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Asean Affairs   12 July  2011

Proposed wage increase in Thailand already is divisive

By  David Swartzemtruber

 
AseanAffairs     12 July 2011

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One of the standout planks in the winning Pheu Thai party’s platform in the recent election is a proposal to increase the minimum daily wage nationwide in Thailand to 300 baht (US$10). At present, wage scales differ from province to province with the resort area of Phuket commanding the highest wages off 221 baht and the Bangkok and its surrounding provinces coming in at 215 baht. Other provinces being less prosperous come in lower.

While Thai media are reporting that prime minister-elect Yingluck Shinawatra says the 300 baht wage is “definitely” going to be implemented, another report that says the actual committee responsible for adjusting wages, the Wage Tripartite Committee, is split. The panel brings together government, employers and labor.

The committee indicated support for the proposal when meeting yesterday but the provincial subcommittees proposed a more gradual approach. Coincidentally, that echoes a wage increase approach championed by the losing Democrat party.

The subcommittees propose an increase of 2 baht to 28 baht in 35 provinces, while the remaining 40 provinces would get gradual increases to the same rate starting in early 2012. These increases are far below the 300 baht proposed by Ms. Yingluck.

Opponents, especially the Thai Chamber of Commerce, say the increase would undermine exports.

Centre for International Trade Studies at The University of the Thai Chamber of Commerce director Aat Pisanwanich said that increasing the daily minimum wage to Bt300 and the starting salary for bachelor's degree graduates to Bt15,000 (US$5,000) per month would increase costs of production by 28 percent. Textile, garments and paper and paper products manufacturing would be the hardest hit by the increases in production costs.

Other issues are the increased wage would attract increased illegal labor from surrounding countries, Cambodia, Laos and Myanmar and the wage increases are not coupled to any increases in efficiency or productivity.

The committee agreed to meet again next month and to await the arrival of the new Minister of Labor, as yet unnamed.

This split on the wage issue is a bad start for the new government. It may try to “ram” this pet vote-getting proposal through parliament, but in turn, it obviously cannot control the economic impacts if it does and it will create enemies in the business community that controls the jobs.

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