for the whole country, according to the office's calculation.

A 12% rise in overall income, but only a 0.7% increase in inflation. Maybe I should have studied Economics rather than Mathematics, but somehow this doesn't add up for me.

BTW I assume that the normal, yearly adjustment of the minimum wage has been done for all those not being lucky enough to work in one of the seven provinces where it's now 300B/day ?

Try reading The General Theory of Employment, Interest & Money then.

"The General Theory of Employment, Interest & Money

John Maynard Keynes

1935"

http://en.wikipedia....erest_and_Money