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Thai gov't urged to review wage hike extension

Publication Date : 06-09-2012

 

Private-sector organisations have called on the Thai government to review its plan to extend the 300-baht (US$9) minimum daily wage nationwide early next year amid uncertainty over global economic growth, which would result in the double whammy of reduced sales for exporters amid higher production costs.

They also urged the government to set up a standard for increasing wages systematically, saying ambiguous policy would encourage more Thai and foreign investors to shift their investment to other countries, especially less developed neighbouring nations.

Thai Chamber of Commerce (TCC) vice chairman Bhumindr Harinsult said the government should not rush to increase wages next year while the global economy is fluctuating because of the euro-zone financial crisis, which will affect Thai export growth and employment.

"More labour layoffs will be seen next year if the government carries on with its policy to raise the [minimum] wage nationwide. Many enterprises, particularly small and medium-sized firms, will need to close down or lay off employees as they cannot shoulder higher operating costs amid sluggishness trading," he said.

According to the TCC, about 7 per cent of SMEs have closed down this year because of higher labour costs. The unemployment rate has risen from 0.7 per cent before April to 1.1 per cent now. A consistent opponent of higher wages for labourers, the chamber claims unemployment will rise even further if the government persists with its policy.

Sukij Kongpiyacharn, president of the Thai Garment Manufacturers Association, said Thai exports next year would be severely hit by double trouble from the euro crisis and higher wages.

"Small firms upcountry will be greatly affected by the higher wage. Thai enterprises will be unable to increase prices easily amid lower purchasing power. If Thai traders increase prices, we may lose buyers to rivals. However, if we do not increase prices, we must shoulder higher production costs and face business losses because of higher wages," Sukij said.

He also called on the government to set clearer standards on wage-increase policy; doing otherwise would affect investor confidence, he claimed. He pointed out that higher labour costs would force enterprises to adjust their operations for the whole supply chain.

Somsak Srisuponvanit, chairman of the National Federation of Thai Textile Industries, said a nationwide 300-baht minimum wage would accelerate the relocation of Thai enterprises to poorer Asean countries, mainly to Myanmar because of lower labour costs and a high supply of workers.

He also called on the government to seek measures to help reduce costs of production and reduce value-added tax for importing machinery to offset higher labour costs.

Somsak claimed it was inevitable that some enterprises would close down next year, unless they turn to employing foreign labourers.

Prokchon Promgungwahn, managing director of Promgungwahn, a Chiang Mai producer and exporter of organic longan, said the higher wage had caused difficulties for his company since early this year.

He said he had to increase the daily wage from 200-250 baht to 300 baht in April, even though the higher minimum came into force in only seven provinces that month, because labourers insisted on enjoying the same increase immediately without having to wait for the nationwide policy.

He said the company would need to increase wages again next year after the expanded policy goes into effect. Yet at the same time, the firm cannot easily increase its prices for trading partners amid the slowing global economy.

Prokchon called on the government to implement measures to relieve the financial burden on SMEs to prevent more of them closing down next year.

Thai Autoparts Manufacturers Association spokesman Tawon Chalatsatien said the nationwide rise in the minimum wage would not seriously affect the auto-parts industry given that it is a high-value business. Businesses in this sector already pay daily wages of at least 300 baht.

He added that raw materials, not wages, were the key cost in this sector, especially the cost of steel.

US$1 = 31.2 baht

 

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