Re: "Analysts anticipate more rate hikes", (Business, June 3).
Increasing interest rates is a blunt tool for tackling inflation. Basically it works like this. If a country is fighting high inflation, then the central bank of that country raises interest rates. This causes the currency to strengthen as foreigners buy government debt to take advantage of the higher rates. This means that imports cost less and home-grown products have to compete and can't easily raise prices.
The problem is that at the moment most countries are doing the same thing so this exchange rate adjustment is not working. Country after country is tackling stubbornly high inflation and continues to raise interest rates with little effect.
These rate increases do have some effect on inflation but for a bad reason. People can't service their debt and have to cut down on purchases which then leads to a recession or even stagflation. In my home country of the UK, there have been strikes by workers who cannot afford to live any more. Nurses, doctors, railway workers and immigration staff are among them.
In Thailand there seems to be no organised trade unions and strikes are unheard of. So tough luck for workers who are paid the minimum wage which is not life-sustaining in my opinion. Yet there is still resistance to offering workers a minimum of 450 baht a day. I challenge any of your readers to say how they would live on the current minimum wage. Companies say they will relocate if wages are increased.
The answer is to have companies that value their employees and are willing to train them so that Thailand can move up the value chain where it has been stuck for decades.
I support the MFP's proposed increase in the minimum wage. To companies that threaten to leave, I say goodbye. We don't need Thailand to be known for cheap goods and cheap labour.