The minimum wage of 300 baht a day is taking its toll on small and medium-sized enterprises (SMEs), leading several to close and start doing business without registering with the Commerce Ministry, according to a university study.
''This is because a large number of SMEs are unable to compete, and if they are not in the system they can lower their costs by avoiding taxes and money sent to the social security fund,'' said Kiatanan Luankaew, director of the Dhurakij Pundit University (DPU) Research Center.
According to Mr Kiatanan, once business operators report a closure (to authorities), they generally opt to purchase condominiums or other types of buildings and set up a new firm without registration. Most of these businesses have no more than five or six employees.
The companies place ads on electric poles, telephone booths and websites, providing contact via mobile phone.
''The workers will receive wages of 300 baht per day, but it is worth the payment because they don't have to pay tax and contribute to social security,'' Mr Kiatanan said.
DPU has been surveying SMEs in seven provinces that raised the minimum wage to 300 baht a day this year. They are Bangkok, Nonthaburi, Pathum Thani, Samut Prakan, Samut Sakhon, Nakhon Pathom and Phuket.
According to the survey, 4,000-5,000 SMEs from a total of 880,000 in the seven provinces have turned to the non-formal system, while some considering entering the official system have changed their minds.
''If the government remains committed to its policy to increase the minimum wage nationwide next year, SMEs will increasingly leave the system in order to lower costs. Businesses upcountry are not prepared to handle the sudden increase in costs,'' Mr Kiatanan said.
If the pattern persists, he said, future governments will receive less revenue from tax and the unlucky ones will be merchants such as noodle stalls where officials will count the number of bowls sold to calculate tax.
Increased living costs have prompted SMEs to adopt promotions and discounts to boost sales, but these are not as useful when grass-roots consumers are cutting their own costs.
This is in contrast to large businesses and malls that use similar promotions but are more successful because their customers are middle- and high-income people, Mr Kiatanan said.
''Many SMEs are cancelling their promotions because they have lost profits and resort to other measures such as cutting workforce and welfare,'' he said.