Business operators oppose Thai minimum wage increase now

[Thai at Heart]

Whilst it would seem like a very obvious connection between minimum wage and inflation, it is in no way a direct connection. This is by no means a proven connection, as much as right wing economists have tried to prove. In Thailand, the cost of fuel and logistics makes up a huge wedge of the cost of products.

http://www.dol.gov/minwage/mythbuster.htm

Overal cost of crude oil in USD terms versus baht terms makes a greater contribution to bottom line costs than wages alone. Oil fuels everything from the fertiliser, to the packaging, the plastics, to running the boilers, to running the power stations, to running the trucks that are all needed to get industry moving. This is why, devaluing the currency will not deliver what Thailand needs. It will give with one and take with the other because any reduction in the cost of domestic inputs in any produtive process will be outweighed by the cost of imported inputs including fuel cost.

Yes there has been inflationary pressure the last few years in Thailand, this isn't to be laid 100% at the foot of the minimum wage. It is far more nuanced than that.

So in the past few years as the cost of oil went down did consumer prices of everything else go down, or just oil? Did fertilizer made from oil go down in Thailand? How about tires made from oil? No they didn't. Only gasoline went down because there was a glut of it and in Thailand with price controls it didn't go down in lockstep at all.

Your example using oil isn't related to wages which the OP is. Can you instead give an example of what happens to a restaurant which has a 7% net profit when wages increase by that same 7%?

Can you further explain what happens to a restaurant when not only its wages increase but the costs of all of its purchased supplies also increase as other businesses scramble to cover the additional costs of wages?

It has a domino affect in that as everything begins to increase it spills over into everything else that begins to increase. Almost nothing can stay at the same price because cost increases reverberate through the economy.

(You're out of your league here.)

What is the current Thai inflation rate? Aren't they worried about deflation?

Out of my league? You really think 300 baht a day effects Thai businesses charging western prices for products that badly?

The minimum wage is still at 300, but what is the current inflation rate? They moved minimum wage up by a large amount and yet, inflation was measured at barely 4% yearly.

Just watch that even if they don't move the minimum wage, as the baht devalues, that will filter through into fuel cost and inflation will be more than ready to bump up without any move in the wages.

I put up elsewhere, the industries with the largest component of wages are textiles t about 24%.

And yet they are still profitable.....

Considering I have a degree in economics that involved studying the Phillips curve in depth, and repeated studies that disproves the connection between minimum wages and unemployment or inflation, you can feel free to continue pedaling your own way.

I prefer to read and study and understand and remember ceteris paribus is a very broad brush.....

Edited June 30, 2015 by Thai at Heart

[robblok]

Whilst it would seem like a very obvious connection between minimum wage and inflation, it is in no way a direct connection. This is by no means a proven connection, as much as right wing economists have tried to prove. In Thailand, the cost of fuel and logistics makes up a huge wedge of the cost of products.

http://www.dol.gov/minwage/mythbuster.htm

Overal cost of crude oil in USD terms versus baht terms makes a greater contribution to bottom line costs than wages alone. Oil fuels everything from the fertiliser, to the packaging, the plastics, to running the boilers, to running the power stations, to running the trucks that are all needed to get industry moving. This is why, devaluing the currency will not deliver what Thailand needs. It will give with one and take with the other because any reduction in the cost of domestic inputs in any produtive process will be outweighed by the cost of imported inputs including fuel cost.

Yes there has been inflationary pressure the last few years in Thailand, this isn't to be laid 100% at the foot of the minimum wage. It is far more nuanced than that.

So in the past few years as the cost of oil went down did consumer prices of everything else go down, or just oil? Did fertilizer made from oil go down in Thailand? How about tires made from oil? No they didn't. Only gasoline went down because there was a glut of it and in Thailand with price controls it didn't go down in lockstep at all.

Your example using oil isn't related to wages which the OP is. Can you instead give an example of what happens to a restaurant which has a 7% net profit when wages increase by that same 7%?

Can you further explain what happens to a restaurant when not only its wages increase but the costs of all of its purchased supplies also increase as other businesses scramble to cover the additional costs of wages?

It has a domino affect in that as everything begins to increase it spills over into everything else that begins to increase. Almost nothing can stay at the same price because cost increases reverberate through the economy.

(You're out of your league here.)

What is the current Thai inflation rate? Aren't they worried about deflation?

Out of my league? You really think 300 baht a day effects Thai businesses charging western prices for products that badly?

The minimum wage is still at 300, but what is the current inflation rate? They moved minimum wage up by a large amount and yet, inflation was measured at barely 4% yearly.

Just watch that even if they don't move the minimum wage, as the baht devalues, that will filter through into fuel cost and inflation will be more than ready to bump up without any move in the wages.

I put up elsewhere, the industries with the largest component of wages are textiles t about 24%.

And yet they are still profitable.....

Considering I have a degree in economics that involved studying the Phillips curve in depth, and repeated studies that disproves the connection between minimum wages and unemployment or inflation, you can feel free to continue pedaling your own way.

I prefer to read and study and understand and remember ceteris paribus is a very broad brush.....

I think you need to study again, we have proven here that there is a link between inflation and minimum wage raise. It might not be 100% but that is logical because wages don't make up 100% of the cost. I got a degree in economics (accounting) too and there is certainly a connection. (unless people get more productive then the link gets weaker)

I am not saying minimum wage should not be raised but without actual figures its an academic discussion. Without knowing the real profit they make and money they have invested its hard to say if its fair or not. Without knowing the ROI on the money they invested the risks they face and stuff like that its impossible to say.

As for your inflation rate of 4%, I have never trusted Thai inflation rates much they are much higher as that. If i look at food prices and how much they have gone up since that wage raise its a lot more. (not talking European food here)

[Thai at Heart]

Whilst it would seem like a very obvious connection between minimum wage and inflation, it is in no way a direct connection. This is by no means a proven connection, as much as right wing economists have tried to prove. In Thailand, the cost of fuel and logistics makes up a huge wedge of the cost of products.

http://www.dol.gov/minwage/mythbuster.htm

Overal cost of crude oil in USD terms versus baht terms makes a greater contribution to bottom line costs than wages alone. Oil fuels everything from the fertiliser, to the packaging, the plastics, to running the boilers, to running the power stations, to running the trucks that are all needed to get industry moving. This is why, devaluing the currency will not deliver what Thailand needs. It will give with one and take with the other because any reduction in the cost of domestic inputs in any produtive process will be outweighed by the cost of imported inputs including fuel cost.

Yes there has been inflationary pressure the last few years in Thailand, this isn't to be laid 100% at the foot of the minimum wage. It is far more nuanced than that.

So in the past few years as the cost of oil went down did consumer prices of everything else go down, or just oil? Did fertilizer made from oil go down in Thailand? How about tires made from oil? No they didn't. Only gasoline went down because there was a glut of it and in Thailand with price controls it didn't go down in lockstep at all.

Your example using oil isn't related to wages which the OP is. Can you instead give an example of what happens to a restaurant which has a 7% net profit when wages increase by that same 7%?

Can you further explain what happens to a restaurant when not only its wages increase but the costs of all of its purchased supplies also increase as other businesses scramble to cover the additional costs of wages?

It has a domino affect in that as everything begins to increase it spills over into everything else that begins to increase. Almost nothing can stay at the same price because cost increases reverberate through the economy.

(You're out of your league here.)

What is the current Thai inflation rate? Aren't they worried about deflation?

Out of my league? You really think 300 baht a day effects Thai businesses charging western prices for products that badly?

The minimum wage is still at 300, but what is the current inflation rate? They moved minimum wage up by a large amount and yet, inflation was measured at barely 4% yearly.

Just watch that even if they don't move the minimum wage, as the baht devalues, that will filter through into fuel cost and inflation will be more than ready to bump up without any move in the wages.

I put up elsewhere, the industries with the largest component of wages are textiles t about 24%.

And yet they are still profitable.....

Considering I have a degree in economics that involved studying the Phillips curve in depth, and repeated studies that disproves the connection between minimum wages and unemployment or inflation, you can feel free to continue pedaling your own way.

I prefer to read and study and understand and remember ceteris paribus is a very broad brush.....

I think you need to study again, we have proven here that there is a link between inflation and minimum wage raise. It might not be 100% but that is logical because wages don't make up 100% of the cost. I got a degree in economics (accounting) too and there is certainly a connection. (unless people get more productive then the link gets weaker)

I am not saying minimum wage should not be raised but without actual figures its an academic discussion. Without knowing the real profit they make and money they have invested its hard to say if its fair or not. Without knowing the ROI on the money they invested the risks they face and stuff like that its impossible to say.

As for your inflation rate of 4%, I have never trusted Thai inflation rates much they are much higher as that. If i look at food prices and how much they have gone up since that wage raise its a lot more. (not talking European food here)

The question is what effect does it have on final costs. I showed u one set of data where it has the biggest effect. Textiles, and yet it still only contributed 23% of costs.

No one said it doesn't contribute, but it isn't the dominant factor as others on here subscribe. Other factors have a bigger effect.

[robblok]

What is the current Thai inflation rate? Aren't they worried about deflation?

Out of my league? You really think 300 baht a day effects Thai businesses charging western prices for products that badly?

The minimum wage is still at 300, but what is the current inflation rate? They moved minimum wage up by a large amount and yet, inflation was measured at barely 4% yearly.

Just watch that even if they don't move the minimum wage, as the baht devalues, that will filter through into fuel cost and inflation will be more than ready to bump up without any move in the wages.

I put up elsewhere, the industries with the largest component of wages are textiles t about 24%.

And yet they are still profitable.....

Considering I have a degree in economics that involved studying the Phillips curve in depth, and repeated studies that disproves the connection between minimum wages and unemployment or inflation, you can feel free to continue pedaling your own way.

I prefer to read and study and understand and remember ceteris paribus is a very broad brush.....

I think you need to study again, we have proven here that there is a link between inflation and minimum wage raise. It might not be 100% but that is logical because wages don't make up 100% of the cost. I got a degree in economics (accounting) too and there is certainly a connection. (unless people get more productive then the link gets weaker)

I am not saying minimum wage should not be raised but without actual figures its an academic discussion. Without knowing the real profit they make and money they have invested its hard to say if its fair or not. Without knowing the ROI on the money they invested the risks they face and stuff like that its impossible to say.

As for your inflation rate of 4%, I have never trusted Thai inflation rates much they are much higher as that. If i look at food prices and how much they have gone up since that wage raise its a lot more. (not talking European food here)

The question is what effect does it have on final costs. I showed u one set of data where it has the biggest effect. Textiles, and yet it still only contributed 23% of costs.

No one said it doesn't contribute, but it isn't the dominant factor as others on here subscribe. Other factors have a bigger effect.

I disagree with you if something has 23% influence on the cost and the increase is 80% that would mean 18,4% rise in prices. That is not a little raise in your cost price. That is huge.

I don't know many companies that could shoulder a 18,4% rise in cost easily. Don't forget its not only the labor of the textile plant that gets more expensive but also that of all its businesses where it buys services. So these rise too.

On the markets people just increased prices because they could people had more money so the traders wanted to make more money too. Its not that simple, this did have a huge impact on things.

I do agree though that salaries should be corrected for inflation.. because otherwise it would get real bad for the employees.

Anyway I think we agree in principle that it does impact prices and that a large raise is a crazy thing to ask.

I would love to see some real figures about how profitable those textile plants are and how much money they invested. That would make this discussion more interesting. Now we really don't know what we are talking about.

[Thai at Heart]

What is the current Thai inflation rate? Aren't they worried about deflation?

Out of my league? You really think 300 baht a day effects Thai businesses charging western prices for products that badly?

The minimum wage is still at 300, but what is the current inflation rate? They moved minimum wage up by a large amount and yet, inflation was measured at barely 4% yearly.

Just watch that even if they don't move the minimum wage, as the baht devalues, that will filter through into fuel cost and inflation will be more than ready to bump up without any move in the wages.

I put up elsewhere, the industries with the largest component of wages are textiles t about 24%.

And yet they are still profitable.....

Considering I have a degree in economics that involved studying the Phillips curve in depth, and repeated studies that disproves the connection between minimum wages and unemployment or inflation, you can feel free to continue pedaling your own way.

I prefer to read and study and understand and remember ceteris paribus is a very broad brush.....

I think you need to study again, we have proven here that there is a link between inflation and minimum wage raise. It might not be 100% but that is logical because wages don't make up 100% of the cost. I got a degree in economics (accounting) too and there is certainly a connection. (unless people get more productive then the link gets weaker)

I am not saying minimum wage should not be raised but without actual figures its an academic discussion. Without knowing the real profit they make and money they have invested its hard to say if its fair or not. Without knowing the ROI on the money they invested the risks they face and stuff like that its impossible to say.

As for your inflation rate of 4%, I have never trusted Thai inflation rates much they are much higher as that. If i look at food prices and how much they have gone up since that wage raise its a lot more. (not talking European food here)

The question is what effect does it have on final costs. I showed u one set of data where it has the biggest effect. Textiles, and yet it still only contributed 23% of costs.

No one said it doesn't contribute, but it isn't the dominant factor as others on here subscribe. Other factors have a bigger effect.

I disagree with you if something has 23% influence on the cost and the increase is 80% that would mean 18,4% rise in prices. That is not a little raise in your cost price. That is huge.

I don't know many companies that could shoulder a 18,4% rise in cost easily. Don't forget its not only the labor of the textile plant that gets more expensive but also that of all its businesses where it buys services. So these rise too.

On the markets people just increased prices because they could people had more money so the traders wanted to make more money too. Its not that simple, this did have a huge impact on things.

I do agree though that salaries should be corrected for inflation.. because otherwise it would get real bad for the employees.

Anyway I think we agree in principle that it does impact prices and that a large raise is a crazy thing to ask.

I would love to see some real figures about how profitable those textile plants are and how much money they invested. That would make this discussion more interesting. Now we really don't know what we are talking about.

I provided a link previously.

They reportedly had a 1.4% profitability, and some were considering to move. This was as of 2013.

Did you read of any moving en masse? Funny. Up country where I knew some friends in textiles, they were always moaning they couldn't get workers.

Another link quoted Korn discussing the merits of cutting taxes companies while increasing the minimum wage. How much of a tax break did industry get? A fairly big reduction if I remember.

Edited July 1, 2015 by Thai at Heart