Despite politicians’ lofty promises, “perfect” minimum wage still long way off
As of press time, the National Wage Committee has decided to postpone a decision on the minimum wage to later this month, even though the new rate was initially expected to be announced from the beginning of April.
Both employers and employees have good reasons to anxiously wait for the announcement of the new rate after it became a hot topic during the political campaign preceding the general election.
During the campaign, political parties promised to raise the minimum wage to lure voters. For example, Palang Pracharat Party proposed to increase the rate to a maximum Bt425 per day over a span of three years while Pheu Thai Party vowed to hike the minimum wage to Bt400.
This is despite the business sector’s calls for political parties not to promise voters with unrealistic wage increase because minimum wage can have repercussions on overall inflation rates and costs of business operations.
Thailand’s minimum wage varies, depending on the cost of living in respective provinces. At present, the highest daily rate of Bt330 is applied in three provinces namely Phuket, Chonburi and Rayong. The minimum wage for Bangkok is Bt325. The lowest rate of Bt308 per day is applied in three deepest southern provinces. Employers in Thailand who pay their workers less than this mandatory minimum rate will be subject to punishment.
Permanent secretary for the Labour Ministry Jarin Jakkaphark said that the provincial sub-committees on wage had earlier proposed an increase of between two to Bt10 this year.
Some labour union representatives also proposed a nationwide-rate of Bt360 per day, which was dismissed by the Labour Ministry. The government said the uniform rate is not practical, citing different level of cost of living in each province.
The final decision depends on a tripartite committee composed of employees, employers, and the government.
Nakarin Amarase, an economist at the Bank of Thailand, said in his recently-released report that the minimum wage is designed to be a social safety protection for low-income workers. Rate increase can improve the workers’ well-being and the country’s economic growth. However, the minimum wage also has an influence on wage increase across the board. This is because employers have to manage the wage gap between the minimum wage and others to maintain the proper gap of wage difference.
He cited a finding which shows that the minimum wage has pushed the overall wage rise. From 2011 to 2018, the minimum wage was increased from Bt176 to Bt316 or up 80 percent, resulting in an increase of overall wage by 47 percent on average. The overall wage per hour rose from Bt52 in 2011 to Bt76 in 2018.
From the employers’ point of the view, a higher wage can impact their cost competitiveness. If the wage increase is too high, they may replace the workers by machinery or some may have to close down their manufacturing facilities.
In short, excessively high minimum wage may not always bode well for workers.
Nakarin said that the level of the minimum wage hike may not be as important as whether the pay rise will be translated into an increase of productivity or value added by workers.
However, the data from 347 industrial activities based on the statistics of the National Statistical Office of Thailand shows that although the worker wage surged by 17.2 percent on average between 2011 to 2016, their productivity rose only 4.3 percent over the same period.
Therefore, he suggested that the wage increase has to take into account the perspectives from both employees and employers. The minimum wage policy is necessary as it serves as a social safety net for low-income earners but all parties should also promote the productivity and add value to workers to maintain their job opportunity in the long run as well.