Wage Rise Will Sink 10 pct Of SMEs: Thai Chamber Of Commerce

[webfact]

ELECTION CAMPAIGN'S PROMISE

Wage rise will sink 10% of SMEs: TCC

PETCHANET PRATRUANGKRAI

THE NATION

BANGKOK: -- At least 10 per cent of the 2.2 million SMEs in the country - about 200,000 - would be forced to shut down or move out to other countries within half a year after the minimum wage was bumped up to Bt300 this month, a leading businessman has claimed.

"About 98 per cent of all companies will suffer from the higher wage as they are SMEs. Construction and security will be hurt the most since they have made advanced contracts for a job, but they have to increase their spending on staff," Bhumindr Harinsult, vice chairman of the Thai Chamber of Commerce, said yesterday.

The TCC reported that about 5.6 per cent of all SMEs - companies employing 1-25 workers - would go out of business and 5 per cent would relocate overseas, as they cannot shoulder the higher costs in this country following the government's policy to boost wages.

The higher wages would create difficulties for most enterprises as they would need to shoulder higher labour costs, but their return would remain unchanged.

According to the chamber's study, only 1 per cent of all companies would feel no pressure from the wage hike, and those are large firms with more than 500 workers. Bhunmindr said the higher wage policy - which did not get the nod of the tripartite wage committee but came from the government's propaganda during the general election - will scare off foreign direct investment.

FDI to Thailand would drop by 25 per cent from the average of Bt400 billion a year. Some foreign investors, particularly those in labour-intensive industries, would look at other countries in Asean with lower personnel costs.

The impact would be more severe early next year as the Bt300 wage hike is applied nationwide, he said.

The chamber urged the government to set up a fund to help SMEs in particular.

The fund may subsidise the cost of workers for SMEs for a period so that they have more time to adjust.

The government should also reduce regulations to facilitate trade and implement quickly the plan to improve the efficiency and productivity of companies, especially SMEs.

Thailand should also urgently develop its education system to improve human resource productivity along with the higher wages.

The chamber warned the government to carefully consider the wage hike policy in the future, as it will create a huge impact on all industries. The government should not use wage hikes to gain popularity during elections. Any policy to adjust wage costs should be based on a fair agreement among all stakeholders.

Agriculture is the biggest employer with 38.2 per cent of the country's workforce, followed by services with 24.7 per cent, industry with 20.7 |per cent and trading with 16.4 percent.

-- The Nation 2012-04-03

[webfact]

100,000 SMEs likely to close down

BANGKOK, April 3 – The Thai Chamber of Commerce (TCC) projects that about 5.6 per cent of the country’s small- and medium-sized enterprises (SMEs) nationwide or about 100,000 businesses will be forced to close in the next six months following the daily minimum wage hike which took effect April 1, TCC Vice Chairman Phumin Harinsuth said.

Raising the daily minimum wage by 40 per cent in 70 provinces and 300 baht in seven pilot provinces will adversely impact the nation’s smaller businesses—SMEs--which employ from 1-25 workers, accounting for 98 per cent of the country's SMEs as the increase will affect 60 per cent of their production cost.

However, it will not have a significant impact to cause unemployment as Thailand still lacks 2-3 million labourers and must import migrant workers.

According to a survey on the daily minimum wage rise, entrepreneurs supporting the higher minimum wage are those depending more on machines, so they are not much affected.

Meanwhile, those who oppose the increase argued that the government has no measures to improve their workers’ work performance.

The impact of the minimum wage can be seen in security service businesses having 3-5 year employment contracts as well as construction businesses.

Meanwhile, University of Thai Chamber of Commerce (UTCC) Economic and Business Forecasting Center director Thanawat Polwichai said that consumer confidence in March improved for the fourth consecutive month.

However, the public are still concerned over the higher cost of living, rising fuel prices and political problems.

Regarding Saturday's car bomb in Songkhla’s Hat Yai business district, he said it must be assessed again but initially, it is considered as a short-term impact on a particular location and is not likely to affect the whole country. (MCOT online news)

-- TNA 2012-04-03

[noitom]

The Thai owner of this "shoe manufacturing" subcontractor is not sweating the minimum wage increase. Notice the doorway leading to the dirt alley. His contracted local security guard makes sure no one gains unauthorized admittance to check out compliance with standards. These child workers will continue to get their daily rate, some food, and nothing if they don't show up due to illness.

They sit all day like that making those great brand name knockoffs while the Thai boss feigns "financial strain and pressure" and arrives daily to check the work production and to hand out the daily piece work pay rate based on how many they made. The Thai boss responsible for this "factory" is the main part of the problem. The minimum wage increase may just be the vehicle that gets a lot of these Thai manufacturing charlatans out of the business. This photograph is a great example of the robust and professional Thai manufacturing sector, based on the notion that a Thai can get rich by exploiting the poor and child workers.

[Thai at Heart]

Stop importing labour would a start maybe?

[geriatrickid]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum.com/articles/interview-with-john-schmitt-of-the-center-for-economic-and-policy-research

[OzMick]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

" It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies."

Would that include small scale rice-farmers?

Do you remember your post where you claimed to "selectively obey" Thai laws?

[jonclark]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

GK - But that research focuses on low paid work in the US ("low wage work in rich countries" - para 1.). The situation here is low wage work in a poor(er) country, so it isn't entirely directly comparable with this situation.

I agree entirely that a minimum wage of 300 baht is a perfectly reasonable expectation however I feel that many Thai workers feel that this new wage is their right (as they voted for it) and is not (in their mind) linked to their increased productivity. It is in effect a reward for their vote and that is a real concern

[welbymd]

Any wage increase will be passed on to the consumer or end user of any particular product. There may be some market under cutting, depending on which province or city a company/business is located. Higher wages versus cost increases will negatively effect the poorer people in the poorer provinces. That's just about the way it always goes. Wages may go up, but real income remains porportionally the same after factoring in buying power.

Statement that 100,000 business will go under seems greatly exagerated. Same goes for small businesses leaving Thailand. I would think if the business' fiscal bottom line is that small, it is bound to fail in any event.

I also agree that there almost appears to be a form of vote buying associated with this wage increase. I don't blame anybody for wanting or finally receiving a higher wage, but in most places, this amount (percentage wise) would be accomplished over a period of time and not in one fell swoop.

[givenall]

I am sure the government don’t really care about SME. them and their friends don’t own any SME, they only care about the very large companies any way

[Thai at Heart]

Stop importing foreign labour and paying them under the wage limit.

[bigbamboo]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

" It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies."

Would that include small scale rice-farmers?

Do you remember your post where you claimed to "selectively obey" Thai laws?

I thought all Thais selectively obeyed Thai laws. The GK has simply gone native!

[geriatrickid]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

" It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies."

Would that include small scale rice-farmers?

Do you remember your post where you claimed to "selectively obey" Thai laws?

????

Small rice farmers will not be impacted by the wage increases as the labour is almost always family. One of my temps from Issan always returns for rice growing season. Small subsistence farm.

Personally, I think it would not be so bad to get rid of some of the smaller rice farms or at least organize them into co-ops.

BTW the terms of my employment require me to obey the law. Any serious criminal act anywhere in the world could cost me my job. When there is a conflict in the law, the governing jurisdiction is my employer's.

[geriatrickid]

I thought all Thais selectively obeyed Thai laws. The GK has simply gone native!

i make no mention of obeying laws, but I do refer to actual economic reality.

And yes I have partially gone native. I am sitting here, no A/C and in barefeet.

[geriatrickid]

I am sure the government don’t really care about SME. them and their friends don’t own any SME, they only care about the very large companies any way

And I am sure you are wrong as you offer no corroborating evidence of such a position.

Edited April 3, 2012 by geriatrickid

[bigbamboo]

I thought all Thais selectively obeyed Thai laws. The GK has simply gone native!

i make no mention of obeying laws, but I do refer to actual economic reality.

And yes I have partially gone native. I am sitting here, no A/C and in barefeet.

Business is bad, eh?

[Thai at Heart]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

" It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies."

Would that include small scale rice-farmers?

Do you remember your post where you claimed to "selectively obey" Thai laws?

????

Small rice farmers will not be impacted by the wage increases as the labour is almost always family. One of my temps from Issan always returns for rice growing season. Small subsistence farm.

Personally, I think it would not be so bad to get rid of some of the smaller rice farms or at least organize them into co-ops.

BTW the terms of my employment require me to obey the law. Any serious criminal act anywhere in the world could cost me my job. When there is a conflict in the law, the governing jurisdiction is my employer's.

Well fertiliser will go up with the oil price. Of course, those wanting to devalue the baht don't quite seem to see the linkage. Co-ops are the way forward, but the moment you mention that the Agriculture ministry gets all funny and imagines Mao's great leap forward. They like the little guys all small and separated, just the way the big boys like it.

[Hyponeros]

What? Instead of doing 95% profit they will make only 90%? I understand how unbareble that must be!

[belg]

as soon as burma is getting better/stronger many maids/gardeners/construction workers/factory people will go home and make the thai work themselves

if they claim the production has to go up (can ?) by 10% ; why did it not on the old salary ?

they will not start to work better/quicker suddenly when their salary doubles

[monty]

People seem to forget that it is not only minimum wage workers who get a bump in salary!

For example,as of today a Thai food cook has the wage bumped up from 280 to 400 Baht. A Thai food chef cook goes from 360 to 510 Baht.

E.g. In construction, a starting carpenter gets a smaller bump from 300 to 335 Baht.

Overall SME will feel this pretty hard...

Posted with Thaivisa App http://apps.thaivisa.com

[tlansford]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

GK - But that research focuses on low paid work in the US ("low wage work in rich countries" - para 1.). The situation here is low wage work in a poor(er) country, so it isn't entirely directly comparable with this situation.

I agree entirely that a minimum wage of 300 baht is a perfectly reasonable expectation however I feel that many Thai workers feel that this new wage is their right (as they voted for it) and is not (in their mind) linked to their increased productivity. It is in effect a reward for their vote and that is a real concern

it is a minimum wage and hence by definition not linked to productivity. It is linked to doing a job all day.

If an employer has a job that needs to be done all day, it costs at least 300 B.

An easy calculation to make.

[tlansford]

This is fear-mongering and outright lies from the business lobby - but it doesn't stop them from asking the government for a handout (as if the drop in the corp tax rate was not enough) :

Fear-mongering :

At least 10 per cent of the 2.2 million SMEs in the country - about 200,000 - would be forced to shut down or move out to other countries within half a year after the minimum wage was bumped up to Bt300 this month, a leading businessman has claimed.

...

The TCC reported that about 5.6 per cent of all SMEs - companies employing 1-25 workers - would go out of business and 5 per cent would relocate overseas, as they cannot shoulder the higher costs in this country following the government's policy to boost wages.

...

Some foreign investors, particularly those in labour-intensive industries, would look at other countries in Asean with lower personnel costs.

1 & 2 above : 10-11% of the companies will go belly up or leave Thailand - this is just blatant fear-mongering. But hey, let's check back next year and see how far off their prediction was.

3) this is already happening. On one hand, the only alternative is to pay the same wages at Burma / Vietnam, or hey, why stop there, pay the same wages as in Africa...

But it avoids the point that wages are already increasing in all the neighboring countries and in China, too.

Lies :

The higher wages would create difficulties for most enterprises as they would need to shoulder higher labour costs, but their return would remain unchanged.

...

Bhunmindr said the higher wage policy - which did not get the nod of the tripartite wage committee but came from the government's propaganda during the general election - will scare off foreign direct investment. FDI to Thailand would drop by 25 per cent from the average of Bt400 billion a year.

1) and what about the dramatically lower corp tax rates? Their "return" will definitely be higher. In addition, it ignores that 60B/day per worker will amount to production cost increases for most companies of a fraction of a Bhat / unit production.

2) outright lie, as the government does not have the authority to set the minimum wage, this must be done by the wage committee. The second point about FDI is not an outright lie due to the fact that he is making a prediction, but his predicting a drop of Bt100 bilion / year is so outlandish that it nearly qualifies as an outright lie.

But the TCC is not above a little "Corporate begging"

The chamber urged the government to set up a fund to help SMEs in particular.

The fund may subsidise the cost of workers for SMEs for a period so that they have more time to adjust.

The government should also reduce regulations to facilitate trade and implement quickly the plan to improve the efficiency and productivity of companies, especially SMEs.

The TCC should be ashamed.

[jonclark]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

GK - But that research focuses on low paid work in the US ("low wage work in rich countries" - para 1.). The situation here is low wage work in a poor(er) country, so it isn't entirely directly comparable with this situation.

I agree entirely that a minimum wage of 300 baht is a perfectly reasonable expectation however I feel that many Thai workers feel that this new wage is their right (as they voted for it) and is not (in their mind) linked to their increased productivity. It is in effect a reward for their vote and that is a real concern

it is a minimum wage and hence by definition not linked to productivity. It is linked to doing a job all day.

If an employer has a job that needs to be done all day, it costs at least 300 B.

An easy calculation to make.

Not such an easy calculation to make when the answer results in people potentially being laid off or the company (10% of SMEs if the OP is corrrect) going under.

[tlansford]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

GK - But that research focuses on low paid work in the US ("low wage work in rich countries" - para 1.). The situation here is low wage work in a poor(er) country, so it isn't entirely directly comparable with this situation.

I agree entirely that a minimum wage of 300 baht is a perfectly reasonable expectation however I feel that many Thai workers feel that this new wage is their right (as they voted for it) and is not (in their mind) linked to their increased productivity. It is in effect a reward for their vote and that is a real concern

it is a minimum wage and hence by definition not linked to productivity. It is linked to doing a job all day.

If an employer has a job that needs to be done all day, it costs at least 300 B.

An easy calculation to make.

Not such an easy calculation to make when the answer results in people potentially being laid off or the company (10% of SMEs if the OP is corrrect) going under.

Many people here on TVF are in business. Are they really 60B/employee/day away from going out of business?

The TCC is making a ridiculous claim.

[Sing_Sling]

At least 10 per cent of the 2.2 million SMEs in the country - about 200,000 - would be forced to shut down or move out to other countries within half a year after the minimum wage was bumped up to Bt300 this month, a leading businessman has claimed.

FDI to Thailand would drop by 25 per cent from the average of Bt400 billion a year. Some foreign investors, particularly those in labour-intensive industries, would look at other countries in Asean with lower personnel costs.

My company pays above average wages and salaries . . . and we feel no pressure. Perhaps the 'secret' is doing it right and for the owners of these 'SMEs' to not pocket it all themselves.

Edited April 3, 2012 by Sing_Sling

[vijer]

"The TCC reported that about 5.6 per cent of all SMEs - companies employing 1-25 workers - would go out of business and 5 per cent would relocate overseas, as they cannot shoulder the higher costs in this country following the government's policy to boost wages"

55555 Really? They have 1-25 employees and can't afford to pay their employees more or raise their prices, but they can afford to shut down and open up business in another country! Overseas even! And then ship their product where?

Maybe I'm daft/uninformed, but I would assume that a company with 1-25 employees is most likely selling its products in Thailand to Thai's. Likely manufacturing furniture, pottery, crap electronics, lamps, etc. With the exception of the Chinese who are mass producing similar products where's the competition with substantially lower costs?

So the cost of an employee making $10 more a DAY can't be overcome. Must be some really shit workers. Oh and how are those security companies mentioned in the article going to relocate? Sure maybe they have contracts, will go out of business (to void the contract) and then open up a new company under a new name doing the same business ... that's how the honorable big businesses and governments do it in other countries.

Sounds like fear mongering to me.

Edited April 3, 2012 by vijer

[geriatrickid]

GK - But that research focuses on low paid work in the US ("low wage work in rich countries" - para 1.). The situation here is low wage work in a poor(er) country, so it isn't entirely directly comparable with this situation.

I agree entirely that a minimum wage of 300 baht is a perfectly reasonable expectation however I feel that many Thai workers feel that this new wage is their right (as they voted for it) and is not (in their mind) linked to their increased productivity. It is in effect a reward for their vote and that is a real concern

I don't know about the mindset of the Thai worker, but I can share a real life example. (BTW I am not arguing against your point because I think it's a reasonable question.)

My friend's room rent here in Patong was 5500 baht/month 2 years ago +water & electricity. Last year it increased to 6500 baht. The landlady wants 7500 baht this year. He is trying to negotiate it down because he just doesn't have the income. His salary has not increased in 2 years. He makes a modest Thai salary of just under 16,000 baht. On this salary he has to support a crippled father (from a work injury) and a mother with a serious heart condition. He lives a modest lifestyle with no partying etc. He is still paying off his student loan with a balance in excess of 100,000 baht. Food is expensive in Phuket. His girlfriend is a university student with a part time job that goes to pay her tuition and subsistence. She' can't contribute to the rent. That's the face of the typical Thai worker. He lives stressed out every day trying to make ends meet.

To all those foreigners that are dismissing the concept of an attempt to provide a living wage, I suggest that they try to live on 300 baht in Phuket. It's not much of a life. I know I couldn't do it.

[Orac]

I would be interested how 5% of these SME will move overseas. Firstly the relocation costs would be far higher than any impact of the higher wages given that they have less than 25 employees of which some are probably on more than a minimum wage. Also I am not exactly sure how you can relocate most of these businesses overseas. Certainly industries such as agriculture and construction would find this difficult and, as far as SMEs are concerned, service industries tend to be fairly static.

[RKASA]

The SME's I have seen around here could save a lot if they stopped using the hired to do personal chores - laundry - yard work etc. If they are hired to make things then make things. A few years ago an SME my sister in law worked at had her baby setting in the afternoon after baking all morning - I am sure they wrote that off on the taxes too. Mixing funds is maybe a term they never concerned themselves with. I bet 10% of SME's don't even know what the real cost of their labor even is. Beside 7% of the increase will be in VAT by sundown every payday and that will make up some of the tax that SME's don't pay out of the cooked books they run. In the end it is win win for those that matter.

[pattayaorganic]

Wow, they are using the outdated arguments that really have never been proven in other countries when minimum wages increased.

Don't lose site of the fact that many of these marginal businesses are local and they exist by undercutting other firms that invest in product quality, responsible management and ethical HR practices. It would do the economy some good to be rid of a large number of marginal inefficient and/or bad companies.

China is currently experiencing labour issues as workers demand higher wages. Even, Vietnam is seeing wages increase and suffers from inflation. Please do not play the "but the jobs will leave" song as it won't apply. BTW there is a labour shortage in Thailand with too much reliance on the exploitation of Burmese labourers. It is time for many Thais and foreign businesses to stop being so greedy. (And for the record I am a fiscal conservative and am not a commie.)

Economist John Schmitt says it best;

A lot of small businesses are focused on local markets. They prosper as the local economy prospers. One of the best ways we can jump start that is get more money into the hands of low- and middle-income consumers, who spend all that they get.

"There are a lot of ways to run a business that is profitable. One way: Take the low road and pay employees poorly, and you have high turnover. So you pay in cost and productivity. Meanwhile, firms that operate on the high road strategy pay more, but in exchange they have…good workers who stick around and have good productivity.’’

http://www.openforum...policy-research

Actually you are completely wrong here and this is out of context. When you let the MARKET decide what to pay workers, better quality workers will gravitate to higher paying employers. However, the current government policy, just put the cart before the horse, i.e. used the law to implement minimum wage without investing anything into education or taking any steps to improve labor productivity. Since it is now a level playing field, the above no longer applies.

Edited April 3, 2012 by pattayaorganic

[USNret]

Keeping in mind that the Chamber of Commerce represents business, it is not an unbiased organization... I have seen this same, tired argument from U.S.companies over the past 40 years of steady increase of the minimum wage. Each time, the mantra was "Jobs will flee; woe is us". Yeah, the job market collapsed recently, but not because of wages. It was due to the greed & overextending of banks & big business.

In the end, higher wages = increased consumption which is something every business owner should embrace. If they could see two inches beyond their immediate payroll spreadsheet.