How Manufacturers In Thailand Are Coping With Minimum Wage Hike

[birdpooguava]

Unfortunately, there are people that actually believe that increasing minimum wage will help the poor. I have quoted above a very balanced and comprehensive research paper that shows overwhelmingly that minimum wage hurts the people that need it most. Please go back and read my posts. Last time I checked, Thailand, as most of the world is part of a free economy, not a socialist or communist system. You cannot adjust one side of an economic equation and get the expected result. If the blokes in Oz just sat around since childhood and drank whiskey everyday and never bothered to obtain any marketable skills, where do you think Australia would be today? Opposition to the increase in minimum is not equivalent to support for the oppression of Thailand's poor. Minimum wage is almost always a politically popular tool to promote populist policies and in the specific case of Thailand it can be argued quite effectively that is merely vote buying.

As for the question of what incentives to business owners have to increase productivity, profit, profit profit! Any increase in productivity will increase the owner's profit, and simultaneously reduce the demand for labor. However, if the worker has obtained marketable skills, and there are businesses that can exploit those skills for profit, then the system works in an overall positive way.

Thailand's population has about 50% of it in primary industry (farming) directly and indirectly. AEC is coming in a few short years. If Myanmar is open as it appears today, I would worry if I were Thai worker. In my experience, they speak more English, they have a better work ethic and will accept far lower wages than a similar Thai worker. Similarly, Lao farm workers will work for 1500B per month (I know because I employ them) and work 12h per day for that.

The workers that have already obtained some skills and are working in automotive or electronics industry are already making more than minimum wage so it is the farming sector and food processing industry, the true heartland of what is Thailand that will suffer the most. These are the exact people that PT purports to be helping.

I am involved in shrimp farming and aquaculture and I am seriously considering a move to Myanmar. Not today or tomorrow, but the labor situation in Thailand is horrendous. Just as the rice cutter stated above, it doesn't really matter how much you pay these workers these days. One of my farms has 120 workers last year. After New Year Holiday, only 60 returned. They just decided not to show up! And they are well taken care of, supplied with housing and food which if you count the monetary value of the total compensation package is way above minimum wage already.

The conclusion is that Thai workers are lazy and unreliable and getting worse. I don't blame them for this, but the current policy of the Red Shirts/PT is CERTAINLY exacerbating the situation. They just expect some hand outs without any desire to upgrade their skills or provide a valuable service to the business owner so he can afford to pay him a decent wage. This in combination with the terrible education system is the real heart of the problem.

Now if you want to spend loads of tax money training good teachers, providing a strong vocational infrastructure for educating the future generation of workers/farmers, then I am ALL FOR IT.

Increasing the minimum wage gets the politicians what they want, but doesn't get the poor anything. That is the reason for my vehement opposition.

Non-believers will soon have their proof in the pudding. You will see.

Now after that rant, perhaps you can tell us why virtually every country in the world has Minimum Wage legislation? Also explain to us why countries with similar GDP per capita have similar and in many cases higher minimum wage rates than Thailand.

Also statistics show the majority of Thai workers are employed in the informal sector, with the highest rates in the rural North-east. These are the ones you say "are lazy and unreliable and getting worse." Well maybe this is to do with their lack of rights, security & benefits and not the nature of the people. I have found at Industrial estates where unskilled workers are paid above minimum wage with good benefits their reliability and work ethic are excellent.

[kruangfaifar]

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.

I don't think so. After the rise in minimum wage was announced I read a quote from a Japanese manufacturer who said that the rise didn't concern them since they already pay all of their workers more than the new minimum. I suspect that is typical of many foreign manufacturers. Given how most manufacturing is automated as much as possible these days labour costs have an ever decreasing influence on the viability of a manufacturing facility. I would think that Thailand's BoI incentives and the availability of Infrastucture here have more of an influence on foreign investment than the cost of unskilled labour

Edited April 3, 2012 by kruangfaifar

[Johpa]

I am involved in shrimp farming and aquaculture and I am seriously considering a move to Myanmar. Not today or tomorrow, but the labor situation in Thailand is horrendous. Just as the rice cutter stated above, it doesn't really matter how much you pay these workers these days. One of my farms has 120 workers last year. After New Year Holiday, only 60 returned. They just decided not to show up! And they are well taken care of, supplied with housing and food which if you count the monetary value of the total compensation package is way above minimum wage already.

The conclusion is that Thai workers are lazy and unreliable and getting worse.

Ah, the musings of a true neo-sahib. As you imagine it, in your own magnificence, you imagine as having provided excellent care of your workers. Yet nearly half of your work force seems to disgaree. And then you brand them as lazy and unreliable over that disagreement. I nominate you for neo-sahib of the year. But hey, those Burmese illegals, commonly found in the fishing and shrimp industries, who have absolutely nothing but misery are willing to toil just for the protection from the Thai authorities. They just need to have that horrid speed drink to which they are all addicted in order to dull the misery and provide the will to work.

And yes, if Burma opens up these neo-sahibs will move their operations to Burma where the wages will be lower. And then, after a few years, once Burmans begin to demand a decent wage, they will cuss the Burmese and relocate once again to a more wretched land to find the cheapest labor. This pattern is most easily seen in the shoe business where the cost of moving the factory is quite marginal. This is what capitalism is all about: exploitation and extraction.

[geriatrickid]

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.

I don't think so. After the rise in minimum wage was announced I read a quote from a Japanese manufacturer who said that the rise didn't concern them since they already pay all of their workers more than the new minimum. I suspect that is typical of many foreign manufacturers. Given how most manufacturing is automated as much as possible these days labour costs have an ever decreasing influence on the viability of a manufacturing facility. I would think that Thailand's BoI incentives and the availability of Infrastucture here have more of an influence on foreign investment than the cost of unskilled labour

An astute farang lol

[Thai at Heart]

Of course it would be possible to generate a lot of demand by doing away with the 51:49 rule for foreign ownership. How mamy companies dont invrst here because of this anachronism?

But of course the silent 51 percent are looking out for the thai employees. This entire article is tosh, and they actively admit they need foreign labour. 300 baht a day it is and this ahould apply to cambodians or burmrse.

I was in a huge chicken processing factory the other day. 2 years old, all daily labour from cambodia. Neat idea if you can build 15 km on the cheapest land away from any village.

[geriatrickid]

Forgive me if I fail to share the enthusiasm for Burma. Limited infrastructure, poor logistics and an unstable regime. A foreign investor's worst nightmare. International sanctions have yet to be lifted and Burma is a long way off from normalization. I also draw attention to the Vietnamese dong devaluation combined with inflation and pressure from workers to increase wages. China is now experiencing labour issues as the workers demand higher wages. It seems to me, a simple working man, that this globalization thing is about to experience an adjustment as asian economies force higher wages to be paid. As the internal economies grow and consumer demand increases in China and Vietnam the desirability of low wage paying foreign investors is going to diminish. China is moving towards value added industries, e.g. the Airbus facilities and I don't think Frankie Farang and his running shoe factory with its 100 low paying wage jobs is going to have quite the cachet.

With all due respect to fish farmers and processors it's a stinky job. The work is difficult and boring, and the conditions are not pleasant. I've been in one of those shrimp processing plants. Damp, dark wooden building with a choking stench. I wouldn't want to work in one even if they paid me 5million baht. I've been in labs where we sliced and diced rotting bodies. At least we had air filtration, A/C, washing facilities, access to a cafeteria, and modern facilities.

Edited April 3, 2012 by geriatrickid

[Thai at Heart]

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.

I don't think so. After the rise in minimum wage was announced I read a quote from a Japanese manufacturer who said that the rise didn't concern them since they already pay all of their workers more than the new minimum. I suspect that is typical of many foreign manufacturers. Given how most manufacturing is automated as much as possible these days labour costs have an ever decreasing influence on the viability of a manufacturing facility. I would think that Thailand's BoI incentives and the availability of Infrastucture here have more of an influence on foreign investment than the cost of unskilled labour

An astute farang lol

Automation goes where it is profitable. Ther are plenty of foreign factories here using less automation than on pricier parts of the world for the simple reason that people here are cheap.

That doesn't mean many significant foreign investors will leave because of this. 10 usd per day is still barely above 1usd per hour

[bigbamboo]

Forgive me if I fail to share the enthusiasm for Burma. Limited infrastructure, poor logistics and an unstable regime. A foreign investor's worst nightmare. International sanctions have yet to be lifted and Burma is a long way off from normalization. I also draw attention to the Vietnamese dong devaluation combined with inflation and pressure from workers to increase wages. China is now experiencing labour issues as the workers demand higher wages. It seems to me, a simple working man, that this globalization thing is about to experience an adjustment as asian economies force higher wages to be paid. As the internal economies grow and consumer demand increases in China and Vietnam the desirability of low wage paying foreign investors is going to diminish. China is moving towards value added industries, e.g. the Airbus facilities and I don't think Frankie Farang and his running shoe factory with its 100 low paying wage jobs is going to have quite the cachet.

With all due respect to fish farmers and processors it's a stinky job. The work is difficult and boring, and the conditions are not pleasant. I've been in one of those shrimp processing plants. Damp, dark wooden building with a choking stench. I wouldn't want to work in one even if they paid me 5million baht. I've been in labs where we sliced and diced rotting bodies. At least we had air filtration, A/C, washing facilities, access to a cafeteria, and modern facilities.

And I believe all land in Burma is owned by the government, something which is unlikely to change in the short term at least.

[pattayaorganic]

Forgive me if I fail to share the enthusiasm for Burma. Limited infrastructure, poor logistics and an unstable regime. A foreign investor's worst nightmare. International sanctions have yet to be lifted and Burma is a long way off from normalization. I also draw attention to the Vietnamese dong devaluation combined with inflation and pressure from workers to increase wages. China is now experiencing labour issues as the workers demand higher wages. It seems to me, a simple working man, that this globalization thing is about to experience an adjustment as asian economies force higher wages to be paid. As the internal economies grow and consumer demand increases in China and Vietnam the desirability of low wage paying foreign investors is going to diminish. China is moving towards value added industries, e.g. the Airbus facilities and I don't think Frankie Farang and his running shoe factory with its 100 low paying wage jobs is going to have quite the cachet.

With all due respect to fish farmers and processors it's a stinky job. The work is difficult and boring, and the conditions are not pleasant. I've been in one of those shrimp processing plants. Damp, dark wooden building with a choking stench. I wouldn't want to work in one even if they paid me 5million baht. I've been in labs where we sliced and diced rotting bodies. At least we had air filtration, A/C, washing facilities, access to a cafeteria, and modern facilities.

GK, give me a effin' break. You are either a liar or it has been at least 50 years since you have been to a shrimp processing plant. In order for a modern shrimp processing plant to have a glimmer of hope marketing their products, they need GMP, HACCP, EU USFDA approvals. I will pay you a million baht right now if you can show me a "damp, dark wooden building with a choking stench" shrimp processing factory. I have been to nearly every shrimp processing plant in Thailand and I can absolutely guarantee you that nothing like you describe exists in this country. Are you sure you weren't in a nam pla factory?

A shrimp processing worker wears clean room clothes, works in a clean and air conditioned room, has company canteen and medical facilities (as required by international law) and MOST facilities in addition are achieving fair labor labels through labor governance policies.

Stop imagining things and please restrict your comments to something you actually know about.

[pattayaorganic]

I am involved in shrimp farming and aquaculture and I am seriously considering a move to Myanmar. Not today or tomorrow, but the labor situation in Thailand is horrendous. Just as the rice cutter stated above, it doesn't really matter how much you pay these workers these days. One of my farms has 120 workers last year. After New Year Holiday, only 60 returned. They just decided not to show up! And they are well taken care of, supplied with housing and food which if you count the monetary value of the total compensation package is way above minimum wage already.

The conclusion is that Thai workers are lazy and unreliable and getting worse.

Ah, the musings of a true neo-sahib. As you imagine it, in your own magnificence, you imagine as having provided excellent care of your workers. Yet nearly half of your work force seems to disgaree. And then you brand them as lazy and unreliable over that disagreement. I nominate you for neo-sahib of the year. But hey, those Burmese illegals, commonly found in the fishing and shrimp industries, who have absolutely nothing but misery are willing to toil just for the protection from the Thai authorities. They just need to have that horrid speed drink to which they are all addicted in order to dull the misery and provide the will to work.

And yes, if Burma opens up these neo-sahibs will move their operations to Burma where the wages will be lower. And then, after a few years, once Burmans begin to demand a decent wage, they will cuss the Burmese and relocate once again to a more wretched land to find the cheapest labor. This pattern is most easily seen in the shoe business where the cost of moving the factory is quite marginal. This is what capitalism is all about: exploitation and extraction.

A typical arm-chair quarterback. You also know quite close to nothing that you are commenting on. The assumption that most Burmese workers are illegal is simply not true. It is cheaper for us as employers to process the work permit legally that to be held hostage by the local mafia.

In addition, the largest employers of Burmese workers in the food industry are dependent upon exports for their revenue and it is just too risky in this market to employ illegals. We are perfectly happy with our Burmese (legal) workers. They are loyal, hard working, and our incentive program which gives the workers 1% of the crop revenue makes them quite well paid (if they do their job properly).

We have separate teams with Burmese and Thai workers (both have same compensation schemes) and the Burmese workers invariably outperform their Thai counterparts in all aspects. We have tried doubling the salary of Thai workers to try to create loyalty and reduce turnover and despite providing housing, food and an excellent salary, we just cannot find good quality Thai workers. The Thai University graduate management staff is also lacking in common sense and skills typical in the care of living things. They have a hard time just following instructions, whereas the Burmese university educated manager (if you can find one of these gems) is highly trained in the requisite skills to run a modern farming operation.

This has nothing to do with my "enslaving labor practices" and everything to do with the Thai education system and current culture of expecting a free lunch and hand outs for nothing.

[pattayaorganic]

Forgive me if I fail to share the enthusiasm for Burma. Limited infrastructure, poor logistics and an unstable regime. A foreign investor's worst nightmare. International sanctions have yet to be lifted and Burma is a long way off from normalization. I also draw attention to the Vietnamese dong devaluation combined with inflation and pressure from workers to increase wages. China is now experiencing labour issues as the workers demand higher wages. It seems to me, a simple working man, that this globalization thing is about to experience an adjustment as asian economies force higher wages to be paid. As the internal economies grow and consumer demand increases in China and Vietnam the desirability of low wage paying foreign investors is going to diminish. China is moving towards value added industries, e.g. the Airbus facilities and I don't think Frankie Farang and his running shoe factory with its 100 low paying wage jobs is going to have quite the cachet.

With all due respect to fish farmers and processors it's a stinky job. The work is difficult and boring, and the conditions are not pleasant. I've been in one of those shrimp processing plants. Damp, dark wooden building with a choking stench. I wouldn't want to work in one even if they paid me 5million baht. I've been in labs where we sliced and diced rotting bodies. At least we had air filtration, A/C, washing facilities, access to a cafeteria, and modern facilities.

And I believe all land in Burma is owned by the government, something which is unlikely to change in the short term at least.

Doesn't matter. They will give you 30, 60, or 90 year lease for your farming operation. Better than Thailand since you don't need to invest in land.

[pattayaorganic]

Well in the case of shrimp farming , I think the situation is a bit unique in that shrimp farming is actually quite profitable right now and we are able to offer workers significantly higher than even 300b per day and still make good money, so the issue is not so much the cost of labor as it is the reliability of the labor. The Thai laborer of late is very fickle and will decide to just not show up one day. Our choice for a solution is to either import the workers, move the operation to a country with a more reliable workforce, or automate.

Fortunately automation technology for shrimp farming is coming online that makes the most labor intensive aspect of prawn farming totally automated, so we may be able to stay in Thailand, but we will be dramatically reducing our work force. As a company, I am happy as I can be. What worries me is the social aspects the current labor policies. Giving people an education and training and giving them a job that they can show pride in, is important to the future of this country in my humble opinion.

[TAWP]

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

Do tell, how is anyone being exploited by foreign corporations in Thailand?

[TAWP]

"The General Theory of Employment, Interest & Money

John Maynard Keynes

1935"

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

Yeah I know when it was written & where to access it. Could you then tell me which theory the recent massive stimulus spending around the world was based on?

Based on the flawed thinking in Keynesian economy and Corporatist govern of the nations, many has bailed out corporations that should have been allowed to failed.

[TAWP]

Unfortunately, there are people that actually believe that increasing minimum wage will help the poor. I have quoted above a very balanced and comprehensive research paper that shows overwhelmingly that minimum wage hurts the people that need it most. Please go back and read my posts. Last time I checked, Thailand, as most of the world is part of a free economy, not a socialist or communist system. You cannot adjust one side of an economic equation and get the expected result. If the blokes in Oz just sat around since childhood and drank whiskey everyday and never bothered to obtain any marketable skills, where do you think Australia would be today? Opposition to the increase in minimum is not equivalent to support for the oppression of Thailand's poor. Minimum wage is almost always a politically popular tool to promote populist policies and in the specific case of Thailand it can be argued quite effectively that is merely vote buying.

As for the question of what incentives to business owners have to increase productivity, profit, profit profit! Any increase in productivity will increase the owner's profit, and simultaneously reduce the demand for labor. However, if the worker has obtained marketable skills, and there are businesses that can exploit those skills for profit, then the system works in an overall positive way.

Thailand's population has about 50% of it in primary industry (farming) directly and indirectly. AEC is coming in a few short years. If Myanmar is open as it appears today, I would worry if I were Thai worker. In my experience, they speak more English, they have a better work ethic and will accept far lower wages than a similar Thai worker. Similarly, Lao farm workers will work for 1500B per month (I know because I employ them) and work 12h per day for that.

The workers that have already obtained some skills and are working in automotive or electronics industry are already making more than minimum wage so it is the farming sector and food processing industry, the true heartland of what is Thailand that will suffer the most. These are the exact people that PT purports to be helping.

I am involved in shrimp farming and aquaculture and I am seriously considering a move to Myanmar. Not today or tomorrow, but the labor situation in Thailand is horrendous. Just as the rice cutter stated above, it doesn't really matter how much you pay these workers these days. One of my farms has 120 workers last year. After New Year Holiday, only 60 returned. They just decided not to show up! And they are well taken care of, supplied with housing and food which if you count the monetary value of the total compensation package is way above minimum wage already.

The conclusion is that Thai workers are lazy and unreliable and getting worse. I don't blame them for this, but the current policy of the Red Shirts/PT is CERTAINLY exacerbating the situation. They just expect some hand outs without any desire to upgrade their skills or provide a valuable service to the business owner so he can afford to pay him a decent wage. This in combination with the terrible education system is the real heart of the problem.

Now if you want to spend loads of tax money training good teachers, providing a strong vocational infrastructure for educating the future generation of workers/farmers, then I am ALL FOR IT.

Increasing the minimum wage gets the politicians what they want, but doesn't get the poor anything. That is the reason for my vehement opposition.

Non-believers will soon have their proof in the pudding. You will see.

Now after that rant, perhaps you can tell us why virtually every country in the world has Minimum Wage legislation? Also explain to us why countries with similar GDP per capita have similar and in many cases higher minimum wage rates than Thailand.

Also statistics show the majority of Thai workers are employed in the informal sector, with the highest rates in the rural North-east. These are the ones you say "are lazy and unreliable and getting worse." Well maybe this is to do with their lack of rights, security & benefits and not the nature of the people. I have found at Industrial estates where unskilled workers are paid above minimum wage with good benefits their reliability and work ethic are excellent.

Countries have minimum wage legislation do bring in votes from the electorate. Nothing more.

It is NOT done in the interest of the consumers.

[nietzche]

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

Do tell, how is anyone being exploited by foreign corporations in Thailand?

Those Thai's being exploited in the labour market are being exploited by Thai's, not foreigners. I'm sure if you asked any Thai if they would rather work for a Thai or a faring, the answer would be the latter.

[sparebox2]

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

Meals cost 25 baht, max 30 Baht. 3 meals a day means that even if you earn 100 baht a day, you still have spare.

[hyperdimension]

An increase in the minimum wage for all Thais is great as long as its a nett increase. Whats the point of increasing their wage then eroding it through increased taxes, inflation and decreased services. For example they increase the minimum wage but decrease company taxes to compensate. Then to replace the lost revenue from increased public servant wages and decreased company taxes they reduce the petrol, cooking oil ect subsidies.

The net increase is in the profits of the businesses of the Shinawatra clan largely due to the huge reduction in the corporate tax rate.