Wage Increase In Thailand Begins To Bite

[webfact]

Wage increase begins to bite

THE NATION

Workers laid off in some factories as hike rolls nationwide

BANGKOK: -- Hundreds of workers have already lost their full-time jobs and many more are facing the axe in the wake of the government's much-touted policy to raise the daily minimum wage to Bt300.

Although the new wage rate only took effect nationwide on Tuesday, lays-off are already being reported. A number of businesses have also begun relocating their manufacturing bases to neighbouring countries such as Cambodia, where wage levels are much lower.

In Buri Ram, two garment factories have laid off more than 120 workers. In Si Sa Ket, more than 50 workers visited the local premises of the Social Security Office (SSO) yesterday to claim unemployment benefits under the social security scheme. Officials, meanwhile, are busy answering phone calls from employers who are planning to put a halt to hiring in the face of the sharp wage hike.

Elsewhere, the climate of job insecurity has spread to labour-intensive factories, where employers are clearly struggling with the big rise in operating costs. The Bt300 minimum wage is being cited in many quarters as the main cause of the problem.

Unlike in the seven large provinces that saw an early launch of the minimum wage last April, many of the 70 less-industrialised provinces are finding it extremely difficult to cope with the wage hike. The wage hike here has been especially sharp given that the daily minimum wage in these provinces had been much lower than Bt300. The old wage rates in the rest of the country were far lower than those offered in the big provinces such as Bangkok.

"Many employers are definitely unable to pay Bt300 a day to their workers. So they have now reduced the number of workdays from six to just four a week," Lamphun Chamber of Commerce secretary-general Narong Thammajaree said yesterday.

Atiphum Kamthornworarin, honorary chairman of Lampang's Federation of Thai Industries branch, complained that employers would not be able to shoulder the wage hike because workers would still only deliver the same quantity and quality of work per day as before.

"Several employers are now paying their workers according to the amount of work they do instead," he said.

He said if the employers did not change employment conditions, the daily minimum wage of Bt300 could have thrown them out of business.

In Nakhon Pathom, more than 80 workers arrived at work yesterday only to find their factory had suddenly closed. They now fear the worst.

"Is this our New Year gift?" worker Mantana Sa-thong-ord asked sarcastically.

She said that instead of receiving the higher wage, she and her colleagues were now facing imminent dismissal.

Director-general of the Department of Labour Protection and Welfare Pakorn Amorncheewin has so far insisted that the overall employment situation remains normal.

"There's no sign of massive layoffs," he said. Most of the factories that were now closing down had long been operating in the red, he added.

Pakorn promised that his department would help laid-off workers claim the compensation and benefits to which they were entitled.

"In addition, the SSO will offer unemployment benefit, and the Employment Department can help workers find new jobs," he said.

Labour Minister Phadermchai Sasomsap said the government had already provided several measures, including the cut in corporate income tax and free training to help employers cope with the sharp wage hike, and was preparing to introduce more.

Phadermchai will meet with Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong today to consider additional measures.

PM's Office Minister Nivattha-mrong Boonsongpaisal said the government was closely assessing the impacts of the rise in the minimum wage. Phadermchai said the policy's impacts should be clear by March.

A Myanmarese worker in Ranong who gave his name as Jila yesterday lamented that he would lose his job because his employer of three years could not afford to pay Bt300 a day.

-- The Nation 2013-01-04

[mccw]

Maybe PTP is thinking its not a shortage of labour problem that thailand has, but an oversupply of jobs issue! Anyhow, its far easier to bribe the electorate legally and directly through unemployment "benefits" rather than all that pesky cash that can go missing on the way; you know you just can't get the staff these days ;(

[Chao Lao Beach]

Buriram is Issan in my book, which is the reds heart land, kind of an Oppps one might say !!!

These kind of thing can be a blessing in disguise for many people,get them out of their comfort one and make them get some skilled training that change their life for the better. Maybe the staff in this case do not agree though which is fair enough if the come from almost zero opportunity.

It seems two extreams, shops in Bangkok have 6 staff when they require 1 or 2, yet I believe that some factory workers and labours work incredibly hard in Thailand.

Edited January 4, 2013 by Chao Lao Beach

[BEVUP]

OK look at it this way

Decrease staff = decreased production = same boat

[slapout]

OK look at it this way

Decrease staff = decreased production = same boat

Maybe you can explain and justify you equation to the private, national, and international companies who have had "reduction of force" and managed to maintaine productivity, gross income, while watching their profit margin increase.

[waza]

Great policy, large wages rises without any compensation from increased productivity, a formula for failure. This scheme will increase the debt burden on the Thai treasury as unemployement rises and so will the claims for unemployement. It further erodes the tax base, therefore less income and larger expenditure and a pool of disgruntled unemployed people. A formula for increased popularity for the PTP, not.

[Ricardo]

It can't be all bad, that employers will be looking for a meaningful day's work, in return for a higher day's pay, something they should have been doing already & certainly should have been top-of-their-list for the past eighteen months, in the better-run businesses.

Hopefully the displaced workers will find jobs elsewhere quickly, although this may require retraining or moving, to wherever the need for labour really is.

Oh, and Yay for Red-Shirt 'pre-election promises', when they finally (18 months later) get the money, it's already been eroded by rising inflation, and might also cost you your job as well !

Standby for more squeals & pleas for further government-help, from the employers, as reality bites ! And also from the many who are experiencing the price-rises, but who don't have the luxury of a daily-paid job, the poor are still with us despite the politicians' promises.

Edited January 4, 2013 by Ricardo

[scotto]

many businesses will move to cambodia and the likes

the cambodian government must be loving this move by the thai

government

[seajae]

There is nothing wrong with pay increases but to make it so big is a bit of a worry to some businesses, especially with no offsets in the amount of work required. It is easy to mandate a huge pay increase to gain political power but when reality kicks in and people start to lose their jobs because of it they need to realize that their supposed saviours were full of sh*t and promised something that was beyond them. Maybe sitting down with the actual business people and discussing a pay rise like they do in the western world would have been a good idea, now they are facing loosing these businesses to other countries and a huge increase in unemployed people.

[DLock]

This was not unexpected.

If businesses are only now figuring this out and did not stop hiring 6 or 12 months ago, didn't improve training or put in place quotas or production targets to increase productivity and minimize the impact of the salary hike, then they have no one to blame but themselves.

I do not agree with this significant salary increase and believe it was purely a populist policy to get the mass vote, but the inept Government dragged this out to 18 months - more than enough time for businesses to prepare.

The other edge of the sword will be that basic prices will increase to cover wage increase. So any gain will eaten up by rising costs and all those made unemployed will be much worse off.

Just one of the Government people attending an elective Economics 101 in University would probably have avoided this mess.

It will only get worse.

[PaulHamon]

"Several employers are now paying their workers according to the amount of work they do instead," he said.

that's good for people that actually work hard and don't sit around on their asses chatting for hours each day.

[petermwolk]

A good way to look at the fundamental error in the "raise the minimum wage" discussion is to make a reductio ad absurdum: if you can BY FIAT set a minimum wage then why not set it to 600 baht an hour so everyone can have a nice home and car? Why not 1,000? 10,000? (So everyone can buy a Mercedes!) Because, very quickly, product and service charges will rise to cover those costs ... and a loaf of bread will go for thousands of baht.

A minimum wage of 10,000 baht / hour might sound silly - but then so is 300. Just a smaller amount - but the results will be / must be the same. Just on a smaller, slower, scale so hopefully people won't notice what's happening.

So, raising the minimum wage without at the same time imposing sweeping price controls is meaningless ... and heaven help any country that tries that. Oh, wait a minute! Isn't that the basis for Marxism? Haven't we seen how well Communist societies fared in the 20th Century? "To each according to his needs" - whether or not you can pay for it! "From each according to his abilities" - whether or not your abilities have any value to the society or ultimate consumer. And exactly WHO is determining what YOU need? What YOUR abilities are?

But wouldn't a utopia be nice anyway?

(Just for comparison, minimum wage in U.K. is 300b/h, U.S. is 225b/h. Both of which having much higher costs of living than here.)

[wjthornton]

IMHO, the real issue is that large corporations want to maximize shareholder returns, using a model that gives all profits to distributors instead of producers. That means 10 baht extra per unit to the person who does the real work means 100 baht per unit higher cost to the consumer. And the middle-class consumer struggles to pay an extra $3.00 because his or her job is being off shored to reduce his collective bargaining power and reduce his wages every year in real terms. Again the only goal is to maximize shareholder profits that go to the top 1% without regard to social health. Everyone who sucks blood from this system without producing anything of value is like a parasite getting fat like a bloated tick.

We collectively choose to create a society that encourages the growth of parasites instead of rewarding those who do productive and creative work. Recognizing the source of the problem instead of blaming the poor for being lazy and non-productive would begin to move us toward a fair system that truly rewards creativity, hard work, honesty, and productivity. Investors deserve a *fair* return. However, squeezing out every bit of profit to increase the concentration of wealth and power in a class that controls capital due to historical reasons is unjust and harmful to social health and stability. The concentration of wealth does nothing for economic growth, that is a myth promoted against all science, logic, and common sense. On the contrary it is the growth of a healthy middle class that promotes healthy economic activity.

[thaicbr]

OK look at it this way

Decrease staff = decreased production = same boat

Maybe you can explain and justify you equation to the private, national, and international companies who have had "reduction of force" and managed to maintaine productivity, gross income, while watching their profit margin increase.

Where? In Thailand?

Which companies?

To be honest there are very few well managed labour intensive companies here. The vast majority rely on cheap labour.

sent from my Q6

[Thai at Heart]

A good way to look at the fundamental error in the "raise the minimum wage" discussion is to make a reductio ad absurdum: if you can BY FIAT set a minimum wage then why not set it to 600 baht an hour so everyone can have a nice home and car? Why not 1,000? 10,000? (So everyone can buy a Mercedes!) Because, very quickly, product and service charges will rise to cover those costs ... and a loaf of bread will go for thousands of baht.

A minimum wage of 10,000 baht / hour might sound silly - but then so is 300. Just a smaller amount - but the results will be / must be the same. Just on a smaller, slower, scale so hopefully people won't notice what's happening.

So, raising the minimum wage without at the same time imposing sweeping price controls is meaningless ... and heaven help any country that tries that. Oh, wait a minute! Isn't that the basis for Marxism? Haven't we seen how well Communist societies fared in the 20th Century? "To each according to his needs" - whether or not you can pay for it! "From each according to his abilities" - whether or not your abilities have any value to the society or ultimate consumer. And exactly WHO is determining what YOU need? What YOUR abilities are?

But wouldn't a utopia be nice anyway?

(Just for comparison, minimum wage in U.K. is 300b/h, U.S. is 225b/h. Both of which having much higher costs of living than here.)

Yes, yes, yes, we've all studied basic economics.

How does this reconcile with say a Thai Chinese garment exporter who transfer prices all the profit out through Hong Kong, thus paying no income tax in Thailand whilst paying his labour at rates below equilibrium?

This move could simply be seen as a transfer of wealth from owners to labour.

[RachaRob]

"In addition, the SSO will offer unemployment benefit" The Thai government will succeed in creating a large electoral majority of benefit recievers voting for the party promising the largest government handouts.

[Whidbeyboy]

many businesses will move to cambodia and the likes

the cambodian government must be loving this move by the thai

government

Yes, being known for cheap slave labour is awesome. These companies come to Thailand to take advantage of the cheap labour and the lack of benefits for thier employees who are taken advantage of. They will not go out of business by increasing wages, but will not be able to fill the CEOs pockets with nice bonuses and the investors can't buy thier kids that mercedies for thier birthday. These people SUCK. Eventually, even Cambodia wages will rise. This is why Unions started, due to slimy corporation profits more important then the people who make them those profits.

Edited January 4, 2013 by Whidbeyboy

[allan michaud]

and five of the 6 will be playing games on their smart phones or texting. I will never understand Thai employers.

[Skywalker69]

OK look at it this way

Decrease staff = decreased production = same boat

Decrease stafe=relocate to a neighbouring country with cheaper labor=different boat.

[tingtongfarang]

I dont see what all the fuss is about, The 300bht minimum wage is,nt and seems in many places wont be implemented even in bkk.

[allan michaud]

many businesses will move to cambodia and the likes

the cambodian government must be loving this move by the thai

government

Yes, being known for cheap slave labour is awesome. These companies come to Thailand to take advantage of the cheap labour and the lack of benefits for thier employees who are taken advantage of. They will not go out of business by increasing wages, but will not be able to fill the CEOs pockets with nice bonuses and the investors can't buy thier kids that mercedies for thier birthday. These people SUCK. Eventually, even Cambodia wages will rise. This is why Unions started, due to slimy corporation profits more important then the people who make them those profits.

Spot on. Sadly a few incredibly greedy people are now making massive profits while increasing poverty. Asia's so called 'elites' are merrily following western corporate greed and show a shocking disregard for their fellow human beings. The scum that floats on top of our respective societies is truly awful.

[markt7081]

Political expediency meets real free market conditions.

Its going to force the woeful Thai management to rationalise & make people work.

Example, go to the supermarket, someone gives you a ticket on the way in & takes it back whe you go (why?), another one stands there whistling & gets in the way when your trying to park. We can all think of many laughable (by western standards) of Thai over manning.

The other thing, of course, its all part of industrial evolution, people work for nothing, get pay increases, industry goes to a cheaper country.

Happened to the UK in the 70s & 80, Happening in Japan, there are many examples.

Luckily for most workers in those countries, they were reasonably educated & were able to go on to something else. (Hmmm).

[chrisinth]

A good way to look at the fundamental error in the "raise the minimum wage" discussion is to make a reductio ad absurdum: if you can BY FIAT set a minimum wage then why not set it to 600 baht an hour so everyone can have a nice home and car? Why not 1,000? 10,000? (So everyone can buy a Mercedes!) Because, very quickly, product and service charges will rise to cover those costs ... and a loaf of bread will go for thousands of baht.

A minimum wage of 10,000 baht / hour might sound silly - but then so is 300. Just a smaller amount - but the results will be / must be the same. Just on a smaller, slower, scale so hopefully people won't notice what's happening.

So, raising the minimum wage without at the same time imposing sweeping price controls is meaningless ... and heaven help any country that tries that. Oh, wait a minute! Isn't that the basis for Marxism? Haven't we seen how well Communist societies fared in the 20th Century? "To each according to his needs" - whether or not you can pay for it! "From each according to his abilities" - whether or not your abilities have any value to the society or ultimate consumer. And exactly WHO is determining what YOU need? What YOUR abilities are?

But wouldn't a utopia be nice anyway?

(Just for comparison, minimum wage in U.K. is 300b/h, U.S. is 225b/h. Both of which having much higher costs of living than here.)

Whereas I can see where you are coming from, the minimum wage is per day and not per hour as you have been comparing with.

Minimum wage for an average 8 hour day per hour would be 37.5 baht.

[TomTao]

Wage increase = price increase and a lower level of attractiveness for multinational corporations who seek to maximise profits while minimising costs, ulimately the people at the bottom of the social ladder are going to be the ones to pay the highest price associated with the wage increase.

Sent from my GT-N7100 using Thaivisa Connect App

[laobali]

and five of the 6 will be playing games on their smart phones or texting. I will never understand Thai employers.

A lot of these excess employees are members of the family that owns the small business. Better than having them laying around the house doing the same thing, watching tv or sleeping. It's similar to Laos - Vientiane anyway.

[petermwolk]

Yes, my argument holds even at 37.5 baht / hour. But that obviously I couldn't "compute" that the number was /DAY and not /HOUR says something about how I can't even imagine making a living at that level.

And that shows something else about Marx's argument. While his "solution" is utopian and unworkable, his basis is correct: that labor is just a commodity like any other commodity - and that market forces will always, eventually, drive it down to subsistence levels. So (1) we need laborers to make things, we can't all be entrepreneurs or technologists; and (2) in a healthy society we can't have major segments only able to make a bare "living" (if it can be called that.)

The solution? I have no idea. But raising the minimum wage is not one of them. So then what?

[petermwolk]

A good way to look at the fundamental error in the "raise the minimum wage" discussion is to make a reductio ad absurdum: if you can BY FIAT set a minimum wage then why not set it to 600 baht an hour so everyone can have a nice home and car? Why not 1,000? 10,000? (So everyone can buy a Mercedes!) Because, very quickly, product and service charges will rise to cover those costs ... and a loaf of bread will go for thousands of baht.

A minimum wage of 10,000 baht / hour might sound silly - but then so is 300. Just a smaller amount - but the results will be / must be the same. Just on a smaller, slower, scale so hopefully people won't notice what's happening.

So, raising the minimum wage without at the same time imposing sweeping price controls is meaningless ... and heaven help any country that tries that. Oh, wait a minute! Isn't that the basis for Marxism? Haven't we seen how well Communist societies fared in the 20th Century? "To each according to his needs" - whether or not you can pay for it! "From each according to his abilities" - whether or not your abilities have any value to the society or ultimate consumer. And exactly WHO is determining what YOU need? What YOUR abilities are?

But wouldn't a utopia be nice anyway?

(Just for comparison, minimum wage in U.K. is 300b/h, U.S. is 225b/h. Both of which having much higher costs of living than here.)

Whereas I can see where you are coming from, the minimum wage is per day and not per hour as you have been comparing with.

t tr

Minimum wage for an average 8 hour day per hour would be 37.5 baht.

<Repeating my second post quoting response to my first post - didn't do it right first try>

Yes, my argument holds even at 37.5 baht / hour. But that obviously I couldn't "compute" that the number was /DAY and not /HOUR says something about how I can't even imagine making a living at that level.

And that shows something else about Marx's argument. While his "solution" is utopian and unworkable, his basis is correct: that labor is just a commodity like any other commodity - and that market forces will always, eventually, drive it down to subsistence levels. So (1) we need laborers to make things, we can't all be entrepreneurs or technologists; and (2) in a healthy society we can't have major segments only able to make a bare "living" (if it can be called that.)

The solution? I have no idea. But raising the minimum wage is not one of them. So then what?

[mortenaa]

many businesses will move to cambodia and the likes

the cambodian government must be loving this move by the thai

government

Yes, being known for cheap slave labour is awesome. These companies come to Thailand to take advantage of the cheap labour and the lack of benefits for thier employees who are taken advantage of. They will not go out of business by increasing wages, but will not be able to fill the CEOs pockets with nice bonuses and the investors can't buy thier kids that mercedies for thier birthday. These people SUCK. Eventually, even Cambodia wages will rise. This is why Unions started, due to slimy corporation profits more important then the people who make them those profits.

You are full of insight about how the world works, aren't you. Would you rather be without these people, that come here, invest their money, build businesses, take huge risks and so on.. ? Then everyone would be without jobs. We could all farm our own groceries, and slaughter our own pigs. Hehe.

[petermwolk]

A good way to look at the fundamental error in the "raise the minimum wage" discussion is to make a reductio ad absurdum: if you can BY FIAT set a minimum wage then why not set it to 600 baht an hour so everyone can have a nice home and car? Why not 1,000? 10,000? (So everyone can buy a Mercedes!) Because, very quickly, product and service charges will rise to cover those costs ... and a loaf of bread will go for thousands of baht.

A minimum wage of 10,000 baht / hour might sound silly - but then so is 300. Just a smaller amount - but the results will be / must be the same. Just on a smaller, slower, scale so hopefully people won't notice what's happening.

So, raising the minimum wage without at the same time imposing sweeping price controls is meaningless ... and heaven help any country that tries that. Oh, wait a minute! Isn't that the basis for Marxism? Haven't we seen how well Communist societies fared in the 20th Century? "To each according to his needs" - whether or not you can pay for it! "From each according to his abilities" - whether or not your abilities have any value to the society or ultimate consumer. And exactly WHO is determining what YOU need? What YOUR abilities are?

But wouldn't a utopia be nice anyway?

(Just for comparison, minimum wage in U.K. is 300b/h, U.S. is 225b/h. Both of which having much higher costs of living than here.)

Whereas I can see where you are coming from, the minimum wage is per day and not per hour as you have been comparing with.

Minimum wage for an average 8 hour day per hour would be 37.5 baht.

<<Reposting my reply including original post and comment. Did it wrong...>>

Yes, my argument holds even at 37.5 baht / hour. But that obviously I couldn't "compute" that the number was /DAY and not /HOUR says something about how I can't even imagine making a living at that level.

And that shows something else about Marx's argument. While his "solution" is utopian and unworkable, his basis is correct: that labor is just a commodity like any other commodity - and that market forces will always, eventually, drive it down to subsistence levels. So (1) we need laborers to make things, we can't all be entrepreneurs or technologists; and (2) in a healthy society we can't have major segments only able to make a bare "living" (if it can be called that.)

The solution? I have no idea. But raising the minimum wage is not one of them. So then what?

[Lite Beer]

Some workers laid off on wage hike

The Nation

Two textile factories in Buriram have laid off 120 workers, to maintain the operating cost after the minimum wage hike.

Nataya Saengsakul, a labour officer in the province, said that more could lose their jobs. The provincial labour office has coordinated with companies in and outside the province, to relocate some 10,000 jobs. A job fair will also be launched.

Meanwhile, Anchalee Sinthuphan, a labour officer in Nakhon Ratchasima, said that since January 1, 800 workers have been laid off as factories reduced cost to match with declining orders.

In December, 550 workers were put out of jobs on the same reason.

Anchalee expressed concern on labour-intensive industries which are of high number in the province. These factories may be unable to cope with the higher minimum wage, but this will be apparent in the next few months.

Yet, she admitted that the province’s labour demand remains high with new factories being constructed. The higher wage will ease the shortage, as local workers would be encouraged to find jobs in their hometown.

-- The Nation 2013-01-04