Raising the minimum wage in Thailand to 450 baht a day will make workers happy, but certainly not business operators, as reflected in the negative opinions voiced by various business groups.
Poj Aramwattananont, vice chair of the Thai Chamber of Commerce, has warned that the increase in the minimum wage, as pledged by parties during their election campaigns, could prompt potential foreign investors think twice and may delay their plans to invest in Thailand.
Take a look at the minimum wages in the Philippines, Vietnam and Indonesia, in comparison with the wages in Thailand. Indonesia’s minimum wage is higher than that in Thailand but, given the size of the Indonesian population, estimated at about 300 million, the prospect for domestic and external trade is greater than in Thailand.
The minimum wage in the Philippines, 353 baht/day, is close to Thailand’s, whereas the rate in Vietnam is lower, at 343 baht. Vietnam, however, has higher proportion of young people, according to Poj.
If the minimum wage is to be increased to 450 baht, he warned that even Thai investors may consider moving their production bases to Myanmar or Cambodia.
Associate Professor Yongyuth Chalamwong, an advisor on human resource policy at Thailand’s think-tank, the Thailand Development Research Institute (TDRI), contends that wages are not the only factor determining decisions to invest in Thailand.
Citing his study of minimum wage increases during 2012 and 2013, which saw the wages jumping by about 80%, from 170-215 baht to 300 baht, he said that the increases made Thailand’s the third highest in ASEAN, after Singapore and the Philippines, resulting in several labour-intensive industries, such as textiles and shoes, relocating to Cambodia and Vietnam respectively, where labour costs are is much lower than in Thailand.
He noted, however, that the situation today is different from a decade ago, as business operators have adjusted by investing more in machinery to replace manpower and shifting away from labour intensive industries, such as food processing and textiles. Meanwhile, migrant workers from neighbouring countries have replaced Thai workers in these labour intensive industries.
Ahead of any wage increases, Associate Professor Yongyuth suggests that business operators increase their productivity by improving the skills of their workforce, to ensure that they are worth the pay rise.
The more worrisome issues for business operators are the high electricity costs, which are three times higher than the rate in Vietnam, and business taxes.
Another important incentive, to attract foreign investors, is the Generalised System of Preferences (GSP), granted by developed economies like the United States to under-developed and developing countries for their exports to the US market.
He said the Thai government must try to negotiate with the US to regain the GSP status for Thai products which have been removed, because Thailand is no longer regarded as a developing country.
