With Pheu Thai now the core party in government, its campaign promise to raise the minimum daily wage to 600 baht by 2027 might have high chances of success.
Prime Minister Srettha Thavisin floated 400 baht per day as a reasonable level for the minimum wage during a parliamentary debate on the government’s policy statement last month.
The minimum daily wage currently varies from one province to another, from 328 baht to 354 baht, with the average daily minimum wage at 337 baht. The last wage hike, 5.02% on average, took place in October last year after a freeze for over two years.
A minimum wage of 400 baht entails a rise of 13-18%, which could be too much for some sectors — especially labour-intensive industries and small-and-medium enterprises (SMEs).
Labour Minister Pipat Ratchakitprakarn said the benchmark of 400 baht per day will happen, but it will not apply to all sectors.
But instead of adopting a fixed rate of 400 baht, the wage is likely to be increased based on the province, and in line with inflation.
The government has started a wage review, with the first hike likely to be announced by November so it can take effect in January as a New Year’s gift for workers.
Ambitious policy goal
Assoc Prof Yongyuth Chalamwong, a labour economics and development scholar at the Thailand Development Research Institute (TDRI), told the Bangkok Post that raising the minimum daily wage is a policy goal advocated by some parties, but a rate of 400 baht cannot be implemented across the country.
The minimum wage differs for each province with wage rises being considered by a provincial tripartite committee chaired by the governor. The panel takes into account factors including the province’s consumer price index, inflation and employers’ financial status.
If the 400-baht rate is to be approved, it will be limited to economic provinces such as Chon Buri, Chachoengsao, and Rayong which are in the Eastern Economic Corridor (EEC), and popular tourist destinations like Phuket.
“Politicians may have to swallow their pride when it comes to the wage increase. The wage rise will be a gradual one, not a single-step rise across the country,” he said.
A gradual increase will not disrupt business operations and the government can also roll out remedies to help those affected by the wage hike or even change the production structure to increase productivity, he said.
Wage rise motivation
According to the TDRI scholar, a minimum wage is the lowest amount that employers are required to pay their unskilled or entry-level workers and is intended to ensure that workers receive a living wage for their work.
In his opinion, state agencies should review the wage and raise it when appropriate based on economic conditions, instead of making minimum wage increases mandatory every year.
Workers are expected to improve their skills in return for which they should get more pay. Employers should have wage structures which motivate workers to enhance their skills to meet the criteria for a raise.
Bosses should not keep paying the minimum wage until the government approves a wage hike because the practice cannot motivate people to give their best, he said.
“The wage should also reflect workers’ performance which is beneficial to both sides, especially workers who can set career goals,” he said.
Annual hike not sustainable
An ex-member of the tripartite wage committee agreed with the TDRI scholar that wages should reflect workers’ skills and performance or workers who receive the minimum wage would have no incentive to up-skill themselves.
“Raising the minimum wage every year isn’t good. When it’s way too high neither employers or workers will survive,” said the wage specialist.
He said the Labour Ministry and the tripartite wage committee should think strategically when it comes to the wage policy because labour is crucial to national development and a misstep could hurt the country.
The minimum daily wage, which is the baseline, should apply to a limited group of people while the majority of the workforce should receive wages based on wage structures, he said.
In a data-driven economy, labour authorities must help workers reach their full potential and receive higher compensation for their labour, with the goal of making Thai labour competitive in the global market.
No benchmark urged
Suchart Chantaranakaracha, vice-chairman of the Federation of Thai Industries (FTI), said the government should consider the wage increase based on criteria. A 400-baht benchmark would interfere with the work of the wage committee.
He said the committee was under pressure during the Yingluck government to raise the minimum daily wage to 300 baht and the result was a catastrophe, with many SMEs wiped out.
Mr Suchart insisted businesses do not turn a blind eye to workers’ hardships but said that without an appropriate wage, businesses cannot survive. It is the government’s duty to introduce measures to help reduce the cost of living and mitigate impacts for employers and their staff, he added.
Atthayuth Leeyawanich, chairman of the Employers Confederation of Consumer Goods and Services, said the wage hike should reflect an average inflation of 3%, as projected by the government representatives on the wage committee.
“The 400-baht minimum wage is doable if the economy grows at 5% for two or three years. But if it is adopted as early as next year, that would be unacceptable,” he said.
He echoed Mr Suchart’s call for the government not to interfere with the wage committee’s decision.
A labour representative on the wage committee said all views must be taken into account when reviewing the minimum wage hike with real economic conditions factored in.
“As a worker, I’d like a big raise. But as a member of the wage committee, I must make an informed decision that keeps both employers and workers satisfied,” he said.
Impact of wage increases
Thaniwan Koonmongkon, president of the Thai Restaurant Association, said restaurants are among labour-intensive businesses that will bear the brunt if the minimum daily wage is increased to 400 baht.
She said SMEs and those which have yet to fully recover from the Covid-19 pandemic may consider raising prices for goods and services or reducing portion sizes to cover the added costs.
She also expressed concerns the wage hikes may force some employers to cut some benefits or working hours, which would do more harm than good to workers.
Ms Thaniwan urged the government to come up with a reasonable rate because businesses will be under pressure to raise pay beyond the new baseline to retain staff.
She said a big increase will affect labour-intensive sectors such as agriculture and construction and the country learned the hard way when the wage was raised to 300 baht in 2012-2013.
“We had massive layoffs and relocation of production bases to border areas. It may happen again and the government must consider this,” she said.
Assoc Prof Yongyuth said raising minimum daily wage is likely to push up goods prices and create an additional burden for those in the informal sector such as taxi drivers, taxi-motorcyclists, subcontract workers or street vendors who lack income security.
He said the government should reduce the cost of living through schemes such as the Thong Fah (Blue Flag) scheme which can distribute low-cost, essential products to communities.
The government should also create job opportunities for community enterprises which produce and sell local products as an additional source of income for rural people, he said.