Wage hikes could harm economy

Wage hikes could harm economy

Parties urged to be more realistic

Political parties are being urged to stop wooing voters by promising them unrealistic leaps in daily minimum wage rates which many experts warn will do more harm than good to the country’s economic system.

These kinds of populist policies are popular among parties because they require no funding from the government side as only employers will be forced to foot the bill up to a level imposed onto them by politicians, said Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry.

He was speaking at a forum yesterday organised by the Isra Institute to discuss wage policies being touted as a key policy by some of the major parties in the lead-up to the next general election, expected in May.

The remarks come days after the Election Commission warned parties should cost their policies, or face the prospect of a 500,000 baht fine.

The Pheu Thai Party is promising a new daily minimum wage of 600 baht and a starting monthly salary of 25,000 baht by 2027, while the Move Forward Party came up with a similar policy to increase the daily minimum wage to 450 baht and adjust it every year.

The Democrat Party hasn’t shared an exact figure in its policies but has boasted about a “living wage” which it believes will be an ideal solution to problems associated with low wages.

At present, daily minimum wages vary from one province to another, ranging from 328 baht to 354 baht, following the latest wage hike that took effect last October.

“Unrealistically high wage hikes will only hurt the entire consumption chain and adversely impact consumers in the end,” said Mr Tanit. He said these unrealistic policies will “destroy” the country’s economy.

Small- and medium-sized enterprises (SMEs), which account for more than 90% of businesses in the country, were hardest hit by the government’s major wage hike in 2012, he said.

A number of these SMEs ended up going out of business while many others moved their production bases to neighbouring countries where wages are cheaper, including in Vietnam and Indonesia, he said.

“Personally, I think daily minimum wages should automatically be adjusted to keep up with inflation and be free of political interference,” he said. “The ideal goal in this matter should be a situation where employers and employees both win.

“People should be aware that these parties are using an absolutely commercial marketing strategy to win as many seats as possible in the House of Representatives,” he said.

Thailand has suffered a great deal already as a result of a jump in daily minimum wages implemented by the government, said Assoc Prof Yongyuth Chalamwong, a scholar on labour economics, labour development and labour policies at Thailand Development Research Institute (TDRI).

Such politically-motivated wage hikes distorted the economic mechanism determining proper wage rates and drove production costs to surge, he said.

He warned that such interference by politicians in the tripartite wage regulating mechanism will harm the country’s competitiveness and its labour market.

He said the government should focus on improving the productivity of workers as a more realistic way to help them earn higher wages.