Small firms face 'shock' of wage rise

CENTRAL BANK OFFICIAL ISSUES WARNING

Business operators must adjust or go out of business following the full-scale increase of the minimum wage to 300 baht per day, a central bank senior official has warned.

The Labour Ministry conceded Saturday that the nationwide wage hike from Jan 1 would place more than 2,000 small and medium enterprises (SMEs) in hardship.

Somsajee Siksamat, director of the Bank of Thailand's Statistics Office, described the coming wage increase as a "shock" to the economic system.

But she said the rise was necessary because wages had been suppressed at an unrealistically low level for a long time.

Speaking at a workshop at the Labour Ministry yesterday, Mrs Somsajee said previous minimum wage increases were not even proportionate to inflation rates and it was about time businesses realised they could no longer hire employees at these low rates.

She said product prices would definitely rise after the wage hike.

To overcome this challenge and survive, Mrs Somsajee said, business operators would have to focus on improving the quality of their staff, productivity and efficiency.

She said a certain number of workers would have to lose their jobs as a result of the wage increase, which was expected to lead to a significant decrease in jobs, drive up inflation and result in a stronger baht.

Importers of Thai products would probably consider reducing their orders due to a rise in prices resulting from increased labour costs, said Mrs Somsajee.

Manufacturers most likely to be affected by the wage hike include the makers of plastic products, textiles, electrical appliances, steel, chemical products, apparel, cars and motorcycles, she said.

These businesses now depend largely on blue-collar workers whom they would have to pay a considerably higher wage from next month on, she said.

Most businesses remain ill-prepared for the wage increase and need extra attention from the government, Mrs Somsajee said.

Citing a study by Bank of Thailand, Mrs Somsajee said Thai businesses would be able to survive this hardship if they could manage to improve their competitiveness by increasing labour productivity by 8% and the efficiency of production by 2.5%.

Labour Minister Padermchai Sasomsap said a total of 2,193 SMEs are expected to be affected by the minimum wage hike.

Mr Padermchai estimated that nearly 50,000 employees working for those manufacturers would be affected by the wage increase.

The five industries most likely to be affected are auto parts, general production, wholesale and retail sales, construction and food, he added.

He said problems identified and suggestions raised during the workshop would be taken into account in adjusting the 27 existing assistance measures to minimise the impact of the wage increase, ensuring they are in line with manufacturers' needs.

A final conclusion on additional assistance measures will be proposed to a meeting of a committee on minimising the impact of the wage rise, chaired by Finance Minister Kittiratt Na-Ranong, scheduled for Friday.

Meanwhile, Somkiat Chayasriwong, permanent secretary for labour, cited the results of a different study conducted after the wage hike in the first seven provinces in April. He said the increase actually did not pose a severe threat to businesses as feared.

The unemployment rate was recorded at 0.8 % and 0.7% of the entire workforce in June and December respectively. The months were seen as being "normal" when compared to the same months last year, he said.

And the good news was, he said, that the piloted wage hike was found to have improved competitiveness among affected businesses, which was well reflected in the reported productivity of labour.

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Writer: Penchan Charoensuthipan
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