SMEs 'need B143bn subsidy' for minimum wage rise

The government needs to implement wage subsidies totalling 143 billion baht over the next three years to offset the effects of the increase in the nationwide daily minimum wage on small and medium-sized enterprises (SMEs), say researchers.

Kiatanantha Lounkaew, director of the Dhurakij Pundit University Research Center, said establishing a subsidy fund is the soundest measure, as it can be implemented on a large scale within a short time without having to go through complicated processes.

He called on the government to focus on one effective rescue mechanism instead of 27 measures as proposed.

"This measure is not populist but rather a form of investment whereby the government will help businesses to restructure and adapt over a period of three years," Mr Kiatanantha said.

He added the results will have a positive effect on the country as a whole, not just SMEs.

The proposal is based on a survey that asked 1,344 SMEs in 21 provinces about the impact of the daily minimum wage hike and their mitigation plans.

It found SMEs will not be able to shoulder the sum worth 75 baht per employee per day that will result from the second round of minimum wage increases, effective next Tuesday.

Some 5.3 million people are eligible for the wage increase to 300 baht a day.

Considering that each employee works an average of 240 days a year, companies face paying each worker 18,000 baht extra per year.

Mr Kiatanantha said the government's subsidy should be spent over three years so it can slowly reduce its contributions.

Next year, the government could subsidise 75% of the wage increase, equal to 71 billion baht, reducing to 50% or 48 billion in 2014 and 25% or 24 billion in 2015.

As many as 63% of respondents ranked a wage subsidy as their preferred measure, while 13.8% wanted a reduction in Social Security contributions, 10.4% preferred a change in benefit-related contributions to Social Security, 9% wanted a tax reduction of the wage adjustment preferential, 3.2% chose tax reductions and 1.3% named other policies.

Mr Kiatanantha said 40% of SMEs reported they are not ready for the wage increase, indicating that 800,000 to 1 million SMEs out of the 2.9 million in the country will be at risk.

To cope with the wage hike in the new year, 86.6% of respondents said they will delay new employment.

In addition, 74.4% will reduce long-term investment, 62.3% will improve labour productivity, 56.9% will increase prices, 45.6% will lay off workers and 39.9% will use more machinery to replace labour.

SMEs employ 11 million staff. Production accounts for 37% of gross domestic product or the equivalent of 3.8 trillion baht.

About the author

Writer: Soonya Vanichkorn
Position: Reporter