Wage hike caution

Wage hike caution

Labour Minister Suchart Chomklin is right to vow an increase in the daily minimum wage from Oct 1, instead of next year.

Low-income workers have been suffering from skyrocketing food and consumer product prices while minimum wages have been frozen for two years.

The Trade Policy and Strategy Office said headline inflation, measured by the consumer price index (CPI), rose to 7.61% year-on-year which accelerated from a 7.1% increase in May and a 4.7% increment in April.

The relentless rise in energy prices has prompted the Commerce Ministry to upgrade its forecast for headline inflation in 2022 to 5.5-6.5% (or 6% on average) from the 4-5% range (averaging 4.5%) projected in March.

The ministry’s inflation projection is, however, still far behind the increase in street food prices which have gone up a whopping 25-40% by some estimates.

Even instant noodles, a staple among low-income people struggling to make ends meet, have been hit.

The producer of Mama noodles is seeking permission from the Commerce Ministry to raise the price to 8 baht a pack from 6 baht.

The government claims its cash handout scheme supports low-income people. But it goes without saying the government’s subsidies are insufficient, especially for those living hand-to-mouth with the current minimum wage at 336 baht daily.

Minimum wages, last increased in January 2020, range from 313 baht to 336 baht, depending on an area’s economic and industrial intensity.

Labour networks have demanded a minimum wage suitable to the current economic situation of 492 baht for entire the country.

Although the networks’ proposal seems unrealistic and could increase production costs, it is inarguable that the current wage is insufficient given the cost of living, particularly for those in big cities.

The minister said he wanted an increase in the daily minimum wage of 5-8% from Oct 1 and increments will vary by 1-2 baht for some provinces. Employers have argued against a blanket across-the board rise, as cost-of-living expenses can vary dramatically between provinces.

As it ponders the increase it will introduce, the government needs to be prudent to control for the possible impacts of an increased wage.

Thailand’s current minimum wages are high compared to prevailing rates among its Southeast Asian competitors, which raises concerns an excessive boost could hurt exports.

Normally, a minimum wage increase will lead to a rise in goods prices. The government needs to make sure that a wage increase will not add insult to injury.

A study of the impact of the latest wage increase in 2020 shows that 1% of the wage increase resulted in a 0.18% goods prices increase.

Raising the minimum wage might also create cost-push inflation as businesses attempt to compensate for the higher cost of wages through higher prices.

The government must ensure a balance in the labour market to avoid further inflation. It must also strictly enforce the law to prevent unfair increases in goods prices after the wage hike.


Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

Email : anchaleek@bangkokpost.co.th

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