Private sector opposes wage hike

Private sector opposes wage hike

Entrepreneurs fear rise in daily wage would deal a blow to businesses

On Labour Day this past Sunday, workers paraded from Democracy Monument to Government House to urge the government to meet their minimum daily wage demand of 492 baht. (Photo: Apichit Jinakul)
On Labour Day this past Sunday, workers paraded from Democracy Monument to Government House to urge the government to meet their minimum daily wage demand of 492 baht. (Photo: Apichit Jinakul)

A proposal by labour advocacy groups to increase the daily minimum wage to 492 baht is drawing stiff opposition from entrepreneurs who fear the hike in a volatile economy will deal a blow to businesses.

The last minimum wage increase was in January 2020, when it rose to a range of 313 baht to 336 baht, according to labour advocates.

While the government is considering an appropriate pay rise, Tanit Sorat, vice-chairman of the Employers' Confederation of Thai Trade and Industry, said wages should be increased if the inflation rate exceeds 5% and reeling businesses post a full recovery.

He called on political parties not to use the wage hike to draw votes in the next election.

NAIL IN THE COFFIN

Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association, said now is not the right time to raise the rate for tourism workers as the industry is only gradually recovering after a massive blow during the two-year pandemic crisis.

She said a flat rate of 492 baht is too high, compared with the current rate of 331 baht, as payroll accounts for 40-50% of outlay for hotel operations.

In addition to this cost, hotels have to take responsibility for debt repayments and absorb higher costs for energy and consumer products caused by inflation, while the land and building tax starting this year will also create a massive burden for hotels, said Mrs Marisa.

"The rising minimum wage is a nail in the coffin for us, especially small hotels," she said.

Atip Bijanonda, vice-chairman of the Thai Board of Trade, said raising the daily minimum wage to 492 baht without considering the impact and workers' skills will make the situation worse.

"The economy is poor. The pandemic remains. The war has no end in sight. Inflation is higher while the tourism industry and general business have not yet recovered," he said.

"Higher wages will trigger higher costs of living. The increase will do nothing as labour workers will face higher expenses."

Mr Atip said the impact from higher daily wages would be immense, particularly on small and micro-businesses that have much weaker liquidity than large companies.

If these employers cannot pass on these rising costs, they might have to close down, leaving workers unemployed, he said.

"With this proposed minimum wage, we won't be able to attract foreign direct investment," said Mr Atip. "Thailand will lose its competitiveness as foreign investors will relocate their production bases to Vietnam."

WEIGHING THE WAGE

Amonthep Chawla, head of research at CIMB Thai Bank, said it is reasonable to increase the minimum wage because of rising prices, but the hike should be practical and in line with the economic situation.

The government should set a guideline on several minimum wage hike options, such as a single increase nationwide or a gradual increase step by step in selected areas and industries, said Mr Amonthep.

For recovering business sectors, such as manufacturing, exports and consumer goods, which are linked to the middle and upper-income segments, the minimum wage is unlikely to impact their businesses, he said. But the weak tourism industry is not ready for the wage increase, said Mr Amonthep.

Somchai Lertsutiwong, chief executive of Advanced Info Service, the country's largest mobile operator by subscriber base, said the call for a minimum wage hike by workers is unavoidable amid surging inflation and a decline in government assistance.

The government should be careful in addressing demand, with small and medium-sized enterprises (SMEs) acting as the focus because this group would bear the heaviest brunt, he said.

Mr Somchai said the government should implement policies and measures that balance economic recovery and assisting affected people.

He said big corporations could be less affected by a minimum wage hike than SMEs, which have already been troubled by surging inflation. The country's economic engines, particularly tourism and domestic consumption, are now in trouble, said Mr Somchai.

To ease the economic strain, the government must focus on state spending, which can drive peoples' income, such as skill training, he said.

SMEs should not be left to struggle day by day or month by month until the economy recovers, said Mr Somchai.

Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said the model the chamber believes is appropriate is to adjust the daily wage in line with the mechanism designed by the tripartite wage committee in each province.

He said there are varying and distinct situations and demands in each province.

"Using the existing mechanism each province currently has through mutual recognition and agreement among entrepreneurs, employees and the state sector to decide an appropriate new daily wage is the best solution and will benefit all parties," said Mr Sanan.

INFLATION CAP NEEDED

Chaichan Chareonsuk, president of the Thai National Shippers' Council, said a hike in the daily minimum wage should be primarily based on the inflation rate, while the government needs to more effectively manage inflationary pressure to keep the rate from rising past 5% this year.

He said the government should help control or reduce overall expenses such as public transport fees, electricity, energy and water bills, while maintaining the stability of domestic retail oil prices through existing tools or mechanisms to curb an excessive impact on entrepreneurs and consumers.

Taniwan Koonmongkon, president of the Thai Restaurant Association, said she understands the costs caused by inflation and the higher cost of living, but a rate hike should be done in line with the domestic inflation rate.

She said the restaurant business now pays a daily wage higher than 331 baht.

"It is acceptable if the daily wage is increased by 7-10%," said Ms Taniwan. "It doesn't make sense if the minimum wage for unskilled workers is increased to 492 baht a day. We expect mass layoffs if the minimum wage is allowed to rise to 492 baht a day."

She said given the current harsh economic situation, plans to raise the daily wage should be put off until next year once the environment for doing business improves as the tourism industry strengthens.

"Several sectors have yet to recover, particularly the restaurant industry. Restaurant operators pay not only wages, but also other benefits to support their employees such as meals, accommodation expenses and others. All of these are operating costs," said Ms Taniwan.

Nattachart Mekmasin, research manager of Trinity Securities, said wages need to rise along with the cost of living and expects the government will be able to find a middle ground between employers and employees.

He said every country needs to consider increasing minimum wages this year because inflation has soared from energy prices.

Mr Nattachart said higher labour costs would hurt most of the country's manufacturing sector, including consumption.

If wages rise along with consumer spending, both employers and the economy will not benefit much from a possible increase in consumption expenditure, he said.

"A minimum wage of 492 baht might be too high. I think 400 baht would be a reasonable rate," said Mr Nattachart.

However, even if the government agrees to a wage rise, Thailand will not lose its competitiveness as a manufacturing base because every country faces the same problem and requests from employees to raise the minimum wage, he said.

Mr Nattachart said Thailand's economic growth will rank as the lowest in the region this year because it is encountering several obstacles such as rising energy prices and the pandemic.


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