The minimum wage was introduced to Thailand in the mid 1970's as a way to protect against basic labour being taken advantage of and provide a guaranteed minimum wage for all workers. However, it was never applied to "all workers". The International Labour Organisation (ILO) said that this was the "minimum sum payable to a worker for work performed or services rendered, within a given period, whether calculated on the basis of time or output, which may not be reduced either by individual or collective agreement, which is guaranteed by law and which may be fixed in such a way as to cater to the minimum needs of the worker and his/her family, in the light of national economic and social conditions".
The latter part of the paragraph has been hardly considered in many years. An increasing gap has arisen between the Minimum Wage (as defined by local labour laws) and the Living Wage (as defined by the Living Wage Calculator devised through a Ford Foundation Grant to MIT). This has led Dr. Amy Glasmeier of MIT to many different markets around the globe, to look at what it means to have a job that provides the basic needs for an individual or family. The gap between what the ILO defined and local governments legislated into being, has been growing for years. Virtually every year, the cost of living goes up and yet in many countries, including Thailand, the minimum wage is not increased annually. Most employers do have a salary budget that includes projected increases in the cost of employment. For instance, healthcare which is provided by many employers to their employees with or without an employee contribution, increases between 5%-12% per year. Wages typically increase 5% per year.
The MIT Living Wage Project developed the Living Wage Calculator (LWC). This is a template used to calculate how much money it takes to support oneself or a small family. Assumptions are made that include, cost of housing, utilities, transportation, meals, clothing, basic toiletries, healthcare, basic entertainment, savings for emergencies and for retirement. If there are children, school fees, school supplies, more clothing and more food and more healthcare are added. Using the LWC, MIT has evolved a global reference tool to calculate what it takes in wages to provide for the basic needs of individuals or small families. In the UK there is the Living Wage Foundation (LWF), a similar approach with a unique difference: they certify employers as providing a Living Wage. The government only mandates a minimum wage. But this is below the Living Wage Foundation benchmark. In the LWC or LWF there is typically no inclusion of owning a house. Rental is normally what is considered. There is also no individual- or family-owned transportation vehicle but rather the use of public transportation. This does not include either bicycles or small motor cycles.
People at the lowest end of the employment scale in virtually all economies, are stuck with whatever the minimum wage is. It is typically lagging behind the cost of living and what employed persons are getting. The minimum wage, which according to the ILO is designed to "cater to the minimum needs of the worker and his/her family, in the light of national economic and social conditions", has not kept that promise.
The Living Wage generally means that a person working 40 hours per week, with no additional income, should be able to afford the basics for a modest but decent life. That includes: food, shelter, utilities, transport, healthcare, and child-care. Living wage advocates have further defined a living wage as the wage equivalent to the poverty line for a family of four. The income would have to allow the family to "secure food, shelter, clothing, healthcare, transportation and other necessities of living in modern society." When the minimum wage will not allow an individual or family to live to this standard, the economy is not supporting a sustainable society. It is time to drop the minimum wage process and look at instituting a "Living Wage".
Governments could make a substantial contribution. Their public policies could address low cost or free public transportation. Public transportation routes could link to work centres. Free public education could be really "free" and cover people past secondary school, so they could keep up with educational requirements for employment. The social security health plans should cover all employees and their families. More affordable low cost housing could be subsidised.
The findings from the LWC project from MIT, that are spreading around the world, indicate that it is morally ethical to pay people who are at the lowest job level, a living wage, not merely a minimum wage.
According to data from the US, as of 2017 a typical family of four (two working adults, two children) needs to work nearly four full-time minimum-wage jobs (a 76-hour work week per working adult) to earn a living wage. Single-parent families need to work almost twice as hard as families with two working adults to earn the living wage. A single mother with two children earning the federal minimum wage of $7.25 per hour needs to work 138 hours per week — nearly the equivalent of working 24 hours per day, for 6 days — to earn a living wage.
It is interesting to note that the minimum wage in the US has not increased in over 10 years (because of politics) but in most mid-western cities, restaurants and fuel stations advertising for help want between $13.50 per hour and $15.00 per hour. The market is working. The same is the case in any industrial estate on the Eastern Seaboard of Thailand. The help wanted signs outside the factories are advertising for Baht 400 per day, when the minimum wage is Baht 325 in Bangkok.
"It's no longer a moral issue," says Glasmeier. "More and more people are understanding that the current system just isn't going to work. We need to allow people to live and work without going into debt. And we need to educate companies to think of a living wage as a fixed cost, and to economise on other budget items. Once they understand they can pay their employees a living wage and still be profitable, they'll want to do it."
Details of the Living Wage Calculator, can be sourced from internet references to "Living Wage Calculator 2019".
Author: Thomas Payne, Principal, AAI-Assessment Asia Co., Ltd, Email: tom.payne@aai-assessment.com
Series Editor: Christopher F. Bruton, Executive Director, Dataconsult Ltd, chris@dataconsult.co.th. Dataconsult's Thailand Regional Forum provides seminars and extensive documentation to update business on future trends in Thailand and in the Mekong Region.